Aer Lingus and British Airways-owner IAG said it planned to raise about €1 billion through a bond issue, further strengthening its finances to help it survive the pandemic should the travel downturn go on longer than expected.

Airlines are counting on a travel restart this summer after a year of minimal income due to restrictions, but rising case numbers in some countries and delays to the vaccine roll-out in Europe could derail the recovery. 

Last month IAG, which also owns Iberia and Vueling in Spain, said it had liquidity to ride out the crisis, but today decided to issue two bonds to add to its war chest. 

In its statement, the airline group said the proceeds from the offering could be used to "withstand a more prolonged downturn in air travel" or provide "flexibility to take advantage of a recovery in demand for air travel". 

The senior unsecured bonds would be issued in two tranches, IAG said, with €500m of bonds due in 2025 and another €500m due in 2029, and final terms due to be determined shortly.

Settlement is expected to take place on March 25. 

IAG has been cutting costs to help it survive while flying only 20% of its normal capacity. It is burning through about €185m a week. 

The airline last month posted a loss after tax and exceptional items of €6.923 billion for 2020 after a year of minimal flying in the pandemic when it has burnt through cash.

IAG had reported profits of €1.715 billion for 2019 and it warned that it could not give guidance due to the ongoing travel slump.