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BA announces plan to raise £600m BA announces plan to raise £600m
(10 minutes later)
British Airways plans to raise £600m to help it get through difficult trading conditions, the airline has said.British Airways plans to raise £600m to help it get through difficult trading conditions, the airline has said.
BA will issue £300m in convertible bonds to existing shareholders and release bank guarantees from its UK defined benefit pension schemes. It will issue £300m in convertible bonds to existing shareholders and release bank guarantees from its UK defined benefit pension schemes.
Observers say the carrier wants a safety net in case it faced industrial action from cabin crew over pay, as well as tough summer trading.Observers say the carrier wants a safety net in case it faced industrial action from cabin crew over pay, as well as tough summer trading.
BA predicts lost about £100m in the three months to the end of June. BA predicts it lost about £100m in the three months to the end of June.
"Following discussions with institutional investors, we're taking action to improve our liquidity and strengthen our position within the industry," BA chief executive Willie Walsh said."Following discussions with institutional investors, we're taking action to improve our liquidity and strengthen our position within the industry," BA chief executive Willie Walsh said.
"This goes hand-in-hand with our cost reduction and efficiency initiatives which are designed to create the right conditions for our sustainable, long term profitability.""This goes hand-in-hand with our cost reduction and efficiency initiatives which are designed to create the right conditions for our sustainable, long term profitability."
BA said the new funding would increase liquidity at the airline to about £2bn.BA said the new funding would increase liquidity at the airline to about £2bn.
The airline had approximately £1.25bn of cash, it said. If shareholders back the fund-raising plan, the airline would have to pay interest on the convertible bonds. Shareholders would be able to convert the bond in 2014 into BA shares at an agreed price.
The convertible bonds would involve BA paying interest on them. Shareholders would then be able to convert the bond in 2014 into BA shares at an agreed price. Union talks
BA has been struggling as demand for air travel has fallen during the global economic downturn, with particular decline in business class and first class travel.
In May, it reported a record annual loss of £401m.
The airline has been in negotiations for several weeks with unions over plans to cut costs and has asked thousands of employees to take pay cuts or work for nothing.
Earlier this week, BA pilots voted overwhelmingly to accept a 2.6% pay cut. Talks with unions representing cabin crew and ground staff are ongoing, but if no resolution is reached, the firm could face a summer of strikes by its 14,000 cabin crew.