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(Alliance News) - International Consolidated Airlines Group SA on Thursday said it has agreed to pay EUR75 million to break its agreement to buy Spanish carrier Air Europa.
IAG said it will pay Air Europe-owner Globalia EUR35 million in addition to the EUR40 million break fee that was previously agreed. The pair agreed that the EUR75 million could be applied against any future purchase price, were a new agreement reached for IAG to buy Air Europa.
The two companies had announced on Wednesday they were discussing an arrangement.
IAG's Spanish airline Iberia had agreed to buy Air Europa in late 2019 for EUR1 billion, but the price was slashed to EUR500 million after the Covid-19 pandemic grounded the entire travel sector.
Air Europa is a Spanish airline that operates domestic and international flights in Europe, as well as long-haul routes to Latin America, the US, the Caribbean and North Africa. In addition to Madrid-based Iberia, IAG also owns Vueling in Spain. In November, the UK Competition & Markets Authority said it began a probe into the deal.
IAG also owns British Airways and Aer Lingus.
As part of the agreement announced on Thursday, IAG said it has agreed with Globalia to evaluate before the end of January, "alternative structures that may be of interest to both companies and offer significant benefits for their shareholders, customers and employees."
IAG Chief Executive Luis Gallego commented: "It is very disappointing that we have had to terminate the current agreement to acquire Air Europa but the decision makes sense due to the market conditions, the deep crisis resulting from COVID-19 and taking into account our desire to maintain a disciplined approach to capital allocation."
IAG shares were 3.2% higher at 129.80 pence each in London on Thursday afternoon following the announcement. The stock is down 19% so far in 2021.
By Tom Waite; thomaslwaite@alliancenews.com
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