International Airlines Group (IAG) and Globalia have confirmed today that discussions are at an “advanced stage to terminate the agreement” for Iberia to acquire the entire issued share capital of Air Europa, which had been signed on 4 November 2019 and amended on 20 January 2021.
The UK’s Competition and Markets Authority (CMA) had been investigating the anticipated acquisition of Air Europa Líneas Aéreas, Aeronova, León Activos Aeronáuticos, and Globalia Lease Finance Seven (together, Air Europa) by International Consolidated Airlines Group (IAG). It has not been disclosed it competition concerns were at the root of the decision to abandon the deal but it has been widely noted in the media as the cause.
In January 2021, IAG had succeeded in renegotiating the purchase price of the entire issued share capital of Air Europe by Iberia down to €500 million with payment deferred until the sixth anniversary of the acquisition’s completion. The original agreement announced on 4 November 2019 agreed an equity value for Air Europa of €1bn, which was to be settled in cash on completion, and was expected to be completed at the end of 2020.
The pandemic crisis has changed the entire operating environment, with European airlines still struggling to return to cash positive position due to continued restrictions on travel. Air Europa had been relying on financial support from the Spanish sovereign wealth fund, Sociedad Estatal de Participaciones Industriales (SEPI), which approved loans of up to €475 million for six years on 11 November 2020 in order to support its liquidity during and after the pandemic. As well as the SEPI loan, Air Europa signed a syndicated loan agreement for a €141 million five year term loan partially guaranteed by the Instituto de Crédito Oficial (ICO) in May 2020.