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| Version 5 | Version 6 |
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| BA announces plan to raise £600m | BA announces plan to raise £600m |
| (about 6 hours later) | |
| British Airways plans to raise more than £600m to help it weather the recession, the airline has said. | |
| It will issue £350m in convertible bonds to existing shareholders and also release bank guarantees from its UK defined benefit pension schemes. | |
| Observers say the carrier wants a safety net in case it faces industrial action from cabin crew over pay, as well as tough summer trading. | Observers say the carrier wants a safety net in case it faces industrial action from cabin crew over pay, as well as tough summer trading. |
| BA also predicted it had lost £100m in the three months to the end of June. | |
| But it added that this was "slightly better than market expectations". | |
| "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." |
| Shares rise | Shares rise |
| BA said the new funding would increase liquidity at the airline from £1.25bn to about £2bn. | BA said the new funding would increase liquidity at the airline from £1.25bn to about £2bn. |
| This puts to bed the suggestions that British Airways is in any sort of risk in the short term Willie Walsh, BA chief executive Check BA's share price | This puts to bed the suggestions that British Airways is in any sort of risk in the short term Willie Walsh, BA chief executive Check BA's share price |
| If shareholders back the fundraising plan, the airline would have to pay interest of 5.8% a year on the convertible bonds. | |
| Shareholders would have the option to convert the bond into BA shares, once shares reached 189 pence - well above its current share price. | |
| BA shares ended the day up 2.95%, or 3.9p, at 136p. | |
| The bonds can be converted up until 2014. | The bonds can be converted up until 2014. |
| Once converted, BA said the number of shares in the airline would increase between 15% and 20%. | Once converted, BA said the number of shares in the airline would increase between 15% and 20%. |
| Mr Walsh said the move "puts to bed the suggestions that British Airways is in any sort of risk in the short term". | Mr Walsh said the move "puts to bed the suggestions that British Airways is in any sort of risk in the short term". |
| "We are clearly in a very strong position, relative to most airlines," he added. | "We are clearly in a very strong position, relative to most airlines," he added. |
| David Cumming, head of UK equities, at Standard Life Investments, one of BA's biggest investors, told the BBC that shareholders thought it was a positive move. | David Cumming, head of UK equities, at Standard Life Investments, one of BA's biggest investors, told the BBC that shareholders thought it was a positive move. |
| "It's been well-received by the markets so that draws a line under near-term funding concerns. Obviously longer-term you'd want to see premium traffic picking up," he said. | "It's been well-received by the markets so that draws a line under near-term funding concerns. Obviously longer-term you'd want to see premium traffic picking up," he said. |
| "British Airways is not a company that is about to go bust, or is any financial difficulties. This move helps their position," he added. | "British Airways is not a company that is about to go bust, or is any financial difficulties. This move helps their position," he added. |
| Taking back pension guarantees | Taking back pension guarantees |
| In 2006, the airline provided bank guarantees for its pension fund. Fund trustees could access the guarantees only if the airline became insolvent. | In 2006, the airline provided bank guarantees for its pension fund. Fund trustees could access the guarantees only if the airline became insolvent. |
| As long as BA is in a position where, if not now then later, it can put money into the fund - then the pension scheme is not in panic mode Tom McPhail, Hargreaves Lansdown | As long as BA is in a position where, if not now then later, it can put money into the fund - then the pension scheme is not in panic mode Tom McPhail, Hargreaves Lansdown |
| The trustees have now agreed to make those guarantees, of up to £330m, available to BA, should the firm need it. | The trustees have now agreed to make those guarantees, of up to £330m, available to BA, should the firm need it. |
| Tom McPhail, head of pensions research at Hargreaves Lansdown, said BA's pension trustees were effectively deciding between "the lesser of two evils". | Tom McPhail, head of pensions research at Hargreaves Lansdown, said BA's pension trustees were effectively deciding between "the lesser of two evils". |
| "Hopefully [agreeing to release the guarantees] will reduce the chances of the company going bust. That improves the possibility of it continuing to trade profitably and so putting money into the pension fund," he said. | "Hopefully [agreeing to release the guarantees] will reduce the chances of the company going bust. That improves the possibility of it continuing to trade profitably and so putting money into the pension fund," he said. |
| "But it means sacrificing longer-term security because if the employer does go bust, they've lost their reserves." | "But it means sacrificing longer-term security because if the employer does go bust, they've lost their reserves." |
| He added: "As long as BA is in a position where, if not now then later, it can put money into the fund - then the pension scheme is not in panic mode." | He added: "As long as BA is in a position where, if not now then later, it can put money into the fund - then the pension scheme is not in panic mode." |
| Union talks | 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. | 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. | 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. | 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. | 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. |