MIAMI – Iberia (IB) and Vueling (VY), owned by International Airlines Group (IAG), will respectively receive €750m and €260m government-backed loans in a five-year arrangement until April 30, 2023.
However, as IAG CFO, Stephen Gunning, said in the statement, non-financial commitments are included in the money package to protect the position of the banks. These conditions include restrictions on the upstream of cash to the rest of the IAG companies. By now, the government has not guaranteed the loans.
Loan implications for IAG
The syndicated loan agreed by the Instituto de Crédito Oficial, a Spanish state-owned bank, and both carriers can be repaid at any time, according to the Spanish legal framework established to help stave off the fallout of the COVID-19 pandemic.
Regarding the not yet guaranteed loans, the deal assures the Spanish government the money will protect only Spanish business and Spanish IAG employees.
In other words, said loans will not go to IAG carriers based in other countries, such as British Airways (BA), Aer Lingus (EI), and LEVEL, also allowing Spanish executives to evade the burden of such external financing.
The financial decline in profits came after the International Transportation Air Association (IATA) forecasted a US$21.7b revenue loss in the UK and US$13b in Spain, the two base markets of the five airline group.