British Airways has 8 billion in liquidity to face the crisis in the medium term without layoffs.

The airline British Airways (BA) would have “sufficient liquidity” to face this economic crisis in the medium term since, due to its size, it has “easy access” to financing from investors, debt and stock markets in case it is needed, according to a report prepared by the economist Iñigo Puell, which assures that the airline, which belongs to the IAG group, was highly profitable in 2019 with the current number of employees.

The economist considers that BA is a solvent company with great liquidity and financial capacity that is capable of overcoming this challenge “without dramatic restructuring or traumatic layoffs”.

The report, known by Unite, the largest union in Britain and Ireland, indicates that the operating profit of the company in 2019 was “impressive”, 960 million euros.

This highlights that BA distributed a total of 1,276 million euros to IAG during 2018 and 2019. For its part, IAG distributed EUR 1,934.9 million in dividends and repurchases to its shareholders. Thus, British Airways’ profits are higher than those of rivals such as Lufthansa and Air France-KLM.

Before the COVID-19 crisis, British Airways “was a growing, profitable company with a solid balance sheet and a privileged market position”, according to the economist, who assures that the airline was “highly profitable” with the current number of employees, mainly due to the lucrative slots at Heathrow and Gatwick”, which made it the main airline in the United Kingdom and the third worldwide.

STRONG AIRLINE BALANCE SHEET

Puell indicates that British Airways is solvent, with reserves and cash deposits of 2,860 million euros and a share capital of 6,380 million in 2019, when liquidity allowed to cover expenses for 7 and a half months.

According to their calculations, data from the first half of 2020 indicate that the airline has goodwill of 2.73 billion euros, 2.5 times the expenditure incurred during the first part of the pandemic.

The analysis also suggests that 55% of British Airways’ total losses in the second half of 2019 belong to fuel items, “the result of bad management”.

The economist considers it “inappropriate” for the workforce to have to pay for IAG’s mismanagement of fuel contracts and believes that they should finance the debt. Thus he indicates that labor costs are not the largest cost of BA but fuel, which in 2019 represented 28% of total costs, workers’ expenses were only 22%.

The economist assures that British Airways has 8,000 million euros in cash to face the crisis but, in addition, IAG has accessed 330 million euros from the Coronavirus Corporate Finance Line in the United Kingdom and 1010 million euros in credit guaranteed by the Official Credit Institute (ICO) in Spain.

Puell recalls that, in addition, IAG will request a capital increase of 2,000 Million Euros at its shareholders’ meeting in September, which will be attended by its shareholders from Qatar.

THE PURCHASE OF AIR EUROPA INCREASES THE RISK

On the proposed acquisition of Air Europa by IAG, the report points out that “it makes no sense because IAG increases the risk of acquiring an entity with serious financial problems and jeopardizes BA’s operations in the most profitable slots at Heathrow and Gatwick, with a valuation of around EUR 830.5 million”.

By EuropaPress