Etihad Airways raises $ 1.2 billion for first aviation ESG loan linked to sustainability
Etihad Airways said it had raised $ 1.2 billion in the world’s first aviation sustainability loan linked to environmental, social and governance goals.
The deal is the airline’s third sustainable finance deal, as it pledged in 2020 to achieve net zero carbon emissions by 2050.
The loan structure, which closed on October 1, includes a tranche of $ 500 million over four years and a tranche of $ 700 million over five years, said Adam Boukadida, chief financial officer of Etihad Aviation Group. The National.
“This will be by far the largest of the three green deals we have completed in the last three years and it is the first loan linked to ESG factors for Etihad and for aviation in the world,” he said. he declares. “This is a large transaction and sustainable financing is an integral part of our financial DNA and a key part of our current and future strategy.
The deal is the largest sustainable finance in the airline’s history and follows two aviation finance deals – a $ 600 million sustainability bridging sukuk in 2020 and a $ 100 million loan. euros linked to the United Nations Sustainable Development Goals in 2019. Etihad also manages the Greenliner program, which uses its fleet of Boeing 787 Dreamliners as a test bed for sustainable flight initiatives.
The Covid-19 pandemic has heightened global concerns about climate change threats, with governments pledging to rebuild greener and borrowers establishing ESG frameworks as part of this transition. Global airlines are keen to improve their green credentials to address passenger concerns about climate-related issues and counter the flight-shaming movement that has started in Europe. Airlines around the world last week accelerated their climate goals and pledged to net zero carbon emissions by 2050 as they face increasing pressure from environmental activists and politicians.
The proceeds from the loan will be used for general corporate purposes, Boukadida said.
The airline has pledged to apply penalties and incentives of up to $ 5.5 million based on its progress against ESG loan key performance indicators.
The loan is linked to several performance indicators on ESG objectives.
The environmental objective is to reduce carbon emissions from passenger planes (measured in terms of CO2 emissions per commercial tonne-kilometer). The airline has set key targets for 2035 and 2025 as part of its net zero goal for 2050.
The social objective will focus on diversity. At its Global Business Service Solution (GBSS) center in Al Ain, which manages functions ranging from HR support to global revenue audits and predominantly employs 300 women, Etihad will focus on increasing female participation and continuous training and development.
The final governance metric will be linked to the Integrity Score, a comprehensive metric used to assess the overall internal culture of integrity within the airline.
Work on these targets will begin with “immediate effect” and the airline will have an annual reporting cycle with lawyers and lenders, Boukadida said.
Etihad Airways has chosen HSBC and First Abu Dhabi Bank (FAB) as strategic and financial partners for this transaction. HSBC and FAB were the joint ESG structuring banks, joint ESG coordinators, associate bookrunner and mandated lead arranger. FAB also acted as installation agent.
The airline is keen to further explore green finance opportunities in the future “where it makes sense and is aligned with our overall transformation and sustainability strategy” and is suitable for all parties involved, the CFO said.
“Next year we will take on additional planes and, if that makes sense and is appropriate, we will look at how we can fund them if necessary, with sustainable funding again,” he said.
Asked about Etihad’s financial performance outlook in the second half of the year, Boukadida said he expects a similar performance to the first half of the year. The airline halved its operating loss in the first six months of 2021 by cutting costs and expanding its freight business.
“Our performance in the first half, despite the loss, is actually quite good… with a reasonable degree of confidence we can expect to see a similar performance in the second half,” he said. “But we still have the second half of the second half to wrap up.”
“As long as we have the demand and the capacity without the constantly changing restrictions to transport our guests to or via Abu Dhabi, I am confident that we will close the second half as strong as we did in the first half,” he said. he adds.
He continues to focus on his previously announced goal of returning to profitability in 2023, Boukadida added.
Update: October 13, 2021, 11:17 a.m.