International Airlines Group and Globalia have announced they are to amend the original purchase agreement for Air Europa, with a rather hefty discount.
Under the terms of the Amendment Agreement, the parties have agreed that the amount to be paid by Iberia for Air Europa will be reduced from an equity value of €1 billion to €500 million with payment deferred until the sixth anniversary of the Acquisition’s completion.
Or half price, with nothing to pay for six years.
Completion of the sale is expected to take place in the second half of 2021. The Acquisition is still subject to approval by the European Commission.
Why is IAG still after Air Europa?
Continued growth is the name of the game, even in this odd COVID-19 times. According to IAG, adding Air Europa to its Iberia network will
- Increasing the importance of IAG’s Madrid hub, transforming it into a true rival to Amsterdam, Frankfurt and Paris Charles de Gaulle;
- Unlocking further network growth opportunities; and
- Delivering significant customer benefits through providing increased choice and schedule flexibility and greater opportunities to earn and redeem miles.
The airline is expected of course to make savings (be it via cost or otherwise).
Air Europa carried 13.1 million passengers in 2019. Passenger volume declined by approximately 70 per cent in 2020.
The airline currently has an operating fleet of 52 aircraft compared to 68 at the end of 2019. All aircraft except one are on operating lease. it operates scheduled domestic and international flights on European and long-haul routes to Latin America, the United States of America, the Caribbean and North Africa.
Luis Gallego, IAG’s chief executive, said:
“Both Iberia and IAG are demonstrating their resilience to face the deepest crisis in aviation’s history. Being part of a large group is the best guarantee to overcome current market challenges which will also benefit Air Europa once the transaction is completed. I am pleased that we have reached agreement with Globalia to defer payment until well into the expected recovery in air travel following the end of the pandemic and when we expect to be realising significant synergies resulting from the transaction.”
Javier Hidalgo, Globalia’s chief executive, said:
“This transaction is a great effort by all of us and is the best way to recover tourism, transport in Spain and the Madrid hub.”
Javier Sánchez-Prieto, Iberia’s chief executive, said:
“This transaction makes perfect strategic sense to reinforce Madrid’s hub competitiveness on a global stage. It will benefit consumers and Air Europa’s incorporation into the Iberia Group will improve the company’s viability benefitting both Iberia and Air Europa employees.”
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