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LONDON, Jan 20 (Reuters) - British Airways and Iberia owner
International Airlines Group has agreed to buy Spain's
Air Europa for 500 million euros ($606.7 million), after the
pandemic cut the price in half and IAG struck a deal to defer
payment for six years.
Under the amended deal, Iberia, which is buying Air Europa
on behalf of IAG, will not pay the 500 million euros until the
sixth anniversary of the acquisition's completion, the companies
said in a statement.
The COVID-19 pandemic has upended the airline industry since
the deal was originally struck in November 2019, bringing most
international travel to a halt.
Air Europa been supported by loans from Spain's state-owned
industrial holding company SEPI during the crisis.
Over the last year, IAG has said it still wanted to buy Air
Europa, but its finances have also been squeezed, and it was
forced to tap investors for 2.74 billion euros while also
shedding thousands of staff to survive. It has been pushing for
a price cut on Air Europa from sellers Globalia.
The new deal is conditional on the satisfactory negotiation
between Iberia and SEPI regarding non-financial terms associated
with loans provided by SEPI. A Spanish newspaper said in
December that the deferral would give Air Europa time to repay
the state aid package.
Iberia's former boss Luis Gallego is now chief executive of
the entire IAG group, making him particularly aware of the
strategic rationale of the deal for IAG: to boost the Madrid hub
with new connections to Latin America and generate cost and
revenue synergies.
"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," Gallego said in the statement.
Given current cash pressures due to a lack of travel, IAG
said that net cash outflow from the deal would be minimal in
2021.
The statement said the completion of the deal was expected
to take place in the second half of 2021 and the acquisition
would be subject to approval by the European Commission.
Shares in IAG traded up 0.5% to 160 pence at 0837 GMT.
($1 = 0.8242 euros)
(Reporting by Sarah Young in London and Aishwarya Nair in
Bengaluru; Editing by Jacqueline Wong and Louise Heavens)
