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(Alliance News) - International Consolidated Airlines Group SA on Wednesday said it has amended an agreement from November 2019 in which its subsidiary Iberia was to buy Air Europa for EUR1 billion in cash from Globalia.
Air Europa is a Spanish airline which operates domestic and international flights in Europe, as well as long-haul routes to Latin America, the US, the Caribbean and North Africa.
IAG - which owns British as well as Spanish carriers Iberia and Vueling - said under the new agreement terms, Iberia will now pay EUR500 million for Air Europa. Payment is deferred until the sixth anniversary of the acquisition completion.
The group said the revised terms are conditional on successful negotiations between Iberia and Sociedad Estatal de Participaciones Industriales regarding the non-financial terms associated with the financial support provided to Air Europa during 2020.
IAG said in November 2019 that the Air Europa deal would transform the company's Madrid hub into a "true rival" for Europe's four largest hubs: Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle.
The acquisition is expected to be earnings accretive in the first full year following completion, IAG said, and will deliver "considerable" value to the group through synergy generation.
"Both Iberia and IAG are demonstrating their resilience to face the deepest crisis in aviation's history. Being part of a large group is the best guarantee to overcome current market challenges which will also benefit Air Europa once the transaction is completed. I am pleased that we have reached agreement with Globalia to defer payment until well into the expected recovery in air travel following the end of the pandemic and when we expect to be realising significant synergies resulting from the transaction," said IAG Chief Executive Luis Gallego.
The acquisition is subject to approval by the European Commission, and completion is expected to take place in the second half of 2021.
IAG noted: "Assuming completion in the second half of 2021, IAG will be taking on Air Europa at a time when air travel recovery could be meaningful as the rollout of Covid-19 vaccines proceeds worldwide."
Shares in IAG were up 1.4% at 162.01 pence in London on Wednesday.
By Zoe Wickens; zoewickens@alliancenews.com
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