BA owner IAG slashes purchase price for Air Europa in half
British Airways owner IAG has slashed the price of its purchase of Air Europa in half, the airlines group announced this morning.
IAG will now pay €500m for the budget carrier, down from the €1m agreed in November 2019.
After the coronavirus pandemic struck, decimating the airline industry, IAG pushed to reduce the price of the acquisition.
Payment for the deal, which will see Air Europa’s shares assumed into Iberia, will be delayed for six years.
Completion of the purchase is expected in the second half of 2021, subject to European Commission approval.
As a result of the pandemic, which has left airlines struggling to stay afloat as passenger numbers collapse, there had been some doubt as to whether IAG would still go through with the deal.
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.”
Hargreaves Lansdown analyst Susannah Streeter said the deal showed that IAG’s board was clearly expecting an upturn in passenger numbers.
‘’British Airways owner IAG has had its eye on the Air Europa prize for some time, but given its severe cash flow crisis brought on by the pandemic, had been negotiating hard on the terms”, she said.
“It’s an impressive deal to pull off, in the midst of the pandemic crisis. It not only shows how desperate Globalia was to offload the carrier, but how the board at IAG clearly expect a rebound in passenger numbers across Europe and beyond once the pandemic eases.
“The boss of IAG, Luis Gallego was the former chief executive at Iberia and it’s clear he’s driven the deal forward, conscious of the opportunities a bigger hub in Madrid could bring.”
Air Europa currently has a fleet of 52 aircraft, down from 68 at the end of 2019.
Passenger numbers at the carrier fell 70 per cent last year, down from 13.1m in 2019. In the same year, the flier booked revenue of over €2bn and profit of €42m.
Shares in IAG rose 0.7 per cent this morning.