April 29, 2020 / 7:00 AM / a month ago

UPDATE 3-Finnair plans to raise 500 mln euros after losses widen

* Shares down 10.7%

* 56%-shareholder Finland plans to take part in offering

* Q1 loss per share widens to 1.14 eur

* Says losing 2 mln eur/day in Q2 (Adds analyst, context, updates shares)

By Tarmo Virki

April 29 (Reuters) - Finnair plans to raise 500 million euros ($543 million) through a rights offering that would be larger than its current equity, the airline said on Wednesday after reporting deepening first-quarter losses.

Airlines across the world are looking for ways to bolster their war chests - raising additional capital and cutting costs as the coronavirus pandemic has grounded most flights.

Shares in Finnair dropped 10.7% in morning trading to 3.81 euros, valuing the firm at 488 million euros.

The Finnish flag carrier said it had started preparations for the offering, with Citigroup and Nordea, signed up as lead managers.

“The coronavirus is a major blow to global aviation and to Finnair,” Chief Executive Topi Manner said in a statement.

“We want to ensure with this share issue that Finnair is a competitive airline in the future.”

The company’s liquid cash funds were at 833 million euros at the end of March, he added.

“Finnair’s liquidity is safeguarded until end of H1’21 but the large share issue of 500 million euros may not have been expected in the markets at this stage,” said Inderes analyst Antti Viljakainen.

Finnair said the government, which holds 55.8% of the airline’s shares, has supported a supplementary budget to cover its participation in the offering which will be put before parliament.

Finnair’s first-quarter loss per share widened to 1.14 euros from 0.33 euros a year earlier. Analysts had forecast a loss of 0.60 euros per share, according to Refinitiv data.

On March 16, Finnair issued its second profit warning in three weeks, saying it would report a substantial comparable operating loss for 2020 because it was cutting about 90% of normal capacity from the beginning of April.

Finnair said it expects to lose about 2 million euros a day throughout the second quarter.

“We expect aviation to recover slowly from July onwards, and passenger numbers to return to 2019 levels in two to three years,” Manner said.

Earlier this week, the head of Finnair’s rival SAS said demand could reach more normal levels in 2022, while the firm said it could reduce its workforce by up to 5,000 full-time positions.

Norwegian Air has said it could run out of cash by mid-May and 4,700 staff would lose their jobs. It is now seeking to convert debt to equity in a bid to qualify for state aid as it seeks to survive the crisis. ($1 = 0.9217 euros) (Reporting by Tarmo Virki in Tallinn Editing by David Goodman and Angus MacSwan)

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