IAG takes over Air Europa

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To boost its presence on routes to Latin America and the Caribbean, IAG, the parent of British Airways and Spain’s Iberia, has announced a €1bn (£863m) takeover of Spain’s Air Europa. Some analysts said IAG may have to shed routes in order to win regulatory approval.

An analyst at Liberum writes in a note: “Potential remedies, perhaps in the form of slot release or behavioural restrictions, may be required and these could impact the potential synergies.” IAG also owns carriers Iberia Express, Level, Ireland’s Aer Lingus and Vueling.

Analysts at Bernstein say: “We are not convinced that having just another brand platform is the optimal move, and could see it potentially combining with Level, Vueling or potentially Iberia Express after some time.”

Air Europa serves 69 destinations, including long-haul routes to the Americas and the Caribbean. It had a fleet of 66 aircraft at the end of 2018.

IAG said it expected the Air Europa deal, which will be funded through external debt, to close in the second half of next year and for it to add to its earnings in the first full year after the closure

Air Europa will initially keep its brand and as it gets integrated into the existing hub at Madrid it will be a standalone operation run by Iberia chief executive Luis Gallego. It will also withdraw Air Europa from the SkyTeam alliance once the deal is completed. Air Europa has a joint venture with Air France-KLM.

Gallego says: “This is of strategic importance for the Madrid hub, which in recent years has lagged behind other European hubs,” adding that Madrid had the potential to serve as a gateway between Asia and Latin America.

Air Europa’s Spanish parent company Globalia earlier this year received authorisation from the Brazilian government to explore the possibility of flying domestic routes within Brazil. It is unclear if that authorisation will remain with Globalia or be transferred to IAG.

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