International Airlines Group reaches deal to buy Air Europa for $1.1 billion
International Airlines Group, the parent company of British Airways and Iberia, among others, has added another airline to its portfolio. Monday morning, the group announced that it had reached a deal to purchase Air Europa, strengthening the group's presence in Madrid with goals of making the airport the next European hub.
According to a press release, IAG's wholly owned subsidiary Iberia has acquired Air Europa under the IAG umbrella. The cash deal, worth 1 billion euro ($1.1 billion), was agreed to between IAG and tourism company Globalia Corp.
Air Europa is currently part of SkyTeam, the global airline alliance which includes Air France-KLM and Delta Air Lines. IAG carriers are in the rival Oneworld alliance, which makes an alliance switch for Air Europa all but certain when the deal is finalized.
The deal allows IAG to continue its growth strategy in Spain. Already owning the flag carrier of the country, Iberia, as well as low-cost carriers Vueling and LEVEL, IAG has a strong hold on the Spanish market. The group plans to use the Madrid hub to increase its presence on the Europe to Latin America and Caribbean routes.
"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," IAG CEO Willie Walsh said in a statement.
The deal is expected to be completed in the second half of 2020, following government approvals.
IAG turned to Spain for growth opportunities given the limitations at its London Heathrow hub. With Air Europa's existing route network to Latin America and the Caribbean, IAG believes that Madrid is set to become Europe's next hub airport, joining the likes of Amsterdam, Frankfurt, Paris and London Heathrow.
In 2018, Air Europa generated 2.1 billion euro ($2.4 billion) in revenue and 100 million euro ($112 million) in operating profit. In the year, it carried 11.8 million passengers on its fleet of 66 aircraft. For long-haul routes, Air Europa operates both Boeing 787 Dreamliners and Airbus A330s.
"We continue to believe there is scope for further consolidation within Europe, and this is the next step," Walsh said.
Initially, IAG will retain the Air Europa brand and it will be run as a standalone part of Iberia. However, in the future, Walsh said that the group will reduce the number of brand names that it operates in Spain.
After completion of the Air Europa deal, IAG will own six commercial airlines: Aer Lingus, British Airways, Iberia, LEVEL, Vueling and Air Europa.