British Airways to raise almost $1 billion

Hard-pressed British Airways said it plans to raise 600M pounds ($980M) to see it through the recession & financial losses, which it estimated at 100M pounds for the 3 months thru June. The airline, which seeked cost-cutting deals with staff, announced it intended to raise 300M pounds through a convertible debt issue & it secured the return of 330M pounds worth of guarantees from pension fund trustees. The debt issue is subject to approval by shareholders. BA shares rose 2% at 134.8 pence on the Exchange. The "additional liquidity is clearly positive. Nevertheless, we believe a significant rating of the stock's unlikely, given the exceptionally weak market conditions, reflected in poor premium traffic volumes," said Gert Zonneveld, Panmure Gordon analyst. "We expect substantial loss in the coming 2 yrs, the pension deficit remains a major headache & Iberia merger talks seem to be dragging on & on with no immediate prospect of a deal," he said. The securities will be sr. unsecured convertible bonds due in '14, which can be converted into 15% to 20% of BA shares. Bonds will be available to institutional shareholders on a prorata basis, it said. BA secured an agreement with trustees of its defined benefit pension plans in the UK to release $540M in guarantees provided in '06 as security against BA The facilities will be available to the airline through mid-2012, it said. BA's called for 3,700 jobs to be cut from its 40,000 staff & a 2-year pay freeze. It also sought volunteers to temp forego paychecks, as CEO Willie Walsh is doing in July. BA pilots voted to accept a 2.6% pay cut as part of a package of measures to save 26M pounds. BA also announced plans to ground aircraft, slash seat numbers & postpone delivery of a dozen new Airbus A380 superjumbos. That said traffic in June fell 5% from 2008, BA is cutting its summer capacity by 3.5%,rather than originally forecast 2.5%. Capacity for Oct. thru March should down 5%, they said.