British Airways –heavy losses, but remains in the game

Commonwealth Aviation review

The British’s flagship airline, British Airways has suffered heavy losses in the year 2020, principally due to the global pandemic and allied social restriction measures. In order to be competitive in the industry and to keep a healthy level of liquidity in hand, the airline had to cut down management salaries, retrench some of its workers and also taken on new debts. Among other measures, BA has taken a financial facility of £298 million loan from the Bank of England Coronavirus Corporate Financing Facility (‘CCFF’).   

Performance at a glance

  • Total revenue: £4,001 million, down 69.9% (2019: £13,290 million)
  • Operating loss before exceptional items: £2,328 million (2019: £1,921 million profit)
  • Passengers: 12.3 million, down 74.3% (2019: 47.7 million)
  • Punctuality: 85% (2019: 76%)

Hard times

2020 was an exceptionally difficult year for BA due to the COVID-19 pandemic in its 100-year history, the airline had never experienced a crisis of this magnitude, compelling it to drastically reduce its flying schedule, workforce, fleet and operation as it navigated continual, fast-changing global travel restrictions and three UK Government lockdowns. Compared to year 2019, over the year BA experienced an average 66% reduction in its schedule.

British Airways cancelled flying to China at the end of January 2020. By March, the virus had spread throughout Europe, at the same month the UK began its first lockdown. BA operated just 5% of its planned schedule compared with the same period in 2019. During this time, the airline operated 134 repatriation flights from 21 countries, keeping vital air links open and returning 40,000 Britons to the UK.

Against this backdrop, BA Management Team had to take urgent action to restructure the business, ensuing it to emerge from the crisis and still be able to compete with its competitors in the field.

BA had taken every steps to save as many jobs as possible. In September 2020, while working with the trade unions, British Airways was able to mitigate the number of redundancies, protect as many jobs as possible and entered into an industrial agreements across the main areas of the business. This includes the airline’s cabin crew and pilot communities.


In order to be remain competitive in a structurally changed industry, BA focused on maintain a healthy amount of liquidity; the measures include taking on a significant amount of new debt. Other measures are preserve the cash position include management pay cuts, pilots unpaid leave, participation in the UK Government’s Job Retention Scheme, deferring a number of aircraft scheduled for delivery between 2020 and 2022 and robust financial controls to ceil spending only to business critical spend.

British Airways obtained a £298 million loan from the Bank of England Coronavirus Corporate Financing Facility (‘CCFF’), with the loan repayable in the first half of 2021.

In addition to the facility, on 30 March 2020, the BA secured US dollar Revolving Credit Facility that was extended for one year from 23 June 2020 to 23 June 2021 and (As at 31 December 2020) and the facility was $768 million.

In November 2020, British Airways entered into an asset-financing structure and raised a total of over $1 billion to refinance short term funding and finance recent and future aircraft deliveries. In the same month, BA concluded a three year Term Loan with its parent company, IAG, for an amount of €1.65 billion, which was fully drawn by year-end.

On 22 February 2021, British Airways entered into a five year term-loan of £2 billion underwritten by a syndicate of banks, partly guaranteed by UK Export Finance.

Sustainable recovery

The airline has planned out a series of measures to brave the uncertain future; in the short-term, BA will improve its operational efficiency, introduce carbon offset and removal projects, albeit in the medium to longer term, it will make substantial investments in the development of sustainable aviation fuels (‘SAF’) and help accelerate the growth of new technologies such as zero emissions hydrogen-powered aircraft.

From January 2020, BA began offsetting carbon emissions on all flights within the UK as a short-term, interim measure, and at the same time, developing alternatives to fossil fuels and evolving new technologies. BA also launched a carbon offsetting tool to providing its customers with the option of offsetting the emissions from their international flights and invest in carbon reduction projects. This include forestry and renewable energy projects in Peru, Sudan and Cambodia.

