International Airlines Group has confirmed subsidiary British Airways has secured a state-backed £2 billion loan which it expects to draw down this month.

The five-year loan – which can be repaid at any time on notice – has been underwritten by a syndicate of banks and “partially guaranteed” by UK Export Finance (UKEF).

IAG said that the loan “will be used to enhance liquidity and provide British Airways with the operational and strategic flexibility to take advantage of a partial recovery in demand for air travel in 2021 as Covid-19 vaccines are distributed worldwide”.

The facility comes with some conditions, including restrictions on BA being able to pay dividends to its parent company IAG during the term of the loan.

IAG said that the group “continues to have strong liquidity”, with cash and undrawn facilities of €8 billion as at November 30, 2020, excluding the UKEF facility, and added that it is “exploring other debt initiatives to improve further its liquidity and will update the market in due course”.

In May 2020 IAG member carriers Iberia and Vueling secured access to state-backed loans totalling £1.1 billion.

And in July last year BA’s rival UK carrier Virgin Atlantic unveiled a £1.2 billion refinancing package which it said represented a “private-only solvent recapitalisation of the airline”.

Virgin Atlantic secures £1.2 billion rescue package