three years and three months after the first purchase announcement, Iberia completes the purchase of Air Europa with the Hidalgo family, as confirmed by both companies. The agreement involves the acquisition by IAG of the remaining 80% of Air Europa -after paying 100 million in August for 20% of the company- for 400 million euros, for which the total of the operation amounts to 500 million euros.
He pay will be held in several batches. Once you receive the approval of competition bodies the first payment of 100 million euros in cash and 100 million in IAG shares (at the price set at the signing of this agreement). Then there will be other two more payments, of 100 million euros each, on the two anniversaries of the approval by the Competition. The deal is subject to approval by the competition authorities, which could take around 18 months, according to IAG, as well as the SEPI and the ICO. In addition, it establishes compensation of 50 million euros in case the transaction does not materialize.
The IAG group agreed in November 2019 to buy Air Europa for 1,000 million euros, but the arrival of the pandemic It meant a stop in the operation. The coronavirus caused most of the planes to have to stay on land and that caused damage to the accounts of the airlines. Air Europa needed a bailout from the Spanish Government worth 475 million euros and an ICO loan worth 140 million euros. That forced Iberia to rethink the purchase in January of last year: it lowered the price to 500 million euros to be paid in five years.
But a few months later the deal started stagger. When traffic seemed to be beginning to recover, at the end of last year, the operation seemed further than ever to be effective. Iberia paid 75 million euros to the company of the Hidalgo family (double the 40 million euros established in the contract in case of breaking the agreement) with the aim of renegotiating the conditions during the month of January to reach a new agreement that could have the approval of the European Comission.
The agreement for the definitive operation continued without reaching. In March of last year, the group of which they are part Iberia, British Airways and Vueling changed the game and granted Globalia an unsecured loan of 100 million euros over seven years with the option of turn it into a stake of up to 20% in the capital of Air Europa that in the month of August the company that runs Luis Gallego executed, thus becoming airline shareholder from Hidalgo family. In this way, Iberia was a little closer to its goal of taking over Air Europa, which culminated this Thursday.
“Strategic” operation
IAG have always considered the purchase of “strategic” Air Europa to the company. The ‘holding’ has always insisted that the operation was key to transforming the hub of Madrid in order to compete with the four largest hubs in Europe: Amsterdam, Frankfurt, London-Heathrow and Paris-Charles De Gaullesince the weight of Iberia at the Madrid airport is less than that of the flag airlines of those big airports. “This agreement will allow IAG’s Madrid hub to compete in equal footing with other European hubs and consolidate its position in the South Atlantic. Madrid is the main gateway between Latin America and Europe and there are opportunities to expand its network, providing significant benefits to our customers, employees and shareholders,” said IAG Chairman, Luis Gallegowho was in charge of signing the operation in 2019, when he was president of Iberia.
The company maintains that, in addition to boosting its presence in the Latin American and Caribbean marketwhere Air Europa has a wide network of destinations and a solid presence and recognition, will also allow it to increase its connectivity with Asia; in addition to “to provide significant benefits for customers” by creating commercial links between Air Europa and other IAG group companies that will grant more chances network, as well as provide access to your loyalty scheme (Avios). The operation will allow, according to Iberia, to offer “significant synergies that will be achieved between the years 2026 and 2028, if the operation is finally closed in about 18 months. At Capital Markets Day, which has not yet been held, Iberia plans to give more details.
does not change the brand
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The purchase does not mean that Air Europa will disappear as a brand, but that the banner will remain but under the Iberian management. The Hidalgo company is one of the main private airlines in Spain, which currently operates regular national and international flights to 36 destinations, including European and long-haul routes to Latin America and the Caribbean. The year before the pandemic (2019) the airline transported 13.1 million passengers -in 2020 and 2021 they fell to 4.3 million and 5 million, respectively- while in 2022 it recovered a good part of its travelers by closing the year with a total of 10 million. Air Europe currently has an operational fleet of 50 aircraft and 15 aircraft on request through aircraft lessors. All aircraft are under operating lease, except for one Boeing 737 under finance lease.
On a financial level, the company declared income of 2.1 billion euros, a profit from operations of 71 million euros and a profit before taxes of 42 million euros in the financial year of 2019. In 2020 it declared income of 756 million euros, operating losses of 460 million euros and pre-tax losses of 465 million euros in 2020. In 2021, it declared revenue of 897 million euros, operating losses of 287 million euros and losses before taxes of 330 million euros. Gross assets at the end of 2021 were €928 million and net debt €574 million.