IAG strengthens its subsidiary Iberia with Air Europa

Air Europa has been for sale for years. Four years ago, the Chinese HNA Group was about to buy 49.9 percent of the Spanish airline. But the talks dragged on forever, and the contract was never signed.

One year later, Air France-KLM was said to be interested. In the summer of 2018, the three airlines announced a far-reaching joint venture for flights to South America, and further steps towards rapprochement were planned. But both of these things have now become obsolete. On Monday (November, 4), International Consolidated Airlines Group IAG announced that it ist buying Air Europa.

Brand remains, for the time being…

The holding company of Aer Lingus, British Airways, Iberia, Level and Vueling will pay one billion euros in cash for all shares in the Spanish airline. The purchase will be implemented via the Spanish IAG subsidiary Iberia, into which Air Europa will be integrated as an independent company. The transaction is expected to be completed in the second half of 2020. «cquiring 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,» commented CEO Willie Walsh.

With Air Europa, IAG will once again be number one for flights to South America, just ahead of Air France-KLM. As a first step, the two airlines will coordinate their schedules, interconnect sales channels, introduce codeshare flights and merge frequent flyer programs. The brand name of the smaller airline will stay, at least «for the time being», as IAG states in its press releases.

Lower costs

IAG explains the takeover as follows: The merger will make the group the market leader in South America. In addition, Madrid will be positioned as one of the leading hubs in Europe alongside Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle. However, further synergies are to be leveraged between the two Spanish airlines – through lower administrative costs, lower handling charges and cheaper sourcing.

The blue and white Spanish airline achieved a turnover of 2.1 billion euros in 2018 and posted an operating profit of 100 million. It currently serves 69 destinations worldwide with a fleet of 65 aircraft. The acquisition of Air Europa by IAG is a further step in the consolidation in Europe, at the end of which many experts still see three large groups.

Bad for Skyteam

IAG has not yet commented on the alliance issue. However, it is certain that Air Europa will leave Skyteam. Anything else would make little sense. This means that the alliance will lose another member after China Southern.