Cash call at embattled BA seen only as last resort

By John Bowker

LONDON (Reuters) - British Airways has not ruled out a major rights issue to help shore up its balance sheet but analysts see such a move as an absolute last resort and one that could destroy management credibility.

The carrier, which hosts worried shareholders at its annual general meeting (AGM) in London on Tuesday, declined to comment on a weekend news report that it has received a blessing from major investors for a 500-million-pound fund-raising in the event of a drawn out crisis.

Analysts polled by Reuters said the move was not impossible but added it would be a last throw of the dice for the troubled airline -- which posted record losses for the year to end-March and has seen crucial business passenger numbers plummet amid extremely tough trading conditions.

"Although (a rights issue) cannot be dismissed, it will be avoided if at all possible ... It's a very expensive way to raise capital and you would only do it if you absolutely had to do it," said Nick Cunningham, an analyst at Evolution Securities.

He said the tone from management presentations had been that a rights issue was not on the agenda, and that a U-turn would therefore leave the airline with a "credibility problem."

He also said there were many other ways of saving cash, such as cancelling plane deliveries from Boeing and Airbus.

PLETHORA OF PROBLEMS

British Airways' cash position at the end of March was 1.4 billion pounds, and it has said it has a target of 1 billion pounds in cash by the end of financial year in March 2010.