Aer Lingus owner IAG is looking at raising as much as €2.75bn in a share sale to help strengthen its balance sheet and ride out the coronavirus crisis.
The London-based group, which also owns Spain's Iberia and British Airways, said yesterday that it may opt for a rights issue, though no final decision has been taken.
While airlines worldwide are suffering after the pandemic upended travel, the premium markets on which IAG relies may be among the last to recover as economies stumble and people shun long-haul flights. The company also hasn't received the billions in aid pumped into rivals Deutsche Lufthansa AG and Air France-KLM, with help limited to furlough funds and state-backed loans.
IAG chief Willie Walsh was due to retire in June but delayed his departure when the crisis hit.
Given IAG's market value of about €4.39bn, the amount of money it aims to raise suggests the share count could more than double, leaving investors facing a choice between increasing their exposure or being substantially diluted, said analyst Daniel Roeska.
The course of action is still preferable to seeking a bailout, according to Mr Roeska, who said in a note that "private money rather than a government stake would allow the company to maintain strategic freedom".
IAG shares closed 4.8pc lower in London, extending the decline this year to 68pc.
The fundraising could take place in September, according to a person with knowledge of the group's plans who asked not to be named discussing the matter. Bloomberg reported last month that IAG was working with Goldman Sachs Group Inc. and Morgan Stanley on plans to boost liquidity.
High coronavirus infection rates in the US are delaying a recovery in the lucrative North Atlantic market. While IAG had cash and undrawn facilities of €10bn as of April 30, Mr Roeska said the carrier may be concerned about that trend, or that its cash burn could be worse than expected.
IAG also said yesterday it had renewed an air-miles deal with credit card giant American Express, adding £750m (€824m) to its coffers. It is also cutting thousands of jobs and retiring older planes to slash maintenance costs.