AAirlines

One year later, Iberia expects state aid to Air Europa to close the purchase.

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Iberia is waiting for the closing of the rescue of Air Europa by SEPI’s fund for assisting strategic enterprises, in order to set the terms of the purchase operation, above all the price, which will be substantially lower than the one billion agreed now, a year ago, in pre-Covid times.

See also: Air Europa will double its flights to Latin America by the end of the year.

Luis Gallego, CEO of International Airlines Group (IAG) – formed by Iberia, British Airways, Aer Lingus, Vueling and Level – has indirectly asked the Government to help them with this operation to ensure that the “hub” (distribution center) in Madrid competes on equal terms with the four major European airlines, which are receiving aid from governments with injections of funds into the respective airlines, EFE reported.

The purchase operation continues to make strategic sense for Iberia because it would help strengthen the Madrid hub and bring it up to the level of those in Amsterdam, Frankfurt, London-Heathrow and Paris Charles-De Gaulle, which it had left behind.

See also: Dutch government withdraws state aid to KLM.

Furthermore, with this operation Iberia would take the lead over the Air France-KLM conglomerate, leader of the SkyTeam alliance, in which Air Europa is also integrated.

With this group, the Globalia company was considering a “joint venture” for flights between Europe and South and Central America that would have left IAG at a competitive disadvantage.

With the addition of Air Europa, IAG’s market share in air connectivity between Europe and Latin America will increase from 19 to 26%. It would leave behind its main rival, Air France-KLM (19%), and would increase the distance with competitors such as the Lufthansa group (9%), Tap (8%) or Latam (8%), according to the data handled by Iberia before the covid.

However, the context is radically different from that of a year ago when Iberia, last November 3, announced that it had committed to disburse one billion in cash for the Hidalgo airline.

For this reason, once the public bailout is approved, Iberia will examine the new situation of Air Europa, which has a loan of 140 Million Euros backed by the ICO, to which must be added the 475 Million Euros of public money which SEPI would inject to avoid bankruptcy and the 600 Million in debt, with negative operating results. “We are not buying the same”, said Gallego.

For its part, Globalia is analyzing the conditions imposed by SEPI’s fund for making effective the bailout for a volume of 475 Million, which would allow it to save the bankruptcy.

This is 75 Million more than what the airline had initially requested, because the worsening of the epidemic since Air Europa requested the bailout at the beginning of September has worsened even more the business prospects due to the fall in the traffic.

It is still unknown whether, in case the operation is closed, the Air Europa brand, routes and fleet will be maintained, issues that are being analyzed in this purchase process.

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