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IAG gambles €100 million that it can still acquire Air Europa

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The saga of IAG, the parent company of British Airways and Iberia, and its pursuit of Spanish airline Air Europa refuses to die.

To summarise events so far:

  • In November 2019, IAG announced a €1 billion plan to acquire Air Europa, which would see the airline leave the SkyTeam alliance, join oneworld and adopt Avios as its loyalty currency
IAG gambles €100 million that it can still acquire Air Europa
  • The announcement went down badly with the EU because it would give IAG 73% of the domestic Spanish airline market (the figure is even higher if you exclude intra-Canary Islands services)
  • During the pandemic, IAG managed to halve the acquisition price to €500 million, with no requirement to pay until 2026
  • In November 2021, the UK announced its own investigation into the deal, because Air Europa is a low cost competitor on certain long haul routes from Britain via a connection in Madrid
  • In December 2021, IAG appeared to throw in the towel and was preparing to pay the €40 million abort fee it had promised if the deal did not complete
  • In February 2022, it was reported that Air Europa had opened discussions with other airlines

IAG has now decided that if it can’t have Air Europa, no one else will have it either.

IAG has agreed to lend Globalia, Air Europa’s parent, €100 million with no security. Clearly no bank would be willing to lend money to a loss making travel and tourism group on such terms.

The catch is that Globalia has had to agreee not to sell Air Europa to another other airline for next 12 months. For the following three years, Air Europa has to guarantee IAG the opportunity to match any bid made by another airline.

IAG is clearly hoping that, given enough time, it can find a way around the regulatory hurdles. The problem is that there is no other domestic carrier in Spain which is large enough to take on the routes that Air Europa would need to sell. IAG may need to find a way of creating ‘an airline within an airline’ which could be sold as a stand-alone carrier and future competitor.

Comments (28)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Bobby says:

    Looks like is under maintenance right now

  • Scott says:

    I had a look at buying around 50k Hilton points yesterday and it would have, with the 100% bonus, cost around $25 more than the cash rate (and those didn’t include the few 1000 I have already).

    • Sandgrounder says:

      You’ve got to price up every trip and make your own choice. I’m going up to the Edinburgh festival as as Gold 5 nights is about half price if you buy points.

  • Riaz says:

    The Palm Waldorf is showing at 634k points plus £1,000 for 5nights in a basic room, not 4x80k

  • Chris says:

    Apologies for OT but haven’t seen any other Barclaycard article lately. For BC avios application, can my other half enter household salary (i.e. mine) as she is not working at the moment or not? (AMEX application allows you to do so)

  • Spaghetti Town says:

    Does Amex work with the betting sites okay? it is super saturday (rugby) after all

  • Spaghetti Town says:

    Also – 2k heathrow rewards expiring, anyone found the best value with these? i know it varies by person to person. Currently collecting virgin/avios.

  • Sam says:

    Hi, thank you for the info – I’m looking at doing the same – booking the Waldorf Astoria Palm, Dubai for 5 nights in a King suite. I have HH gold status but zero points. How can I see how many points I would need to buy for my stay? When I sign in it only says I don’t have enough points to book it, but does not tell me how many I need. Many thanks, Sam

    • Rob says:

      You can only book standard rooms on points and with 544. Better rooms are Premium Rewards which are poor value.

    • Peter K says:

      It’s a quirk of the Hilton IT that if you don’t have enough points in your account for a redemption then you need to log out to see how many points are required.

      I believe if you are logged out however then the 5 for 4 discount doesn’t show.

  • Lady London says:

    So, IAG wasn’t going so far as to make it a convertible even though I know 100 million euros isn’t a lot. And IAG shows it has lots of cash around to fund this.

    I’m not even sure the conditions attached to the loan, especially as it’s only a loan with conditions and not a more complicated instrument with the conditions more embedded, could not be ruled as uncompetitive by EU.

    • Dubious says:

      It is convertible, but not stated in this article.
      “Subject to any relevant regulatory approvals, IAG will have the option to convert the loan into an up to 20 per cent equity stake in Air Europa.”
      From the RNS.

      • Rob says:

        Yes, it’s convertible but I left that out because we don’t know what the terms are or who can trigger it or when.

    • Richie says:

      Isn’t it cheaper to ‘influence’ the right people?

This article is closed to new comments. Feel free to ask your question in the HfP forums.

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