Iberia acquires Air Europa, making Madrid the fifth largest European hub

It will pay one billion euros in cash and give IAG the leadership in connections with Latin America and the Caribbean

The airline company Iberia, subsidiary of the International Consolidated Airlines group (IAG), has reached an agreement for the acquisition of 100% of the share capital of Air Europa for a total of one billion euros, to be paid in cash at the close of the transaction, scheduled for the second half of 2020, after the necessary authorizations have been obtained.

The purchase of the Spanish airline will make the Madrid-Barajas Adolfo Suárez airport the fifth largest European hub, in direct competition with Amsterdam, Frankfurt, London Heathrow and Paris Charles de Gaulle. It will also reinforce IAG's leadership in connections between Europe and Latin America and the Caribbean.

Leading European hub
According to Willie Walsh, chief executive of IAG, in the press release to announce the agreement: “Acquiring 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, therefore generating additional financial value for our shareholders. IAG has a strong track record of successful acquisitions, most recently with the acquisition of Aer Lingus in 2015 and we are convinced Air Europa presents a strong strategic fit for the group”.

For Luis Gallego, chief executive of Iberia: “This transaction is of strategic importance for the Madrid hub, which in recent years has lagged behind other European hubs. Following this agreement, Madrid will be able to compete with other European hubs on equal terms with a better position on Europe to Latin America routes and the possibility to become a gateway between Asia and Latin America”.

National and international destinations
Air Europa, previously owned by the Globalia tourist group, operate regular flights to 69 destinations in Spain, Europe, Latin America, Caribbean, United States and North Africa. In 2018 it generated revenues of 2.1 billion euros, with an operating profit of 100 million euros. In this period, it carried 11.8 million passengers with a fleet of 66 aircraft.

Both the Spanish brand and its accounting will remain autonomous within IAG, although they will be under the management of Luis Gallego, Iberia's CEO. Air Europa will also be integrated in Iberia's hub structure in Madrid and on the IAG group's shared services platform.

Generation of synergies
Javier Hidalgo, chief executive of Globalia, describes the transaction: “For Globalia, the incorporation of Air Europa to IAG implies the strengthening of the company’s present and future that will maintain the path followed by Air Europa in the last years. We are convinced that the incorporation of Air Europa to a group such as IAG, who over all these years has demonstrated its support to the development of airlines within the group and the Madrid hub, will be a success”.

The synergies generated with the incorporation of Air Europa in the commercial relations between the companies in the IAG group will enable savings both in sales, general and administrative costs, and in the areas of provisioning, handling and distribution. These synergies are expected to be optimally integrated by 2025, and to contribute value in terms of revenues.