Airline giant International Airlines Group (IAG) has agreed to purchase Spain’s Air Europa for just €500 million (US$607 million), at a discount of 50 per cent.
Negotiation began for IAG subsidiary Iberia to purchase Air Europa on behalf of IAG in November 2019, just three months before the COVID-19 crisis brought international travel to a halt. At that time, the deal was worth €1 billion.
However, since then, IAG – owner of British Airways, Iberia and Aer Lingus, among others – had negotiated the deal down to just half of its original price.
Moreover, the airline conglomerate has negotiated to defer its €500 million payment for six years after the deal’s completion.
As it stands, the Spanish airline is currently held up by nearly €500 million in loans from Spanish state-owned industrial holding company SEPI.
IAG said the final deal is contingent on negotiating appropriate terms with the Spanish government surrounding said loans.
The government aid leaves Air Europa with net debt of about €2.1 billion, according to calculations by Mark Simpson, an aviation analyst at Goodbody.
However, given the potential benefits from combining operations with Iberia at its Madrid hub and the six-year delay in payment, the analyst believes this is “still a good deal for IAG”.
The purchase of Air Europa from current owner Globalia will offer IAG the chance to cash in on the South American trans-Atlantic market, and see Madrid become a new European hub airport, once the travel market recovers.
“I am pleased that we have reached an agreement with Globalia to defer payment until well into the expected recovery in air travel following the end of the pandemic,” said IAG chief executive Luis Gallego.
The deal is expected to be completed within the second half of 2021, and IAG expects a “meaningful” recovery in air travel in light of the ongoing rollout of COVID-19 vaccines globally.
Air Europe currently has a fleet of 52 aircraft, down from the 68 it held at the end of 2019.
It largely operates domestic flights throughout Spain, as well as short-haul European routes and long-haul destinations in the US, South America and Africa.
