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Iberia and Vueling are bailed out by the Spanish Government

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Iberia and Vueling confirmed this morning that they have received a combined €1 billion bail-out from the Spanish Government.

Sister companies of British Airways inside the IAG umbrella, Iberia received €750 million whilst Vueling received €260 million.

These are five year soft loans.  Whilst the money came from commercial banks, 70% of the loans have been guaranteed by the Spanish Government which means that the repayment risk is substantially reduced.  This allows the money to be lent at a lower interest rate than would otherwise have been required.

The money is not allowed to be passed up the chain to other IAG airlines and must be used exclusively for the benefit of Iberia and Vueling.  I would imagine that it cannot be used to fund the €1 billion acquisition of Air Europa, which has unsurprisingly gone very quiet in recent weeks.

Iberia and Vueling are bailed out by Spain

You can see the full announcement on the IAG website here.

This structure is different to the one that easyJet and Hungary’s Wizz Air have used to receive bail-outs from the UK Government, which involved the Bank of England directly buying new bonds issued by the airlines.  See our articles here on the easyJet £600m bail-out loan and here for the Wizz Air £300m (TBC) bail-out loan.

Didn’t British Airways say it wouldn’t access soft Government loans?

In the announcement on Tuesday, BA’s CEO Alex Cruz said that part of the reason that British Airways had decided to make 12,000 employees redundant was that it was not accepting Government money.

The letter to employees said:

There is no Government bailout standing by for BA and we cannot expect the taxpayer to offset salaries indefinitely.

Except, of course, there IS a Government bailout standing by for BA if it wants one – the same one that easyJet and Wizz Air have accessed.  British Airways had investment grade commercial debt in issue on 1st March 2020 which is the key requirement.

What wasn’t clear at the time was why Iberia and Vueling had not announced redundancies.  Why was British Airways cutting 25% of its staff whilst the Spanish subsidiaries were cutting no one?

Now we know.  It is very likely that the terms of these Spanish Government loans including protections for employee rights.

It is quite clear that the IAG board has no problem with its subsidiaries taking soft Government bail-out loans.  A cynic might suggest that the only reason that British Airways has refused to access the Covid Corporate Finance Facility is to give it cover to pursue its redundancy programme, which itself now appears to be cover for finally ridding itself of high-paid legacy cabin crew.

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Comments (155)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Pat says:

    Even Iberia and Vueling are owned by IAG, they are still Spanish companies. And the UK gov did say they were not bailing out any airlines back in March.

    • Rob says:

      IAG said it wasn’t taking any bailouts a few weeks ago 🙂

      • marcw says:

        But as you said, you would be stupid if you wouldn´t take almost free money.

        • Lady London says:


          So now that we see BA not taking the easy £billions of money available to them, what could BA possibly want more, even more than those billions?

          Could it be the one thing BA is willing to give up billions for, is the chance to finally get rid of longstanding staff who have decent contracts and force those that remain into a single contract at dirt money and conditions? That they’ve been desperate to do for over 20 years?

          They’re saying right now no government loans, so they can get this done.

          Good chance they’ll get it done and circle back and grab the money as well, though, if they can.

      • ChrisC says:

        IB = that was IAG that said that said that we are IB!

        Parsing it yes but to be realistic how many people out there in the non travel blog reading world even know that BA is owned by IAG.?

        Heck how many know that Boots and ASDA are foreign owned and the company that operates your train is likely to be foreign owned as well despite the ‘British’ name on the side of the train?

  • MikeG says:

    A (complete) change of subject…GA, WizzAir, Easyjet et al get an almost automatic right to borrow money at silly interets rates….I (along with countless others) applied for the much plauded CBILS loan and like 5 out of 6 applicants got turned down. OK…I only employ 70 people, many of whom are furloughed…and I only need around £250k to weather the storm…but the UK mainstream banks can’t accept there’s a difference between normal lending criterai and the unusual times we are now in and UK plc (who give money to anyone who is big enough not to need it) and my local MP (who trots out the Boris mantra with practised precision…) actually don’t care a damn if and when my 70 staff hit the dole q.

