The parent company of Spanish airline Iberia has today announced a deal to buy one of its biggest rivals for €1 billion. Air Europa, which is Spain’s second-largest airline, will initially retain its own branding and identity although it will be held and led by Iberia’s management. If approved, the deal is set to close in the second half of 2020.
International Consolidated Airlines Group (IAG), which had successfully managed to keep the deal under wraps until this morning, said bringing Air Europa into its staple of brands would help make Madrid a “true rival” to the largest airport hubs in Europe like Amsterdam, London Heathrow and Frankfurt.
At present, Madrid currently serves just 72 international destinations and of the 20 largest airports in Europe, Madrid sits in 19th place for the number of destinations served.
If approved, IAG plans to add 10 more long-haul routes in Air Europa’s network by 2024, grow its fleet by up to 37 new aircraft and increase passenger numbers by around 35 per cent. Much of that growth is planned for routes between Europe to Latin America and the Caribbean.
Although, initially operating separate brands the tie-up is being seen as creating Europe’s fifth-largest airline in terms of the number of long-haul aircraft – Iberia/Air Europa will have 63 long-haul aircraft, which is just behind KLM with 65 long-haul aircraft.
IAG says it can unlock “significant revenue synergies” within five years by:
- Adding codeshare agreements between IAG airlines like British Airways and Aer Lingus
- Adjusting flight timings to allow for better connections
- Creating new routes rather than competing on existing routes
- Air Europa will join IAG’s in-house frequent flyer Avios currency
The airline’s current owner, the Globalia group has grown Air Europa since buying the carrier in 1991 and last year, Air Europa generated profits of €100 million and carried 11.8 million to 69 destinations. The airline currently operates a fleet of 66 aircraft.
“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,” explained Willie Walsh, the chief executive of IAG.
“We are convinced Air Europa presents a strong strategic fit for the group,’ he continued.