Struggling flag carrier British Airways said today it was considering launching a convertible bond, not a rights issue, to shore up its balance sheet during the global aviation sector downturn.
BA chairman Martin Broughton told shareholders at the company's annual general meeting that the timing was not appropriate for a rights issue because the carrier had a “number of key issues” to resolve in the next twelve months.
However, Mr Broughton said BA was looking at other options to improve its battered balance sheet.
“We are in discussions with our institutional investors exploring opportunities in the convertible market, which we believe is the best way of increasing our cash reserves,” Mr Broughton said.
A weekend news report had suggested the airline had received support from some of its shareholders for a major rights issue, a move seen by analysts as an absolute last resort.
Mr Broughton said it was clear that deficits in the group's pension schemes would be higher than the £1.74 billion indicated last September.
The valuation of its funds was likely to be down by at least £1.2 billion, he said. The company could not afford to increase its own contribution - which totalled more than £1.8 billion in the last three years, he added.
“It is a sobering thought that this level of contribution is far in excess of our cumulative profits, which have been £1 billion, over the same period," he said.
The company will agree a revised funding plan with pension trustees after a review, he said.
Early exchanges at a packed annual meeting near the Houses of Parliament in central London were dominated by questions on director pay and the airline's attempt to persuade ground staff and cabin crew to accept pay cuts and changes to working conditions.
Reuters