The IAG group, parent company of the British airlines British Airways and Spanish Iberia, announced on Thursday the acquisition of Air Europa for 500 million euros from the Spanish company Globalia, finalizing a project that it has been cherishing for several years. IAG announced last August the conversion into shares of 20% of a 100 million euro loan to Globalia. It is therefore now acquiring the remaining 80% for 400 million euros, the group said, adding that the sale “is subject to regulatory and other approvals, which could take around 18 months.”
In 2019, IAG announced a proposed merger with Air Europa, estimated at the time at €1 billion. The British group, which also owns the low-cost Spanish airline Vueling, has wanted to strengthen its links with the American continent and turn Madrid into one of the main European hubs.
But the project had been hampered by the Covid-19 pandemic, which had led IAG to halve its initial offer, and then by the reluctance of the European Commission, concerned about a reduction in competition in the market. Spanish. These difficulties had led IAG to announce in mid-December 2021 the termination of the original purchase contract. However, the British group had specified that they wanted to find a new way of approaching.
Allow Madrid to compete with other European hubs
The operation announced this Thursday “will allow the IAG hub in Madrid to compete on equal terms with other European hubs and consolidate its position in the South Atlantic”, while “Madrid is the main gateway between Latin America and Europe”, argued Luis Gallego, general manager of IAG, quoted in the press release published on the eve of the presentation of the group’s results for 2022.
In detail, the amount of 400 million euros will be paid first in the form of 100 million euros in IAG common shares and 100 million euros in cash at the closing of the transaction. The balance will be paid in two halves on the first and then on the second anniversary. The Air Europa brand will be maintained, under the direction of Iberia.
IAG, which also controls the Irish company Aer Lingus, is the third largest airline group in Europe behind Ryanair and Lufthansa. Air Europa is the third company with the largest presence in Spain, after IAG and Ryanair. Air Europa currently has a fleet of 50 aircraft, with another 15 ordered from aircraft leasing companies. It operates not only Spanish national flights, but also European and long-haul connections with Latin America and the Caribbean. It carried 10 million passengers in 2022.
Disparate destinations for Air Europa and IAG
The aviation sector has been one of the hardest hit by the Covid-19 pandemic that paralyzed world traffic for months. Now, the demand is increasing considerably and the sector is currently in full consolidation in Europe. The German airline giant Lufthansa is in particular in exclusive negotiations with the Italian state for the acquisition of ITA Airways, born from the ashes of Alitalia, while the future reprivatization of TAP Air Portugal is attracting the interest of the Air France-KLM group .
Air Europa, which made a pre-tax profit of 42 million euros in 2019, fell into the red during the pandemic. In 2021, it posted a loss before taxes of 330 million euros. IAG, for its part, returned to profit in the second quarter of 2022 for the first time since its abysmal losses due to the pandemic, thanks in particular to the performance of its Spanish carriers Iberia and Vueling, driven by the Spanish domestic market and connections with South America. The group had confirmed the trend in the third quarter, generating profits again thanks to the return of summer travel demand.
Source: BFM TV
