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With new cash injection in a deal with American Express, British Airways owner IAG hopes to stay afloat after a serious hit due to the coronavirus lockdown.
The International Consolidated Airlines Group SA (LON: IAG), owners of British Airways have renewed their partnership deal with payment service provider American Express Company (NYSE: AXP). The deal valued at GBP 750 Million ($955 million) will cover a multi-year contract between the two multinational companies. As the shares of IAG have plummeted by over 67% this year as the coronavirus pandemic wedged a huge economic downturn in the company.
The contract renewal will help to cushion the economic loss the company is battling as it records going illiquid expending over 200 million euros per week. IAG confirmed that the multi-year renewal agreement with American Express would extend the commercial partnership with the payments company and that American Express was paying IAG to pre-purchase Avios points, which members of rewards programs can use to buy flights.
As it stands, the shares of IAG are on the downturn with a 5.15% loss at 197.65 GBX.
Deal with American Express as a Way for British Airways to Recover
As recorded by almost all airlines around the world, British Airways got grounded as nations closed their borders in a bid to ease the spread of the coronavirus. The resulting lockdown did not only resulted in a loss of revenue for the company, the shares suffered massively.
Back in April, British Airways officials entered into talks with Unions and eventually reached an agreement to suspend over 30,000 staff with well spelled out incentives as reported by the BBC. Since the lockdown in the United Kingdom and most countries have been eased, revenues are still trickling in with a low momentum as consumers are still in a phobia of making international travels.
The negative effects of the pandemic on the British Airways coursed it to have a dire need of funding, which its partner, the American Express came to offer with the $955 million deal.
Hopes for Future Rebound?
The fate of the world in the face of the ravaging effects of the notorious COVID-19 lies in the timely release of a potent vaccine. While countries have lifted their lockdowns, the bureaucracies surrounding international travels will still pose a lot of challenges to getting such businesses as that offered by the British Airways up to the levels it was before the virus became the dread of all nations.
In the meantime, the cash injection from the American Express Company will be used to keep the airline afloat pending when normal flight operations will be restored.