A fusion in four acts

As if it were a play, the marriage between Iberia and Air Europa has been an operation in four acts and a total duration of three years. And as in every self-respecting show, there has also been an interlude, marked by the pandemic and the Hidalgo family’s negotiation with other airlines. The operation involves the integration of the two main Spanish airlines, that is, Iberia-Vueling and Air Europa, and aims to transform the Madrid ‘hub’ “into a true rival& rdquor; for the four “largest hubs in Europe: Amsterdam, Frankfurt, London-Heathrow and Paris-Charles De Gaulle”, as the IAG group has been insisting.

On November 4, 2019 the holding IAGin which is integrated Iberia, Vueling and British Airwaysannounced by surprise the purchase of Air Europa for 1,000 million euros. The group, which he then led Willie Walshsought to create with this operation the Europe’s fifth largest airline in number of long-haul aircraft with 63 aircraft (66 in total), just behind KLM, with 65, according to data from that date. And the plan happened, and it happens as confirmed on Thursday by IAG, for maintain the Air Europa brand. The transaction was then expected to close in the second half of 2020.

The pandemic lowers the price

From 1,000 million euros to 500 million. The coronavirus pandemic grounded all planes and restricted travel, leading to Air Europe to ask for the rescue of the Spanish Government worth 475 million euros and a ICO credit for a value of 140 million euros that forced Iberia to rethink the purchase in January 2021: lowered the price to 500 million euros to be paid in five years.amount to pay in cash within six years. This would lead until 2026 when Air Europa should have returned the loan of 475 million euros from SEPI. IAG CEO, Luis Gallego, He affirmed then that Iberia and IAG demonstrate with the agreement their recovery capacity “to face the deepest crisis in the history of aviation”.

A few months later, the agreement between the two companies began to wobble. When the traffic seemed to be starting to pick up, end of 2021Iberia decided to pay 75 million euros to the Hidalgo family company –double the 40 million euros established in the contract in case of breaking the agreement– with the aim of eliminating the existing pact and renegotiating the conditions again during January 2022 to reach a new deal that could have the approval of the European Commission. At the end of February he still had no agreement and the airline he now runs Javier Sanchez Prieto revealed that Air Europa was maintaining conversations for its sale with other companiesamong which the name of Air France sounded.

Iberia joins Air Europa

When it seemed that the operation was further diluted, Iberia devised a kind of Troy Horse to get his competitor. On March 15, 2022, the IAG group granted Globalia a unsecured loan of 100 million euros to seven years with the option of convert it into a stake of up to 20% in the capital of Air Europa that he gave him in addition one year of exclusivity (until March 2023) for negotiate the purchase of 100% of the airline and two years of trial in case another company wants to invest. On August 17, the group, now commanded by Luis Gallego -CEO of Iberia when the negotiations began- became owner of a fifth of the Globalia airline through what they described as “financial investment & rdquor ;, which did not give entry to the Board of Directors of Air Europa, but paved the way to the successful outcome.

This Thursday, almost three years and almost four months later of the first purchase announcement between Iberia and Air Europa, the airlines have announced a new deal. Iberia has reached an agreement with the Hidalgo family to buy the remaining 80% of the companies for 400 million euros to pay in three parts. About 200 million –100 million in cash and another 100 million in IAG shares– once the competition authorities give the green light to the project, which is expected to happen within a year and a half (August 2024) and 100 remaining million in each of the two anniversaries following that date that would give the final green light to the project. However, since anything can happen, in the event that the operation does not materialize, IAG undertakes to pay Air Europa 50 million euros as compensation. A new path begins now with the relevant competition authorizations, which IAG estimates will occur in a year and a half. In other words, if everything continues its course, in August 2024 Spain will have a new airline giant that will position itself closer to large companies such as Air France-KLM or Lufthansa.

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