Further to the announcement on 31 July 2020 and the approval by shareholders on 8 September 2020, International Consolidated Airlines Group, S.A. ("IAG", the "Company" and, together with its subsidiaries, the "Group") today announces a fully underwritten capital increase with pre-emptive subscription rights to raise gross proceeds of €2,741 million (the "Capital Increase") through the issuance of 2,979,443,376 new shares in IAG (the "New Shares"). The subscription price will be €0.92 for each New Share, representing a 35.9% discount to the TERP (theoretical ex-rights price) based on the closing price of the shares on 9 September 2020. As previously announced, Qatar Airways Group Q.C.S.C. ("Qatar Airways"), IAG's largest shareholder (25.1% holding), has irrevocably undertaken to subscribe for its pro-rata entitlement under the Capital Increase. For each existing share of IAG, its holder is entitled to one subscription right and 2 subscription rights are required to subscribe for 3 New Shares.

Key Highlights

•           The Capital Increase to raise €2,741 million is designed to:

•      enable IAG to strengthen its balance sheet and reduce leverage;

•      enhance liquidity and help IAG withstand a more prolonged downturn in air travel based on IAG's stressed, downside scenario planning; and

•      provide IAG with the operational and strategic flexibility to take advantage of a recovery in demand for air travel.

•           IAG acted quickly to mitigate the impacts of the COVID-19 pandemic, bolster liquidity and to protect its long-term future. These actions preserved cash through a range of measures including: capacity reductions; lowering operating costs; accessing Government wage support schemes in the UK, Spain and Ireland and other measures agreed to reduce employee costs; reducing discretionary spending, including halving planned capex over the next three years, and significantly reducing fleet deliveries.

•           IAG believes the Capital Increase, together with its quick response to the crisis, should enable the Group to emerge from the current pandemic in a strong position, with more resilience, greater flexibility and the ability to make the right operational and strategic decisions for the long term benefit of all its stakeholders.

•           IAG has a proven and successful operating model underpinned by its portfolio of world-class brands, global leadership positions in each of its home markets and unique structure. The Group has a strong track record of value-enhancing consolidation and delivering value to shareholders through industry-leading returns and growing profitability.

•     Qatar Airways, IAG's largest shareholder (25.1% holding), has irrevocably undertaken to subscribe for its pro-rata entitlement under the Capital Increase.

•     The Capital Increase was approved by shareholders at the General Shareholders' Meeting on 8 September 2020.

Details of the Capital Increase

•     The subscription price of €0.92 per New Share represents a discount of 35.9% to the TERP (theoretical ex-rights price) of €1.44 per share by reference to the closing price on 9 September 2020 (the last business day before this announcement).

•     The gross proceeds of the Capital Increase will amount to an aggregate of €2,741 million.

•     For each existing share of IAG, its holder is entitled to one subscription right and 2 subscription rights are required to subscribe for 3 New Shares.

•     The preferential subscription period is expected to last fifteen calendar days from the day after publication of the Capital Increase in the BORME (Official Gazette of the Business Register), during which the subscription rights can be traded.

•     The New Shares will confer to their holders the same voting and economic rights as the ordinary shares of the Company currently in circulation.

•     Subscription rights that are not exercised shall automatically lapse at the end of the subscription period and, therefore, shareholders who take no action will not receive compensation for any unused or expired subscription rights and will be diluted.

•     The Capital Increase is, subject to certain customary conditions, underwritten by Goldman Sachs International and Morgan Stanley & Co. International plc acting as Joint Sponsors, Joint Global Coordinators and Joint Bookrunners, Deutsche Bank Aktiengesellschaft acting as Joint Global Coordinator and Joint Bookrunner and Banco Bilbao Vizcaya Argentaria, S.A, Banco Santander, S.A., Barclays Bank PLC, BofA Securities, Citigroup Global Markets Limited and Credit Suisse Securities (Europe) Limited acting as Joint Bookrunners.

Use of Proceeds

The net proceeds of the Capital Increase will be used to strengthen the Group's balance sheet by reducing financial leverage and increasing IAG's liquidity position.

