International Airlines Group has announced an agreement to acquire the remaining 80 per cent stake in Air Europa.

The long-running saga began in 2019 when IAG unveiled plans to acquire the Madrid-based carrier for €1 billion.

A much changed aviation landscape due to the Covid-19 pandemic subsequently resulted in the purchase price being halved to just €500 million in January 2021.

However The Competition and Markets Authority subsequently launched an investigation into the proposed takeover, and in December 2021 IAG confirmed that discussions were at an advanced stage to terminate the agreement.

In March 2022 IAG’s CEO Luis Gallego said the group remained “convinced about the strategic importance of this deal to the development and competitiveness of Madrid’s hub”, and in August last year IAG exercised a option to convert a €100 million loan into a 20 per cent equity share in Air Europa.

IAG takes 20 per cent stake in Air Europa

Subject to regulatory approvals – which the group said could take around 18 month –  IAG will now acquire the remaining 80 per cent stake in the carrier for €400 million, including €200 million upon closing, comprising €100 million in IAG ordinary shares and €100 million cash, followed by a further €100 million payable in cash on each of the first and second anniversaries of closing.

In a statement IAG’s board said that the acquisition “remains strategically important for the Group and positions it to benefit from growth opportunities in the Latin America and Caribbean market, as well as to increase connectivity to Asia”.

The Air Europa brand is set to be retained, under the management of IAG member carrier Iberia, with the aim of transforming the group’s Madrid hub “to compete with Europe’s largest hubs”.

It is likely that Air Europa will leave the Skyteam alliance once the acquisition is complete, with IAG stating that the takeover would deliver “significant customer benefits by unlocking further network opportunities and providing access to IAG’s Avios loyalty scheme”.

The group will also look to integrate Air Europa into its existing joint businesses – the group currently operates a transatlantic joint business with American Airlines and Finnair, and a Siberian joint business with Japan Airlines and Finnair, as well as agreements with Qatar Airways and China Southern.

Commenting on the news Luis Gallego, IAG´s chief executive, said:

“This agreement will enable IAG’s Madrid hub to compete on an equal footing with other European hubs and consolidate its position in the South Atlantic.

“Madrid is the main gateway between Latin America and Europe and there are opportunities to expand its network, providing significant benefits to our customers, employees and shareholders.”