  • marcw says:

    Companies in Spain can´t announce lay offs if companies furloughed their employees in the special COVID-19 program. There will be layoffs in Iberia and Vueling, I am pretty sure.

  • James says:

    Looking more likely that Virgin will survive now, it would be extremely unlucky and make Pishi Rishi look bad if it were the only airline in the world that isn’t being assisted by it’s native government, with the associated loss of more jobs and more loss of future taxpayers.

    • Rob says:

      I also think that the PR damage to the Government would be too large (irrespective of the social security etc costs). There has to be an element of confidence in the population that the Govt is doing the right thing. A big corporate failure like this (and VS is, to be fair, a bigger brand than its employee numbers imply) would create a lot of pressure to get people back to work ASAP and lift restrictions.

      • Lady London says:

        Unfortunately it looks like you could be right Rob.

        TBH BA is showing its nasty DNA again in the way they’re treating employees who will have to go. But I would still view government support to BA as an investment.

        Whereas the current Virgin-labelled entity has not been viable for 10 years even in boom years
        Any government support to Virgin is just flushing money down the toilet.

        And could now be interpreted as the government supporting BA in the Transatlantic joint venture by keeping a waste-of-space Virgin as a ‘straw man’ to protect BA by making the Transatlantic JV cartel look like it has competitio.

    • Ken says:

      Putting money into Virgin will be like filling a bucket with a hole in it.

      The mooted £500m will barely cover the alleged $200m it owes Delta and the out of the money fuel hedging for 2020 (£120 – £150m guesstimate?).

      How much are we prepared to pay to save each job ?

      I doubt if £100k per job (£800m) will do it – and that won’t get us much beyond the middle of next year.
      No prospect of ever getting this back.

      • Alison says:

        Really, wow I’m so glad you know Virgins fuel hedge positions? I hope your keeping them confidential as I’m sure its highly privileged infomation?
        As for you first point of the $200m VAA “owes” Delta then i suggest you don’t understand the value Delta has in its JV with VAA and the opening up to the lucrative transatlantic traffic it brought them. I believe you find its a point of public record that they are more than happy to defer any payments due until a point much further down the road.

        • Ken says:

          VS lose money most years – that’s in the good times.
          Nothing contentious about stating that Virgin hedge their fuel. They state it in every annual report. All airlines hedging will be out of the money massively.
          The amount was my guesstimate – they spend roughly £750m on fuel a year, If you have a better idea of the hit then I’m all ears.

          The $200m was an amount owed to Delta at 31st March per Delta’s own statement.

          If they Business is so important to Delta and Branson they seem awful shy of putting any money up.

          I don’t want Virgin to fold, but there is a whole line of businesses that are more viable.

          • George T says:

            Ken the Uninformed at his best, if you have nothing positive or factual to say then….

      • Mikeact says:

        Some may be interested in the woes of Virgin Australia, albeit little to do with the Virgin closer to home but it does give an insight to how they were run with the consequent problems they are now in….one may ask , what a way to run a business.

        Virgin Australia currently owes $6.8 billion – more than previously thought – to around 12,000 creditors, the administrators have revealed. More than 9,000 of those creditors are Virgin employees, which are owed a combined total of $451 million. It also turns out that the trust backing the value of Velocity Frequent Flyer points is owed $160 million by the airline.

        Velocity Frequent Flyer is run as a separate business entity to Virgin Australia. Although the loyalty program is 100% owned by Virgin Australia after it bought back a 35% stake from Affinity Equity Partners last year, Velocity is not in administration.
        Virgin Australia CEO Paul Scurrah has reassured Velocity members that “there is a trust in place that has cash backing for the points”.
        This may be the case, but The Australian Financial Review revealed last weekend that Velocity Rewards provided a $150 million loan to Virgin Australia in 2014 which was never repaid. The secured loan, which was an “investment” and has been accruing interest at commercial rates since 2014, now leaves Velocity as a creditor of the airline.
        Velocity is also seeking the return of $10 million that it pre-paid to Virgin Australia for reward seats that would later be redeemed by frequent flyers.
        It is believed that the cash value of unredeemed Velocity points is around $500 million. Therefore, the $160 million owed to Velocity by Virgin Australia represents around a third of the value of “The Loyalty Trust”, as it’s called.

