The purchase of Air Europa by Iberia faces two decisive months, in which the preferential right of negotiation that the second has expires, whose president, Javier Sánchez-Prieto, has set that date to close a process that has been open for more than three years.
After the reduction of the initial price of 1,000 million in cash, agreed by both parties in November 2019, to the 500 million that were agreed in January 2021, once the pandemic had already broken out and Air Europa had received 475 million euros from the fund created by SEPI to help strategic companies face the fall in activity, The two actors in the process continue to clear their differences.
Juan José Hidalgo, the president of Globalia – the business group that owns 80% of Air Europa – always asked for more, and expressed it in public.
For its part, Iberia argued that its competitor was worth less, both for the loan it had received from SEPI and for the 140 million it owed to the ICO, which raised the debt above 600 million euros.
. COMPETITION WARY OF THE OPERATION
The pitfalls between the two airlines also come through competition, because both the European and Spanish authorities in this matter view with some suspicion an operation that involves concentrating the market, especially in Latin America, although Iberia has offered to get rid of routes to pave the way.
In fact, Sanchez-Prieto said in mid-January that the airline of the IAG group (BME:ICAG) -the holding company in which they are in addition to Iberia, British Airways, Vueling, Aer Lingus and Level- hopes to be able to convince the competition authorities in Europe of the benefits of the purchase for the entire sector and, in particular, for customers.
Meanwhile, Iberia took 20% of Air Europa last August, after converting into capital the loan of 100 million euros that it had made in March to the airline of Globalia and that gives it preferential right of negotiation (the one that expires in March), given that another large European group, Air France-KLM (EPA:AIRF), also tempted the Hidalgos.
BATTLE FOR THE ASIAN MARKET
IAG also does not rule out forgetting and liquidating this operation and looking for other allies, but the union with Air Europa would give the strength that the Madrid operational center needs to compete with the big four Europeans: Amsterdam, Frankfurt, London-Heathrow and Paris Charles-De Gaulle.
The battle with these large air traffic hubs is played out in the Asian market, a growing and very attractive niche, in which the two large Spanish airports (Madrid and Barcelona) barely have around 5% of movements, about 20 points below the competitors.
So far, the Government has not spoken clearly about the operation, claiming that it is two private companies, but it does show that it likes the idea of strengthening the operational center or “hub” of Madrid.
PRA OF TAP?
Meanwhile, other options arise such as the possibility of buying the Portuguese public TAP, whose privatization is an option for the Portuguese socialist government, which intends to integrate it into a large aviation group, according to the local press, among which IAG is cited.
But TAP is immersed on its own in a restructuring plan, with reductions in staff and assets, and has a burden of 3,200 million euros of public aid, in addition to a strong labor conflict, circumstances that do not make it exactly attractive to potential buyers.
The company’s accounts show signs of improvement – in the third quarter it had net profits – but the Portuguese airline only plans to achieve financial sustainability in 2025.