2024-08-01 16:20:17
The Spanish airline International Airlines Group (IAG) shocked the world of economics and finance when it announced that its purchase agreement for the airline Air Europa has been broken. According to a company statement, the decision is due to the fact that the acquisition of Air Europa would not be beneficial to its shareholders.
This agreement was announced four years ago, in 2020, when IAG reached an agreement to buy Aer Europa for a total of €1 billion. However, the situation the airline industry finds itself in due to the COVID-19 pandemic has created a new reality in the business world.
According to the president of IAG, Luis Gallego, “the current situation of the air transport market has changed fundamentally since the signing of the Air Europa purchase agreement in 2020. At the moment, economic uncertainty does not allow us to proceed with the acquisition of these goods. airline and we have to be responsible to our shareholders.”
Gallego added that the decision was difficult but necessary to ensure IAG’s financial stability and minimize risks to the company in these uncertain times. The announcement of the breach of the agreement had an immediate effect on the Stock marketas IAG shares fell 6.7% after the statement.
This news caused concern in the financial markets, since Air Europa is one of the largest airlines in Spain and its purchase by IAG would increase competition in the European airline market. However, with the merger cancelled, Air Europa will remain an independent company and will have to face the difficult economic situation that is sweeping through the airline industry.
For its part, the Spanish government, Air Europa’s majority shareholder through the public holding company SEPI, regrets the IAG’s decision and its effect on the country’s economy. In a press conference, the Minister of Economy and Finance, Nadia Calviño, said that the government is evaluating the measures that can be taken to guarantee the viability of Air Europa and to protect the jobs of its employees.
On the other hand, at the European level, the European Commission is concerned about this news, because the competition in the airline market could have changed if IAG bought Air Europa. The EU Competition Commissioner, Margrethe Vestager, has said that an investigation will be carried out into whether the decision to cancel the merger was based on valid reasons, or whether European competition rules were breached.
This is not the first time the COVID-19 pandemic has affected IAG. In 2020, the company announced the reduction of a third of its capacity over the next five years, and it is looking for measures to reduce costs and maintain its financial stability. However, when the purchase of Air Europa was cancelled, IAG had to reassess its plans and adjust its strategy for the future.
Madrid-based airline Air Europa has issued a statement saying it is committed to continuing to operate independently and continue working on its recovery plan. In addition, they thank IAG for their interest in the company and affirm that they will continue to focus on the safety and satisfaction of their passengers.
In summary, the cancellation of the Air Europa purchase agreement by IAG was a severe blow to the Spanish economy and the European airline industry. Despite government efforts and market uncertainty, Aer Europa will continue to operate independently and face the economic challenges presented by the COVID-19 pandemic. For its part, IAG will continue to work on its strategy to face current challenges and maintain its position in the European airline market.
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