British Airways Receives £2bn Loan From Government

British Airways, a primary airline of the International Airlines Group (IAG), has received duties for £2.0 billion (US$2.74 billion) worth of loans. This credit is earmarked by the airline to ‘enhance liquidity’ and provide ‘operational and strategic flexibility’ in the forthcoming year. This additional round of funding comes as the airline continues to take delivery of new aircraft, while anticipating a partial recovery of air travel demand in 2021.

With a loan value of £2.0 billion, IAG states via a press release that the five-year loan (Export Development Guarantee Facility) is underwritten by a syndicate of banks, and in part guaranteed by UK Export Finance (UKEF).

British Airways anticipates making use of this loan facility as soon as this month, although it remains subject to an agreement of final terms with the lenders and UKEF – the UK’s export credit agency.

The airline is “entitled to repay the loan at any time on notice” and according to the terms of this arrangement, will be restricted on its dividend payments to IAG – among other non-financial covenants.

“The proceeds from the UKEF facility will be used to enhance liquidity and provide British Airways with the operational and strategic flexibility to take advantage of a partial recovery in demand for air travel in 2021 as COVID-19 vaccines are distributed worldwide.” – Stephen Gunning, Chief Financial Officer, IAG