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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.

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.  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 (53)

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

  • Kilburnflyer says:
    28 May28 May 06:13

    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:
      28 May28 May 06:45

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

      • Brian says:
        28 May28 May 10:19

        … and trying to land on it!!

      • HM says:
        28 May28 May 14:55

        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:
    28 May28 May 06:49

    Which aircraft are the 737s which are referenced?

  • Heathrow Flyer says:
    28 May28 May 07:12

    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:
      28 May28 May 08:31

      Deffo a typo, just looked at the companies house filing

  • Nick G says:
    28 May28 May 07:15

    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:
      28 May28 May 08:51

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

    • Spaghetti Town says:
      28 May28 May 12:18

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

    • Lady London says:
      28 May28 May 16:08

      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 🙂

  • Steve says:
    28 May28 May 07:32

    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:
    28 May28 May 08:33

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

    • Chrisasaurus says:
      28 May28 May 09:01

      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:
    28 May28 May 08:58

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

    • George says:
      28 May28 May 08:59

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

    • A says:
      28 May28 May 10:21

      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).

  • Henk says:
    28 May28 May 09:34

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

    Those three aircraft are clearly the most valuable of the whole lot, but to say that the vast majority of the value comes from these three is overstating it. My estimate is that they account for about a third of the total value.

    • Rob says:
      28 May28 May 09:44

      That’s what we meant. ‘Majority’ was not meant to be taken literally, ie over 50%.

      • ChrisBCN says:
        28 May28 May 15:06

        So if you use the term ‘majority’ elsewhere we shouldn’t take it to mean more than half? Puzzling!😀

        • ChrisBCN says:
          28 May28 May 15:11

          Oh I see majority is now bulk. Still incorrect, but to be fair I can’t think of an alternative phrasing other than ‘largest individual contribution’ which is a messy line and doesn’t feel quite right either.

          • callum says:
            29 May29 May 02:42

            “The most valuable planes in the package, by far, are the Boeing 787-9 and the two 2014 Boeing 777-300ER aircraft.”

            I often used to get caught up trying to change a single word within a passage to make it sound better, but quickly learnt that some sentences cannot be saved and it’s often better to just start it again from scratch!

          • ChrisBCN says:
            29 May29 May 09:18

            Gold star Callum!

          • Lady London says:
            29 May29 May 19:38

            Nice one @Callum

        • The Original David says:
          28 May28 May 15:12

          Not every time they use the word, but maybe just the majority of the time…

          I’m sure the HfP style guide is perfectly clear on the point 😉

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

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