IAG agrees €100mn exclusivity deal with Air Europa owner

IAG International Airlines Group has reached a deal to negotiate exclusively with Globalia for one year over the chance of buying its airline Air Europa (UX, Palma de Mallorca), in exchange for a EUR100 million euro (USD111 million) seven-year unsecured loan to the tourism holdco. The loan could be turned into a 20% shareholding in the carrier.

The move from the Iberia-owner, divulged in a statement sent to Spain’s securities regulator (Comisión Nacional del Mercado de Valores – CNMV) on March 17, appears to take the lead over Air France (AF, Paris CDG), which has also reportedly shown interest in acquiring a stake in the wholly Globalia-owned Air Europa.

“We remain convinced of the strategic importance of this operation for the development and competitiveness of the Madrid Barajas hub. Since we began negotiations, the world has changed. This agreement will give us time to exclusively evaluate alternative structures that may be of interest to both companies and offer significant benefits for their clients, employees and shareholders,” IAG CEO Luis Gallego said in the filing.

Besides obtaining exclusively over Air Europa for one year, IAG can also match any hypothetical offer from a competitor for the next two years. And if a sale to a third party takes place, IAG reserves the right to leave the shareholding “at any time in the future.”

The agreement is conditional on Globalia receiving approval from the banks that gave it a EUR150 million (USD166 million) syndicated loan guaranteed by the state-owned credit institution, ICO, and from the sovereign wealth fund SEPI which granted it a loan of EUR475 million (USD525 million) in November 2020 to help it survive the worst ravages of the pandemic.

IAG had agreed to buy Air Europa in November 2019 but terminated the deal in December 2021, saying it would seek alternative methods for a tie-up. Last month, reports emerged that Globalia was demanding an additional EUR125 million (USD138 million) advance from the group. The EUR100 million now agreed is added to the EUR75 million (USD83 million) the Iberia owner paid to Globalia in December to release it from the contract. If Air Europa were to fall into the hands of Air France-KLM, the Spanish flag carrier understands it would lose strength at its Madrid hub, crucial for traffic to Latin America as well as connections with Asia.