The aviation industry suffered heavy losses in 2020 and it could take several years to return to pre-coronavirus levels. Airlines are working hard to adapt to the ever-changing environment. The International Airlines Group (IAG) had agreed to buy Spain’s Air Europa for 500 million euros ($606.7 million). Interestingly, the coronavirus pandemic cut the price in half. People should take into account that, the International Airlines Group that owns British Airways and Iberia reached a deal to defer payment for six years.
Iberia is buying Air Europa on behalf of IAG. According to the amended deal, Iberia will not pay the 500 million euros until the sixth anniversary of the acquisition’s completion. Interestingly, the coronavirus pandemic changed the airline industry since the deal was originally struck in November 2019. As a reminder, the pandemic caused a lot of problems for the industry.
People should take into account that, loans provided by Spain’s state-owned industrial holding company SEPI to Air Europa played an important role. Importantly, over the last year, IAG said it still wanted to buy Air Europa. However, due to financial issues, it was forced to tap investors for 2.4 billion euros. At the same time, the company started to reduce the number of employees to reduce costs.
It is worth mentioning that, before the sale can officially go ahead, Iberia must finalize negotiations with SEPI. Notably, the main topic of discussion will be how to handle the non-financial terms associated with the financial support that SEPI provided to Air Europa throughout the turbulent year of 2020.
International Airlines Group and plans for the future
The International Airlines Group expects the completion of the deal to take place in the second half of 2021. Moreover, the deal would be subject to approval by the European Commission. Interestingly, IAG hopes that with the incorporation of Air Europa, it will strengthen its position at Madrid Barajas Airport. Thanks to the expanded route network as a result of the acquisition, IAG hopes that Madrid Barajas Airport can become a competitor with other European hub airports like Amsterdam, Paris, and Frankfurt.
Last but not least, Air Europa is Spain’s third-largest airline after Iberia and Vueling and is based out of Palma on the Balearic island of Mallorca. At the moment, it is a member of SkyTeam. However, it will likely switch to rival alliance Oneworld with IAG-owned airlines such as British Airways and Iberia.