Current Trading and Outlook

Following an almost complete cessation of new booking activity in April and May, June saw a significant increase in bookings to approximately 30% of prior year levels by the end of the month. This was driven by the easing of country lockdowns in key home markets and across Europe as well as the gradual re-opening of intra-European borders. Domestic travel has led the recovery, followed by international short-haul and then long-haul travel.

Since July, IAG has experienced an overall levelling off of bookings. Short-haul bookings have fallen slightly following the re-implementation of quarantine requirements by the UK and other European governments for travellers returning from specific countries including Spain.

As anticipated, IAG has seen a delayed recovery of long-haul booking activity, impacted by the continued existence of travel restrictions to many long-haul destinations, including North and South America. Long-haul bookings have seen a modest increase since mid-August.

Where travel markets have reopened without border restrictions and quarantine requirements IAG has been encouraged by the level of pent-up demand that exists for air travel.

As a result of the impact of current travel restrictions and quarantine requirements on booking activity, the Group's capacity planning scenario for 2020 has been lowered to minus 63% in terms of available seat kilometres (ASKs) compared to 2019 from minus 59% previously. For 3Q 2020 capacity is expected to decline by 78% compared to 2019 and lower than a decline of 74% in the previous scenario. For 4Q 2020 capacity is expected to decline by 60% compared to 2019 and compared to a decline of 46% in the previous scenario. For 2021 capacity is expected to decline by 27% compared to 2019, a reduction compared to 24% previously planned.

Despite a lower capacity in 4Q 2020 than under the previous planning scenario, the Group continues to expect that it would reach breakeven in terms of Net cash flows from operating activities during 4Q 2020. This is as a result of mitigating actions taken to reduce operating expenses further and enhance working capital.

There has been no change to the Group's expectation that it will take until at least 2023 for passenger demand to recover to 2019 levels.

There has also been no change to the Group's downside planning scenario, which was used to determine the size of the Capital Increase. The downside scenario includes a reduction in capacity in terms of ASKs of 66% in 2020 and 35% in 2021 relative to 2019. IAG considers that further downside to the latest planning scenario is more likely to be in the form of delays or extensions to the recovery trajectory, for example as a result of partial travel restrictions, rather than a return to full lockdown.

IAG has continued to implement its restructuring plans. British Airways is in the process of reducing headcount by up to 13,000. By the end of August, the headcount was reduced by 8,236 due to employees leaving the business and mostly as a result of voluntary redundancy. It has concluded labour agreements with its pilots, engineers and Heathrow customer service staff. In regard to cabin crew, agreement in principle has been reached with Unite and a consultative ballot is expected to start shortly. Other consultation discussions continue, including with Heathrow ground handling services and cargo operations staff, UK Contact Centre employees and Gatwick based cabin crew. Iberia and Vueling continue to benefit from the Spanish Government's ERTE furlough scheme, which is expected to be extended into 2021. Aer Lingus has implemented reductions in salaries and working hours across the airline and expects 250 voluntary redundancies by the end of 2020. IAG expects to report restructuring charges of c.€330 million in its 2020 results associated with employee redundancies.

As at 31 August 2020, the Group had total liquidity of €7.6 billion, comprised of €5.8 billion of cash, cash equivalents and interest-bearing deposits and €1.8 billion of undrawn and committed general and aircraft facilities. Cash at the end of August included an approximate £750 million payment from American Express, a significant part of which was a pre-purchase of Avios points, as announced on 24 July 2020.

Directors' Intentions

Each Director who is a shareholder and who is able to participate in the Capital Increase has irrevocably undertaken to take up in full or in part his or her entitlement to subscribe for New Shares.


A prospectus (the "Prospectus") setting out the full details of the Capital Increase, including a full timetable of key dates, is expected to be approved and registered by the Spanish National Securities Market Commission ("CNMV") in the coming days and to be published on the Company's website (www.iairgroup.com) and the CNMV (www.cnmv.es). The preceding summary should be read in conjunction with the full text of the following announcement, together with the Prospectus.

The Prospectus will also include details for shareholders on how to participate in the Capital Increase. Unless the context otherwise requires, words and expressions defined in the Prospectus shall have the same meanings in this announcement.