Air Europa owner Globalia and the International Airlines Group have agreed on an amendment to the acquisition agreement dated November 4, 2019. Accordingly, the IAG will no longer pay one billion euros, but only 500 million euros and that only six years after the transaction has been completed.

The revised terms of the amending agreement require that Iberia and Sociedad Estatal de Participaciones Industriales (“SEPI”) successfully negotiate the non-financial terms related to SEPI's financial support for Air Europa in 2020. The IAG subsidiary intends to start talks with SEPI about these conditions shortly.

“Both Iberia and IAG are showing their resilience to the deepest crisis in aviation history. Being part of a large group is the best guarantee to face the current market challenges from which Air Europa will also benefit once the transaction is closed. I am pleased that we have reached an agreement with Globalia to postpone the payment until the expected recovery in air traffic after the end of the pandemic and to expect that the transaction will result in significant synergies, ”said IAG boss Luis Gallego .

The transaction is expected to be completed in the second half of 2021

Globalia and IAG assume that if all the agreed requirements are met, the acquisition can be completed in the second half of 2021. However, the necessary antitrust approval from the EU Commission is still pending. In its statement, the International Airlines Group also emphasizes that the takeover is a class 2 transaction within the meaning of the listing rules of the British Financial Conduct Authority and therefore does not require the approval of IAG shareholders.

The IAG writes in a press release that the takeover and integration of Air Europa is strategically important for Iberia. The Madrid hub is to become significantly more important and "become a real rival for Amsterdam, Frankfurt and Paris-Charles de Gaulle". Customers should benefit from greater choice and flexibility, as well as further options for collecting and redeeming miles. IAG hopes that the takeover of Air Europa will provide additional opportunities for network growth.

"This transaction is a great effort for all of us and the best way to restore tourism, traffic in Spain and the hub of Madrid," explains Globalia CEO Javier Hidalgo.

The Iberia parent company assumes that the takeover of Air Europa will generate cost and income synergies. It is assumed that these will become noticeable in the first full financial year after the acquisition. The International Airlines Group is currently assuming that air traffic will largely be restored in the second half of the current year due to the global availability of vaccines. Therefore, the Air Europa acquisition is expected to cause a minimal outflow of funds in 2021, and net cash flow is expected to be positive until at least the repayment of the SEPI loan in 2026, when the merger synergies are expected to reach their full maturity.

“This transaction makes strategic sense to strengthen Madrid's competitiveness on a global basis. This will benefit consumers and the incorporation of Air Europa into the Iberia Group will improve the viability of the company, which will benefit both Iberia and Air Europa employees, ”said Iberia boss Javier Sánchez-Prieto.

Air Europa: All aircraft, with one exception, are leased

Air Europa's gross assets as of December 31, 2019 were € 967 million. For the financial year ending December 31, 2019, Air Europa posted sales of 2,1 billion euros. The operating result was 71 million euros and the pre-tax result was 42 million euros. These figures are based on Spanish accounting standards. Air Europa carried 2019 million passengers in 13,1. The number of passengers fell by around 2020 percent in 70 due to the corona pandemic.

The Air Europa fleet consisted of 31 aircraft as of December 2019, 68. In the meantime, this has been reduced to 52 machines. With the exception of one aircraft that is owned, all others are leased. IAG estimates Air Europa's lease liabilities under IFRS 16 to be around 2020 billion euros by the end of 1,6.