The International Airline Group (IAG), parent of British Airways, Iberia, Vueling, Air Lingus and Level, has entered into an agreement to purchase Spanish carrier Air Europa.

IAG expects the $1.1 billion acquisition to close in the second quarter of next year, pending regulatory approval.

Madrid-based Air Europa, a SkyTeam Alliance member, carried 11.8 million passengers last year and ended 2018 with 66 aircraft. The carrier's Latin America-focused transatlantic route network competes against Iberia, which is also based in Madrid. In the U.S., Air Europa flies to New York JFK and Miami.

In a press release, IAG said that along with bolstering IAG's Europe to Latin American position, the acquisition would transform Madrid into a rival of Western Europe's four largest connecting hubs: London Heathrow, Frankfurt, Paris De Gaulle and Amsterdam.

"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, therefore generating additional financial value for our shareholders," IAG CEO Wille Walsh said in a prepared statement.

IAG said it would initially retain the Air Europa brand. However, Air Europa is to become a unit of Iberia and run by Iberia CEO Luis Gallego.

Air Europa is the third largest Spanish airline, behind Iberia and Vueling. IAG has agreed to pay Air Europa a break fee of $45 million in the event that the transaction fails to receive the necessary regulatory approvals and either party elects to terminate the transaction agreement.

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