  • marcw says:

    Britain has turned to Morgan Stanley for advice on a package of measures to keep its airlines in business during the coronavirus crisis, after warnings that the industry might implode, two sources familiar with the matter told Reuters.

    The Wall Street investment bank, originally drafted in to handle a possible bailout of Virgin Atlantic, has been awarded a broader mandate to examine ways to support the entire airline sector in Britain, the sources said.

    “The situation was more complicated than expected,” the second source said, adding that any bailout of Virgin Atlantic might prompt other airlines to request state aid.

    Morgan Stanley’s expanded role comes as British Airways-owner IAG began a sweeping restructuring and the boss of London Heathrow Airport’s boss warned that Britain risks destroying its aviation sector by not propping up airlines as countries such as the United States and France have done.

  • Anna says:

    So…Spain (the land of my father before anyone pipes up), is simultaneously offering its airlines a bailout, AND demanding one from the EU for itself ?

    • Mike says:


      You mean like how the German, UK, Dutch and many other governments bailed out their banks in 2008-2012, and then sought the EU to pay for it? Please…

    • marcw says:

      It´s a commercial loan guaranteed 90% by the gov.

    • Lady London says:

      Of course.

    • Anna says:

      That’s very magnanimous of you, J. I completely fail to see why fiscally responsible nations should be responsible for helping those whI have are well-documented havens of corruption and incompetence. You might want to read some of Transparency International’s reports on how many of your tax euros disappear into a black hole never to be recouped by Brussels.

      • Nick says:

        With respect, you are totally incorrect. You cannot have a shared currency, without shared liabilities. It’s obvious that eventually, and with enormous drama, Germany/Austria/Netherlands/Finland will give in. Eurobonds will happen. Or the alternative is the Euro break up.

        As the above states those countries have profited enormously from the Euro – they will now have to do their bit to maintain it.

        The Guilder was never as important as the Euro. Finnish national currency? Does anyone remember that one…

        • Tim says:

          ‘It’s obvious eventually…’… – actually it is not anymore. This presumption belongs with the international institution expansion argument, that the status quo expands – becoming a new status quo – and does not contract into another new status quo. The Euro was on shaky ground since its inception. The UK leaving the EU, and now the Coronavirus pandemic, have shafted the international instiution expansion argument. As far as the EU is concerned, it has already gone into reverse. Not only with Brexit, but now with Schengen. So ‘’s obvious eventually’… no longer stands. Just as it never did one way or the other.

  • Paul says:

    And of course there’s the added saving in having furloughed staff part paid by the government whilst ‘working’ their notice. Nice little bonus…

  • Alison says:

    They (BA) are just doing what they have always wanted to do and that’s get rid of the legacy contacts. And while doing that trying and in my view failing to push VAA out of business.

    BA and IAG will be under significant financial stress no matter how much cash the are sitting on. BA some 40k+ staff many on old expensive contacts, lots more aircraft yes but that means lots more sat doing nothing more than costing money.

    VAA are, last I heard they are running a lot more high value cargo operations than BA when looked at as a % of daily movements compared to BA , something like 15-20%.

    And being an already smaller more nimble and with much better employee relations they should be able to pivot much more quickly that it’s old rival ( as has been seen in the cargo ops). You only need to look on social media to see how passionate the staff at VAA are, where as BA have just shot themselves in the head with the 12k of redundancies. Any good will has just evaporated.

    Many times BA has underestimated its young upstart of a rival..
    Don’t count VAA out I for one have not and I for one hope they carry on for many many more years and carry on keeping BA honest.

    • mutley says:

      Well said, BA staff morale has always been mediocre at best, its likely to be on the floor now. I for one hope that Beardy airlines survives and that’s not just because I have 300k miles sitting in Flying Club. I always feel that the Virgin crew actually enjoy working for the company.

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