Air Europa Requests €400 Million In State Aid Ahead Of IAG Deal

While negotiations are still ongoing with IAG to lower the acquisition cost for Air Europa, the carrier has put in a request for €400 million ($472m) in state aid. The airline continues to suffer heavily from the travel restrictions to its most profitable markets in South America. However, there are concerns that a bailout now would only serve to facilitate the IAG purchase at a smaller price tag.

Air Europa requests state support €400 million
Air Europa is requesting a €400 million bailout from the Spanish Government. Photo: Getty Images

Air Europa has requested €400 million (approx. $472 million) from the Spanish Solvency Fund for Strategic Companies. Reports surfacing yesterday in El País claim that the application is already being analyzed by the Sociedad Estatal de Participaciones Industriales (SEPI).

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In the process of joining compatriots with IAG

The troubled airline is in the process of being purchased by IAG, the owner of British Airways, Aer Lingus and LEVEL, but also of Air Europa’s compatriot competitors Iberia and Vueling.

This may become an obstacle to the granting of aid from the €10 billion fund set up by the Spanish Government to help key companies avoid bankruptcy. Officials have raised concerns that tax-payer money would be used to lower the airline’s price tag, which is in the process of renegotiations.

Pre-pandemic, IAG was going to pay €1 billion ($1.18 billion) for the Spanish SkyTeam member. However, this was back in November 2019, when no one knew what was waiting around the corner. Now, Air Europa’s upcoming owner is close to an agreement that would see it pay about half of that amount.

Simple Flying has reached out to Air Europa for a comment but was yet to receive a reply at the time of publication.

Unite, IAG, Air Europa
IAG’s Willie Walsh last month was confident that Air Europa would not fail. Photo: Getty Images

Received loan of €140 million in May

Air Europa declared as its reason for the request a pressing lack of funds. The state-guaranteed €140 million ($165 million) that the company secured mid-May from a group of banks has only been enough to tide it over for the past few months.

While of course suffering along with all other European airlines, the carrier has also been particularly hard-hit by travel restrictions across the Atlantic. The pandemic shows no signs of slowing down in South America, Air Europa’s most profitable market.

A record number of cases are still being reported daily. Brazil, Mexico, Chile, Colombia and Peru are all battling major outbreaks and land among the top 10 countries in the world for confirmed cases.

IAG feels confident that Air Europa will not fail. Photo: Air Europa

Walsh remains optimistic

Despite the grim outlook for Spain’s third-largest carrier, IAG’s Willie Walsh recently expressed optimism and according to FlightGlobal said that the acquisition remained justified. He maintained that his company intended to close the deal by the end of the year.

“We firmly believe Air Europa will not fail,” Walsh insisted early last month. “That has been a fundamental factor in our decision.”

If the purchase is given the ok from the European Commission, it means that IAG will effectively control 75% of all domestic routes in Spain. That includes 100% of the Barcelona-Madrid route.

What do you think, should Air Europa be granted state aid while in the process of a take-over worth hundreds of millions of euro? Let us know your thoughts in the comments.