BA-owner IAG axes €500m Europa takeover talks as airlines face new Covid blow

·2 min read
IAG first announced plans to buy the Spanish airline in 2019 (Steve Parsons/PA) (PA Archive)
IAG first announced plans to buy the Spanish airline in 2019 (Steve Parsons/PA) (PA Archive)

IAG’s ambitions for a Madrid hub to compete with major European airports looked in tatters today as the British Airways owner pulled the plug on its €500 million takeover of Air Europa.

The buy-up was intended to transform the Spanish capital’s fortunes by creating a rival to Heathrow, Paris, Amsterdam and Frankfurt, and re-establish IAG as a leader on Europe to Latin America and Caribbean routes.

IAG, which owns Iberia and Vueling, also planned to use Europa’s network to tighten its grip on the local market.

But the group said today discussions to terminate the acquisition are at “an advanced stage”.

The deal was signed with Europa owner Globalia in November 2019 with a price tag of €1 billion. That was halved in January as the pandemic destroyed demand for air travel.

IAG had agreed to pay Europa a €40 million break fee if the deal — which was facing a tricky anti-trust probe in the EU — failed regulatory hurdles.

Mark Simpson at Goodbody said: “Given the uncertainty hanging over the recovery of the long-haul market this is probably a sensible move by IAG.”

Laura Hoy, of Hargreaves Lansdown, said the decision was "disappointing, though not completely unexpected."

She said: "The deal was under scrutiny from EU Regulators who said the combination of IAG Spanish subsidiary Iberia and Air Europa created anti-competition concerns.

"Plus, the pandemic’s taken a toll on IAG’s operations.

"IAG had called the acquisition a brave decision but one it was prepared to make to see Madrid to compete against other major European hubs and serve destinations around the world.

"Right now caution not bravery seems the game plan."

IAG shares, which have tumbled from 180p since the Omicron variant hit in November, fell 2.5p, or 2%, to 130.12p today.

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