IAG has signed an agreement to purchase Spanish carrier Air Europa for €1 billion.
The airline, which IAG said has plans to turn its Madrid base into a "true rival to Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle”, is currently the third biggest in Spain behind Iberia and Vueling – both of which are already part of IAG.
Under the agreement, the airline will be acquired by IAG subsidiary Iberia, with the group stating that the brand “will initially be retained and the company will remain as a standalone profit centre within Iberia run by Iberia CEO Luis Gallego”.
The transaction is expected to complete in the second half of 2020 providing IAG is granted relevant approvals, and the group said that it had agreed to pay Air Europa a break fee of €40 million “in the event that the transaction fails to receive the necessary regulatory approvals and either party elects to terminate the transaction agreement”.
It looks as though IAG has made its move for the airline so it can integrate Air Europa into the existing Iberia hub structure at Madrid; as well as create commercial links between Air Europa and other IAG operating companies, in addition to inclusion into IAG’s joint businesses.
Commenting on the news Willie Walsh, chief executive of IAG, said: “Acquiring Air Europa would add a new competitive, cost effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership, therefore generating additional financial value for our shareholders.
“IAG has a strong track record of successful acquisitions, most recently with the acquisition of Aer Lingus in 2015 and we are convinced Air Europa presents a strong strategic fit for the group.”