International Airlines Group (IAG) has announced that it has secured €1bn (£900m) in bank loans for its Iberia and Vueling brands. The loans will be backed by the Spanish government and will see approximately €750 million going to Iberia and approximately €250 million going to Vueling.
Stephen Gunning, CFO of the group, said the money would be paid through five Spanish banks and is part of “the legal framework established by the Spanish government to mitigate the COVID-19 economic impact”.
The news was released shortly after British Airways announced that it has extended one of its credit lines to $1.4bn and would be cutting 12.000 jobs, including around 25% of its pilots, in an effort to re-organise the business following the slump in air travel caused by the Covid-19 / Coronavirus pandemic. The company has also said that it may not return to flying frm Gatwick Airport after this current crisis has passed.
IAG boss, Willie Walsh, is well-know for his staunch opposition to state aid and complained vehemently against the possibility of state aid to bail out FlyBe when it ran into financial difficulties earlier in the year.
Other carriers have also sought government support to improve their finances. Easyjet, for example, have obtained a £600m cash injection from the Bank of England’s loan scheme.
In a statement Ryanair argued that state aid could “significantly distort” competition in the aviation sector when demand returns resulting in competition for their market share as rival carriers drive down prices.
In reply, an IAG spokesperson said, “These are commercial loans agreed with banks in accordance with current market conditions with 70 per cent government guarantee”.