IAG signs agreement to purchase Air Europa

Monday, November 4, 2019

Spanish carrier Air Europa is set to be taken over by IAG. The latter has signed an agreement to purchase the carrier at a cost of €1billion.

The International Airlines Group made this announcement this morning. IAG’s wholly-owned subsidiaries, Iberia, will be acquiring the airline.

Air Europa is supposed to retain its branding following the completion of the deal. The deal is going to allow IAG to focus on its Spanish operations, specifically those in Madrid.

The acquisition is supposed to generate cost synergies across selling, general and administrative expenses, and procurement, handling and distribution costs.

As per the deal, the acquisition will be funded by external debt. IAG’s net debt is likely to be 0.3 times higher as a result of the acquisition compared to 1.2 times last reported in 2019 end.

Air Europa operates flights to 69 destinations including the long-haul routes to Latin America and the Caribbean. Last year, Air Europa generated revenue of €2.1 billion besides an operating profit of €100 billion. In 2018, it carried 11.8 million passengers and added a fleet of 66 aircraft.

IAG’s chief executive, Willie Walsh, said that by acquiring Air Europa, IAG added a new cost-effective and competitive airline, which will help Madrid to lead as a European hub and thereby helping IAG in achieving South Atlantic leadership.

Last month, Europe’s third-largest budget carrier Norwegian Air had shaken up the market for travel across the Atlantic with cut prices fares. The airlines collaborated with JetBlue Airways to help European passengers to book straight through to around 100 cities.

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