British Airways has secured a state-backed £2 billion ($2.7 billion) loan which it expects to draw on this month, according to an announcement from parent company International Airlines Group.

IAG says the five-year loan is underwritten by a group of banks and “partially guaranteed” by UK Export Finance (UKEF).

The funds “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.”

As a group, IAG said it “continues to have strong liquidity,” with cash and undrawn facilities of €8 billion ($9.7 billion) as of Nov. 30, 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.”

BA can repay the loan at any time but there are some conditions attached, including restrictions on BA being able to pay dividends to its parent company IAG during the term of the loan.

In May IAG member carriers Iberia and Vueling secured access to state-backed loans totaling £1.1 billion ($1.5 billion).

And in July last year UK carrier Virgin Atlantic filed for US bankruptcy protection as it secured a £1.2 billion ($1.6 billion) refinancing package from “new private investors” that would pave the way “for the airline to rebuild its balance sheet and return to profitability from 2022.”

ba.com