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British Airways raises $750 million by mortgaging 48 aircraft

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British Airways has raised a further $750 million to shore up its finances by mortgaging 48 aircraft.

The deal was arranged by Citi – the security documentation is here.  It is a legal requirement to notify Companies House when additional security is given against the assets of a business, as this has an impact on both shareholders and potential and existing lenders.  If you have made an unsecured loan to British Airways plc, for example, you are now relying on a smaller pool of assets to repay you if the company goes into receivership.

British Airways raises $750 million by mortgaging 48 aircraft

Schedule 1 towards the back shows the assets involved:

2 x Airbus A318 (built 2009)

4 x Airbus A319 (built 2001)

24 x Airbus A320 (built 2001-2010)

10 x Airbus A321 (built 2004-2009)

7 x Boeing 777 (built 2000-2014)

1 x Boeing 787 (built 2016)

There are clearly a few dogs here, as there is little residual value in 20 year old short-haul aircraft.

The bulk of the $750 million, in reality, comes from the Boeing 787-9 and the two 2014 Boeing 777-300ER aircraft included in the package.

One quirk is the two Airbus A318 aircraft, pictured above.  These are the aircraft bought to operate the London City Airport to New York JFK service. 

Only one of the two aircraft is currently being used by British Airways.  The second plane was taken over by Titan Airways when BA cut the London City service down to one flight per day – you can see it here landing in St Helena last month.  There was an assumption that British Airways had sold the aircraft to Titan but it is clearly only leased.

Why did British Airways do this?

It is sensible that British Airways is doing what it can at the moment to sustain its cash pile.

However, cynics may suggest that the airline is doing everything it can to avoid having to take Government funding.  Whilst Iberia and Vueling have taken €1 billion from the Spanish Government, and IAG – BA’s parent company – has taken £300 million from the UK Government – British Airways itself has taken nothing.

The cost of servicing this mortgage is almost certainly higher than the cost of servicing a ‘soft’ loan from the UK Government especially as 48 old aircraft are not the most attractive security package in the current environment.

It is possible that British Airways is trying to avoid taking Government funding until it has pushed through the proposed pay cuts, weakened contractual terms and mass redundancies which are currently under consultation.


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Comments (55)

  • Kilburnflyer says:

    Interesting article. NB, the footage you have linked to is the A318 landing at *St Helena* the remote island in the south Atlantic where Napoleon was exiled to (rather than the Falklands).

    • Simon says:

      And if anyone is still bored in lockdown then reading up on the history of St Helena airport is worth your time…

      • Brian says:

        … and trying to land on it!!

      • maccymac says:

        Worth watching Wendover Productions documentary on St Helena if anyone has 45 minutes to spare. Really interesting. Rob please remove if link not allowed and apologies if so.

        https://www.youtube.com/watch?v=5-QejUTDCWw

        • HM says:

          A dangerous rabbit hole to go down – after I watched the Wendover doc a few months back I ended up reading up on not only St Helena’s airport, but its political administration/history/Napoleon etc. as well as the crash history/detection/mitigation etc. of wind shear and all sorts of things! I love the internet! 🙂

  • Liam J says:

    Which aircraft are the 737s which are referenced?

  • Heathrow Flyer says:

    The Citi link is dead – and as noted St Helena certainly isn’t part of the Falkland Islands.

    Also what 737 aircraft does BA own?

    • Spaghetti Town says:

      Deffo a typo, just looked at the companies house filing

  • Nick G says:

    I wouldn’t say hardly any value in old Airbus A319 etc. The engines alone are worth millions (assuming they are owned by BA, and upto standard). The frames and interiors less valuable. Having said that aircraft parts can be worth a lot on the second hand market

    • Rhys says:

      Unlikely to be worth a lot on the second hand market with every airline making early retirements!

    • Spaghetti Town says:

      engines will be quite valuable as they can obviously be used on other airframes

    • Lady London says:

      so a rare case of them being worth more than book value? interesting.

      @Rob just in case you thought your finesse in a very English way of saying what’s going on without actually saying it had gone unnoticed, I thought you did it very well 🙂

  • Alan Wan says:

    I think the 7 x 737 is a typo. According the FT it should be 5 x 777-200

    Besides the above list of aircraft adds up to 50 and not 48

    See https://www.flyertalk.com/forum/british-airways-executive-club/2018507-ba-mortgages-48-aircraft-raise-us-750m.html

  • Steve says:

    As seen by Lufthansa’s deal any govt cash injection would likely require a dilution of shareholding. And as seen by Virgin’s situation a company should be doing all they can to source cash themselves before resorting to govt funding.

  • Spaghetti Town says:

    Clearly Willie isn’t expecting to pass Go and collect £200 anytime soon

    • Chrisasaurus says:

      For extra points mortgage 48 or 50 planes (depending on whether you follow Rob’s maths!) that you intended to retire anyway, trouser the 750mil and default immediately and have someone take them off your hands

  • insider says:

    Is this just the revolving credit facility? Normally that would have some form of asset security behind it

    • George says:

      Pretty sure it is. Sounds like they have drawn on part of it.

    • A says:

      Don’t think this is just as a result of a drawdown of an existing revolver (unless it is a new revolver) – the facility agreement to which it relates is a new $750m signed last Tuesday (see definition of “Facility Agreement” which is expressed to be dated 19 May 2020).

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