IAG said it planned to raise €2.75bn, and had support for this from its main shareholder, Qatar Airways.
The Spanish-registered group, which also owns Iberia and Aer Lingus, said its annual shareholder meeting would be held on September 8, at which shareholders will be asked to approve the capital increase.
'A cash injection will give the British Airways owner short-term breathing space, yet the pace of the airline sector recovery is out of its hands, ' Mould said, dependent as it is on how the coronavirus plays out and government decisions on travel restrictions, quarantines and lockdowns in case of new flare-ups.
IAG recorded an operating loss for Q2 of €1.3 billion loss - narrowly beating analysts -€1.4 billion forecast - down from the €960 million profit that it achieved in the same period past year.
The London-listed titan has meanwhile embarked upon a massive jobs-slashing efficiency drive, in line with carriers like Air Canada, American Airlines and Lufthansa.
Chief executive Willie Walsh said: "All IAG airlines made substantial losses".
IAG had liquidity of €8.1 billion as of June 30, which with further funds including €380 million from plane sales and £750 million from an air-miles deal with American Express "should be ample to position for a post-Covid world", Daniel Roeska, an analyst at Sanford C Bernstein, said in a note.
He added that business had begun to pick up as guidance on travel overseas was loosened: "We have seen evidence that demand recovers when government restrictions are lifted". He predicted air travel won't reach pre-virus levels until at least 2023, while Air France-KLM expects capacity won't rebound until 2024.
British Airways had already warned in April that it could slash up to 12 000 jobs, or a quarter of its workforce, in a drastic restructuring as the carrier grapples with fallout from the deadly pandemic. The ballot closes on Friday.
"Who will back International Consolidated Airlines in its darkest hour?" asked AJ Bell investment director Russ Mould. Reuters had previously reported the plan for a rights issue.
The Gulf airline, which holds a 25% stake, has subscribe for its pro-rata entitlement, with the rest of the capital increase fully underwritten, IAG said Friday.
"Our demand is not what we're actually seeing in our bookings, because bookings are being suppressed by government restrictions", Walsh said.