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* Buys Air Europa for 1 bln euros
* To be funded by external debt
* Shares rise more than 2%
* To be run by Iberia CEO
* Regulators may set requirements -analysts
(Adds detail, analysts, shares)
By Yadarisa Shabong
Nov 4 (Reuters) - IAG, the parent of British
Airways and Spain's Iberia, announced a 1 billion euro ($1.12
billion) takeover of Spain's Air Europa to boost its presence on
routes to Latin America and the Caribbean.
The deal comes less than six months after a proposal by BA,
Iberia and partners American Airlines and LATAM Airlines
aimed at reshaping international air travel in Latin
America was struck down by Chile.
IAG shares rose as much as 2.3% to 555 pence in early London
trading but some analysts said IAG may have to shed routes in
order to win regulatory approval.
Ryanair CEO Michael O'Leary said his company will ask the
UK's market watchdog to force IAG to make divestments as part of
its Air Europa takeover, a deal he said would be bad for
competition.
"Potential remedies, perhaps in the form of slot release or
behavioural restrictions, may be required and these could impact
the potential synergies," an analyst at Liberum wrote in a note.
IAG also owns carriers Iberia Express, Level, Ireland's Aer
Lingus and Vueling.
"We are not convinced that having just another brand
platform is the optimal move, and could see it potentially
combining with Level, Vueling or potentially Iberia Express
after some time," analysts at Bernstein said.
Air Europa serves 69 destinations, including long-haul
routes to the Americas and the Caribbean. It had a fleet of 66
aircraft at the end of 2018.
It will initially keep its brand and as it gets integrated
into the existing hub at Madrid it will be a standalone
operation run by Iberia boss Luis Gallego, IAG said.
"This is of strategic importance for the Madrid hub, which
in recent years has lagged behind other European hubs," said
Gallego, adding that Madrid had the potential to serve as a
gateway between Asia and Latin America.
Norwegian Air, which has shaken up the market for
travel across the Atlantic with cut price fares, last month
signed a partnership with JetBlue Airways to enable
European passengers to book straight through to around 100 U.S.
cities.
IAG said it expected the Air Europa deal, which will be
funded through external debt, to close in the second half of
next year and for it to add to its earnings in the first full
year after the closure.
($1 = 0.8951 euros)
(Reporting by Yadarisa Shabong in Bengaluru; additional
reporting by Andres Gonzalez, editing by Patrick Graham and
Jason Neely)
