British Airways finalized negotiations in two financing agreements that will boost the airline’s liquidity by £2.45 billion ($3.4 billion).
Firstly, British Airways completed negotiations with the United Kingdom Export Finance (UKEF), the British government’s export credit agency, for a £2 billion ($2.8 billion) loan. The five-year Export Development Guarantee term-loan will be partially guaranteed by the UKEF and underwritten by a “syndicate of banks,” read a statement by the airline’s parent company International Airlines Group (IAG) (IAG), issued on February 22, 2021. The British airline “expects to drawdown the facility before the end of February 2021.”
While the loan was first announced on December 31, 2020, British Airways finalized its agreement with the UKEF in February 2021.
Secondly, the London Heathrow Airport (LHR)-based carrier finished negotiations with the Trustee of New Airways Pension Scheme (NAPS). The airline requested to defer £450 million ($630 million) of pension deficit contributions that were due monthly between October 2020 and September 2021. The two parties agreed that British Airways would add the deferred sum plus interest as monthly repayments to the end of the airline’s existing recovery plan, which is scheduled to last until the end of March 2023.
The carrier provided property assets as security for the deferred payments. Furthermore, British Airways will not pay any dividends to IAG until the end of 2023. Starting from 2024, “any dividends paid will be matched by contributions to NAPS of 50 percent of the value of dividends paid.”
“If a new Recovery Plan has not been agreed by 30 September 2021, the default position is that British Airways will return to making payments of £37.5 ($52.5) million per month from October 2021,” read the statement.