The shortfall in contributions to the British Airways pension fund, NAPS o New Pension Plan, is once again present on the list of priority issues of IAG. The flagship airline of the holding company is in advanced talks with the fund administrator to update its valuation and set a new contribution schedule. This matter by itself, as well as the public financing that British accessed in November 2020 to withstand the impact of the pandemic, may keep the airline’s dividend to IAG itself in suspense in the medium term.
NAPS three-year valuation surfaced as of March 31, 2018 a deficit of 2.4 billion poundss (2,695 million euros at the current exchange rate), from the previous 2,800 million pounds marked in 2015. Before the pandemic, a recovery plan was agreed with an increase in the amount contributed by the airline to 450 million pounds until March 2023, compared to a previous commitment of 300 million fixed plus 150 million variables that depended on the company’s cash position. But the outbreak of the crisis caused British to negotiate between December 2020 and February 2021 a deferral of payments until the end of September 2021 (subsequently there have been no contributions either) and a redesign of the calendar which is now retouched again.
In the context of these contacts, British Airways agreed to turn off the tap on any dividend to its parent company until the last day of the 2023 financial year. And as of 2024, any remuneration must be accompanied by a contribution to NAPS for half of the distributed dividend until the full amount of the deferred contributions to the fund is covered.
The determination of new deadlines will entail new commitments on the part of British Airways, as recognized by IAG in the documentation that accompanies the call for proposals. extraordinary meeting of shareholders for next October 26. But it also highlights the expectation that the protection mechanism against excess financing, by which contributions would be suspended if the technical deficit of the pension plan is eliminated, “continues to be activated within the framework of the new valuation and, as long as it is so , no contributions will be paid. Otherwise, IAG says it has “a reasonable expectation of paying contributions to the NAPS significantly lower than those agreed in relation to the 2018 valuation.”
The hole in the NAPS plan was 2.4 billion pounds in 2018, the year of the last calculation
The group led by Luis Gallego anticipates that its four major airlines, British, Iberia, Vueling and Aer Lingus, close 2022 with a positive operating profit after two years of heavy losses due to the collapse of the activity. However, British will not only have to wait for profits to feed the holding company with dividends, but must repay the loans guaranteed by the UK Export Finance (UKEF) in February 2021 (2,000 million pounds) and November of that same year (1,000 million pounds). of pounds), both at five years.
The first of them was arranged in February of last year and must be amortized in March 2026, while a part of the second is still in the chamber. Among the guarantees accepted by British Airways, which can return this lifeline in advance, is the prohibition to pay dividends to its shareholders until 2025. IAG already stated before the CNMV at the time of signing the second loan that it would only have the 1,000 additional millions if necessary, clarifying that he would not use it in the first months.
IAG management has called an extraordinary meeting to vote on the purchase of 50 aircraft from Boeing (25 B737-8200 and 25 B737-10) and 37 aircraft of the Airbus A320neo family. The orders have a catalog value of 11.1 billion dollars and require the approval of the shareholders to become firm.
The largest airline of the IAG holding company received 3,000 million pounds with public support
Within the framework of this call, the company directed by Luis Gallego says it has different financing options for these fleet renewal operations and up to 9,100 million euros in cash in its cash. What is not discussed in the extensive documentation delivered to shareholders is a future return to the dividend, for which the aforementioned charges that British drags and its slower recovery from the coronavirus crisis play against.
With the pandemic already unleashed, IAG withdrew the complementary dividend of 0.17 euros per share (337 million euros) that it was going to bring to the 2020 meeting. Before that step, the firm born from the integration of British and Iberia under the same umbrella, had distributed 4,100 million euros since 2015 among its participants.
Lifeguards in the midst of a pandemic
A ‘low cost’ as a guarantee. Iberia put its low-cost subsidiary Iberia Express as a guarantee before the banks that lent it 758 million over five years, in April 2020, with the guarantee of the ICO. The amortization schedule provides for the return of 15% of the outstanding capital, which is paid on April 30, 2023, 20% of the outstanding balance that same day in 2024, 25% of the outstanding principal in April 2025 and the remaining 40% in the final resolution date, April 30, 2026.
Prices. The airline with its main base in Madrid-Barajas pays Euribor interest plus 2.85% per year. Vueling, which received 262 million with the guarantee of the ICO, has an interest rate of Euribor plus 3.1%.
The British coat of arms. British Airways pays SONIA compound interest plus a margin of 4.65% for its two publicly guaranteed loans in the United Kingdom.
‘Slots’ en Heathrow. Aer Lingus signed its last credit shield against the crisis on March 4 this year. It was with the Irish Strategic Investment Fund (ISIF) and the loan amounted to 350 million euros over three years. The Irishman pledged her landing rights at London’s Heathrow airport. The first 150 million were used in June to repay a previous credit for that amount that was agreed with ISIF in December 2020. Aer Lingus pays Euribor plus 3%.
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