British Airways owner IAG yesterday said it would pay only half the agreed purchase price of Spain’s Air Europa, and not for more than six years, as the sector is ravaged by the coronavirus.
IAG will pay €500mn ($606mn) to Air Europa-owner Globalia, down on the initial €1bn price tag agreed in November 2019.
“IAG and Globalia today announce that they have amended the original agreement,” the pair said in the statement.
“The parties have agreed that the amount to be paid... will be reduced from an equity value of €1bn to €500mn with payment deferred until the sixth anniversary of the acquisition’s completion.”
The deadly Covid-19 health crisis has decimated demand for international air travel, grounding planes worldwide and sparking thousands of job losses under drastic restructuring.
And the Spanish government has granted Air Europa a lifeline of €475mn in loans to help see the carrier through the pandemic.
IAG, which operates also Ireland’s Aer Lingus and low-cost European carrier Level, hopes the Air Europa transaction will generate significant savings across the group.
The takeover is aimed also at expanding routes to Latin America and the Caribbean, while complementing IAG’s Spanish divisions Iberia and Vueling.
The conglomerate wants to help Madrid take on the four largest air hubs in Europe: Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle.
“Both Iberia and IAG are demonstrating their resilience to face the deepest crisis in aviation’s history,” IAG chief executive Luis Gallego said in the statement. “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.”
Founded in 1986, Air Europa was the first private airline to operate scheduled domestic flights within Spain, breaking Iberia’s monopoly.