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IAG shares fall close to rights issue price whilst BALPA claims easyJet could go bust in 2021

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IAG, the parent company of British Airways, suffered a sharp fall in its share price this morning. At 10.45am the price was down 14% to 95p.

The reason this matters is that the share price is now getting very close to the 84p (€0.92) price of the current €2.75 billion rights issue.

If you are an IAG shareholder, you should be thinking very carefully about committing to purchase additional shares at 84p. The market price could well fall below 84p shortly, leaving you sitting on an immediate paper loss.

The deadline for deciding whether to take part in the rights issue is only a few days away. This leaves shareholders in a tricky position.

The good news is that IAG is guaranteed the money regardless. The banks arranging the rights issue have agreed to buy all unsold rights, irrespective of how far the IAG share price falls, so the airline will receive the full €2.75 billion.

easyjet cfo we will be insolvent by next Autumn

easyJet reported as saying that the airline may not survive 2021

To give you an indication of how bad things could get, I was sent an audio transcript of a conference call for easyJet pilots. The union reps were explaining what they claimed to have been told last Tuesday by easyJet management:

bookings for Winter 2020 are “even worse than management’s worst fears”

The airline did own 80% of its fleet. This is now down to 50% and a further batch of sales may be on the way. Aircraft sales generate some cash but immediately trigger on-going mortgage payments.

easyJet is likely to operate no more than 90 aircraft in the UK over the Winter, compared to previous plans for 110+, so additional redundancies may be required

Flights which will operate next year are being filled by passengers who took vouchers for cancelled flights in 2020. Any quoted figures for 2021 loads do not necessarily reflect money coming into the business.

The airline is at risk of insolvency if it does not have a good Summer next year.

For clarity, these comments are from a report by BALPA reps based on a meeting with easyJet management. You need to make a judgement as to their accuracy.

Comments (94)

  • JM says:

    Hi All. I am an existing IAG shareholder and have been offered shares at 0.92 EUR.
    Can I wait for the market price to close today (Tuesday 5pm) and then decide if I want to exercise my rights? Halifax have given me a deadline of midnight, so after FTSE trading hours… Please help if you know the answer. JM

    • mr_jetlag says:

      YMMV. Depending on your broker / custodian’s deadlines you have until midnight to instruct the corporate action (take up all/some/none, and/or apply for additional rights). If you are able and want to sell on their platform you have until end of the trading day today. There is normally a “do nothing” option in which case your broker may sell your rights for you if you have not taken up your rights or otherwise notified them after a deadline.

  • Mikeact says:

    Shame these two popular blogs weren’t split into two separate articles. Lots of scrolling to find the Easy jet comments.

  • Mr. AC says:

    Nope!
    Indeed, if in both cases it was just a fan spinning, there wouldn’t be any difference.
    Yet combustion engines rely on combustion to spin the fan, which actually gets less efficient the lower the pressure is (but more efficient the lower the temperature is). The “optimal” altitude for modern jet engines is ~36000 feet (assuming “normal” weather), because temperature stops dropping off above that while pressure doesn’t. Anything higher, and to maintain efficiency you would need to increase the aperture of the engines basically (that’s why there’s a push for larger engines & why 787 optimal cruising altitude is higher e.g. than a 737).
    No such issues with an electric fan!

    • Mr. AC says:

      (this was supposed to be a response to Rhys on the previous page but didn’t attach to the comment chain for some reason)
      (also for any fellow engineers here, I know I’m oversimplifying, feel free to jump in)

      • Novice says:

        Good to read all the info… I’m just interested in the future concepts as I’m a sci fi writer so inspiration comes from science.

        And, I do envision fast efficient eco friendly planes because let’s not forget when Musk envisioned the future of cars a lot of people laughed and also all those sci fi writers who were seen as mad.

        Now everything they imagined has come to pass and the very action of imagination is creation at its purest so I never write off any difficult concepts. The right person will come along to make it work.

  • Jack says:

    Hi, Trading 212 sold my IAG rights for 0.14p not a great price.