IAG Set To Purchase Air Europa For Half Of Original €1bn Cost

IAG is set to push ahead with its purchase of Air Europa, according to a Spanish language newspaper. The transaction will now go ahead at half of the original cost, with the sum being paid in 2026.

Air Europa, IAG, Airline Purchase
IAG’s acquisition of Air Europa will go ahead, with a significant price cut. Photo: Getty Images

While 2020 has been a challenging year for aviation in general, it has also had an impact on important deals that were being brokered pre-crisis. In April, LOT Polish Airlines pulled out of its purchase of Condor. Meanwhile, Air Canada’s Air Transat acquisition, first announced in May 2019, is now expected to be completed by February. Now, it seems that despite some doubts, the IAG purchase of Air Europa is set to go ahead.

What’s the latest?

There seems to have been some progress with regards to IAG’s takeover of Air Europa. According to Spanish language publication El Confidencial, IAG has now agreed with Air Europa to adjust its purchase conditions. Of course, this will be subject to government approval.

vueling to receive state-guaranteed funding
Alongside Vueling and Iberia, IAG would then own Spain’s three largest airlines. Photo: Getty Images

The publication reports that the agreement was reached yesterday and sees a substantial price cut for the Spanish airline. Air Europa’s original price tag had been €1 billion ($1.23 billion). This has now been halved to €500 million ($6.13 billion). The price drop roughly corresponds to a loan that Air Europa received from the Spanish Government. IAG also won’t pay for the airline until 2026, as the loan has to be repaid by then.

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A spokesperson for IAG refused to comment on the deal when approached by Simple Flying.

Not everybody is a fan of the deal. In June, Simple Flying reported that the UK’s Unite union would be opposing the deal in front of the European Commission. The union was unhappy about job cuts at British Airways while millions were being spent on the Spanish airline. In July, British Airways staff went on to protest outside the Spanish Embassy in London.

Air Europa, IAG, Airline Purchase
British Airways staff protested against the purchase in front of the Spanish Embassy in London in July. Photo: Getty Images

Who is Air Europa?

Air Europa is one of Spain’s larger passenger airlines and is the largest airline in the country not already owned by the International Airline Group. Like IAG’s Iberia, Air Europa’s main base is at Madrid’s Barajas Airport. According to Planespotters.net, the airline currently has a fleet of 54 aircraft, ranging from ATRs to Boeing 787s.

Air Europa is currently a member of the SkyTeam alliance, which it will leave as a result of the deal, while Iberia is a member of the oneworld alliance. When Delta announced a partial acquisition of LATAM last year, the oneworld alliance’s only South American carrier announced its withdrawal due to a conflict of interests. As Air Europa has a strong network to South America, the airline’s acquisition will prove useful to more than just IAG.

Do you think IAG should push ahead with the deal to purchase Air Europa? Let us know your thoughts in the comments!