International Airlines Group (IAG) has reached an amended agreement with Air Europa owner Globalia to move forward with the purchase of the Spanish carrier.
IAG, the parent of British Airways, Iberia, Vueling and Aer Lingus, initially reached a purchase deal for Air Europa in November 2019, before the Covid-19 pandemic rocked the global aviation industry.
Under the amended agreement, IAG would purchase the carrier for 500 million British pounds, down from the previous 1 billion pounds, with payment deferred for six years. As before, Madrid-based Air Europa would be conjoined with Iberia, Spain's largest airline.
Before the amended agreement becomes final, Iberia must reach terms with the Sociedad Estatal de Participaciones Industriales (SEPI), a Spanish state-owned sovereign wealth fund, regarding non-financial terms associated with the financial support SEPI provided Air Europa as the carrier waded through the crisis of 2020.
The acquisition is also subject to approval by the European Commission, which must weigh the impact it would have on competition. Prior to the pandemic, SkyTeam alliance member Air Europa was Spain's third largest airline behind Iberia and Vueling, both of which are owned by IAG.
Air Europa carried 13.1 million passengers in 2019, but it saw a 70% decline in passenger last year, IAG said.
Europa has an operating fleet of 52 aircraft. Its Latin America-focused transatlantic route network competes against Iberia.
Iberia CEO Javier Sanchez-Prieto said the merger would benefit travelers and Spain's economy.
"This transaction makes perfect strategic sense to reinforce Madrid's hub competitiveness on a global stage," he said. "It will benefit consumers and Air Europa's incorporation into the Iberia Group will improve the company's viability benefitting both Iberia and Air Europa employees."
IAG said that acquiring Air Europa would improve the conglomerate's growth opportunities when the airline industry recovers from the pandemic. The acquisition, IAG added, would also transform its Madrid hub into a true rival of transatlantic connecting hubs maintained by the Lufthansa Group in Frankfurt and Air France/KLM in Amsterdam and Paris.
IAG expects the acquisition to close in the second half of this year, assuming satisfaction of all conditions.