In February 2020, Alex Cruz, former Chairman and CEO of BA welcomed HRH the Prince of Wales to the airline’s engineering base in Cardiff to personally inspect BA’s sustainable initiatives.

Later the same month, BA set a target of removing more than 700 tonnes of single-use plastic on board flights by the end of the year. Due to COVID-19 safety measures, BA has had to re-introduce many elements of plastic packaging eliminated earlier in the year. However, the original plan was to get back on track as soon as possible.

Waste to-jet fuel plant  

Along with its partner Velocys, BA planned permission to create the UK’s first commercial-scale waste-to-jet fuel plant in Lincolnshire. The plant will assist BA’s medium-term plans to create SAF that can power aircraft and reduce carbon emissions.

Some of the steps that BA took include BA’s partnering with sustainable jet fuel company LanzaJet to initially commit British Airways to 7,500 tonnes of SAF from LanzaJet’s US biorefinery over a five year period to be commenced as early as the end of 2022. After the successful start-up of the US plant, British Airways hopes to deploy the technology and SAF production capacity in the UK.

In December 2020, British Airways partnered with ZeroAvia, a leading innovator in decarbonising commercial aviation, in a project to explore how hydrogen-powered aircraft that can play a vital role in the future of sustainable flying. This was after ZeroAvia’s successful completion of the world’s first hydrogen fuel cell powered flight of a commercial-size aircraft in September 2020.

BA has permanently retired older, less fuel-efficient aircraft. That includes the entire B747 fleet in 2020, while adding four new Airbus A350 aircraft (bringing the total number in our fleet to eight, with five entering service in 2020), two 787-10s (bringing the total number of 787 aircraft to 32), four 777-300ERs, two A321neos and three A320neos to its fleet.

Liquidity Position

The Group’s liquidity position at 31 December 2020 consisted of £1.3 billion of cash, cash equivalents and other interest-bearing deposits (2019: £2.6 billion). At the end of the year, net debt amounted to £7.5 billion (2019: £3.7 billion). Net debt, defined as long-term borrowings (bothcurrent and non-current), less cash, cash equivalents and current interest-bearing deposits.

In addition, the Group had undrawn long-term committed aircraft financing facilities totalling £0.5 billion (2019: £0.5 billion) and further general facilities of £0.6 billion (2019: £1.0 billion).

In November 2020, British Airways entered into an asset-financing structure and raised a total of $1,005 million to finance all 14 aircraft. The transaction, albeit an unconsolidated structured entity, includes Class A certificates with an annual coupon of 4.25 per cent and maturity of 12.0 years and Class B Certificates with an annual coupon of 8.375 per cent and a maturity of 8.0 years, assisted by a collateral pool of new Airbus A320 NEO, Airbus A350-1000, Boeing 787-10 aircraft, as well as vintage Airbus A320-200. At the end of the year, $428 million (£313 million) remained undrawn and unused.

In April 2020, BA accessed the Bank of England CCFF facility, drawing down £298 million with a twelve month maturity period. British Airways also obtained a three year Term Loan with its parent company, IAG, for an amount of €1.65 billion. On 31 December 2020, BA obtained commitments for a 5-year term-loan of £2 billion underwritten by a syndicate of banks, partially guaranteed by UK Export Finance.

Risk assessment

The Group focuses on mitigating diverse risks at all levels in the business; there are risks outside the BA’s control and these include changes in the political and economic environment, government regulation, external events causing operational disruption, fuel price and foreign exchange volatility and changes in the competitive landscape.

The Group carries out detailed risk management reviews under the IAG risk management framework. Risks are maintained in a risk heatmap, which is reviewed semi-annually by the BA Board.

In overall assessment, British Airways has prudently assessed the risks and foreseeable trends such a green technology and reducing its carbon footprint as well as, taken appropriate measure to ensure that it has a considerable amount of liquidity in hand to compete with its competitors in the field. It may assist the UK government’s goals of becoming the premier Airline in the Commonwealth.  

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