IAG has decided to cancel the complementary dividend to safeguard its liquidity and face the coronavirus crisis, which has forced the company to leave the bulk of its fleet ashore and live a few weeks with practically non-existent income. The owner of British Airways and Iberia thus follows in the footsteps of firms such as Lufthansa and Airbus that have already decided to cancel shareholder remuneration for the difficult situation in the sector.
Specifically, IAG has communicated that the Board of Directors has agreed to withdraw the proposal to pay a supplemental dividend of 17 cents per share and, instead, “allocate the entire result of the 2019 financial year to the provision of voluntary reserve”, includes the Relevant Fact published in the CNMV.
It will allocate much of the result of 2019 to voluntary reserves to overcome the crisis IAG closed last year with a net result of 1,715 million euros, 40% less than a year earlier, but not all that amount will go to reserves since the airline holding company distributed in December 288 million among the dividend shareholders on account of the year 2019. The complementary one supposed an additional disbursement of 338.6 million that would be paid to the shareholders as of July 6, 2020.
IAG had planned to submit the payment of the complementary dividend to a vote at the next General Shareholders’ Meeting to be held in June, but it has also decided to delay holding it until the end of September. At the Shareholders’ Meeting, held in Madrid, IAG usually proposes to shareholders the renewal and re-election of the members of the board of directors, the endorsement of the remuneration policy, the approval of the previous year’s accounts and the remuneration policy.
The cancellation of the dividend is part of the contingency plan put in place by the company to safeguard the box and have enough financial muscle to fly again when the health emergency passes. Thus, the firm has launched temporary employment adjustments for 90% of the Vueling and Iberia workforce, has cut the salary of senior management and is reducing its fleet with the non-renewal of leasing contracts and the early withdrawal of 747 and 340.
In turn, it is reinforcing its liquidity with the search for new lines of financing. Earlier in the week the company announced the renewal and expansion of a British Airways line of credit.
The amount available under the credit line extended until June 2021 is 1,380 million US dollars, bringing the total of general and committed credit lines guaranteed by aircraft to 2,100 million euros.
IAG has a liquidity of 9,300 million euros and seeks to strengthen it
“IAG continues to have a solid liquidity position with cash, cash equivalents and interest-bearing deposits of € 7.2 billion as of March 27. Total cash and undrawn lines of credit are currently € 9.3 billion,” assures the company. In Spain, Iberia is negotiating with the ICO and with banks to grant loans. It seems that the Government will unblock the funds of the Credit Institute from next week.