The purchase of Air Europa by IAG, for its integration into the Iberia group, faces tensions in pricing. The last appraisal of 500 million for the capital, to which would be added a financial debt of more than 600 million, is under discussion within the Hidalgo family. Sources familiar with the conversations comment that the owner of Globalia, Juan Jose Hidalgodefends that his airline is now worth more than in the worst phases of the pandemic.
Iberia, for its part, is not willing to put one euro above the aforementioned 500 million that both parties agreed to in January of last year. The buyer is open, in any case, to discuss the form of payment, which went from a single delivery in cash to a commitment in different terms.
The entry of IAG in August in the capital of Air Europa, with 20%, occurred with the capitalization of a loan of 100 million contributed by the holding company that runs Luis Gallego. It was about the intended airline being able to weather the last blows of the demand crisis. The equity value of 500 million was approved and the transaction, with the attached exclusivity commitment to deal with the integration, frightened the interest of Lufthansa and Air France in Air Europa. Previously, Iberia paid 40 million for the breach of the acquisition agreement of October 2019 and another 35 million to prevent the Hidalgos from denouncing that decline.
Iberia’s lawyers work on the ‘remedies’ while the price is agreed
In the fight to close a definitive price now, four months after the year of exclusivity enjoyed by Iberia expires, Air Europa wants to assert its recovery after a summer of strong demand for flights.
The airline, which seems not to have officially made an improvement claim yet, announced weeks ago that it would reach an ebitda of 160 million in the second half and would be close to balance in the overall year (it lost 830 million between 2020 and 2021). .
The summer (third quarter) has resulted in 87 million ebitda for Air Europa, which implies being 27% above the 2019 figure. And the forecast for this fourth quarter is 73 million, which is four times that of the last quarter of 2021. Another point in favor has been the remission of tensions with Boeing, with which it restructured an order for 15 aircraft in August (five 787-9 Dreamliner and ten 737 MAX), that now buys AerCap to rent them to Air Europa itself.
different visions
Sepi closes the credit tap and prioritizes recovering the rescue of Air Europa
At the IAG headquarters, they estimate that not even repeating the best year in its history, Air Europa could pay the debt contracted to defend itself against Covid: 475 million from the Sepi rescue and the 140 million loaned by banks with ICO guarantee .
The management of Air Europa ensures that refinancing is not being considered, given the length of the amortization terms, nor is new debt required in view of the fact that money has returned to the treasury. Contrary to this version, financial sources affirm that the Globalia airline has tested the possibility of getting a new mattress of 100 million to face a difficult winter season due to the increase in costs and the economic context.
The same sources maintain that Sepi has completely closed the faucet, prioritizing the recovery of the loan. And a greater indebtedness, with which Air Europa could delay the decision to sell to Iberia in search of greater visibility about 2023, could frustrate the operation.
The first problem with the Hidalgo firm is that it lacks coverage for a fuel that will remain expensive in the coming months. He couldn’t sign them when he was in serious financial trouble and he doesn’t have them now. The rise in rates and the strength of the dollar against the euro do not help a company that has a large part of its costs (fuel and fleet) in the US currency either.
“Traditional airlines will struggle in a high cost environment; consumers will keep their trips but will look for value in the entire network of main airports ”, predicted Johan Lundgren, CEO of Easyjet, on Tuesday in the presentation of results of the British low cost. This expert referred to the prioritization of the ticket price in times of high inflation.
The future of Air Europa is up in the air while Iberia’s lawyers, with the support of Garrigues, prepare concessions (remedies) on routes, slots and even aircraft that may favor the green light from the Competition authorities. The buyer’s intention was to have the file on the table of the Markets and Competition Commission (CNMC) in November or, in any case, before the end of the year. In the company they are aware that the passing of the months, with the supposed growth of the activity of the companies, could once again give a determining role to the Directorate General for Competition of the EU, where the operation has already been parked before some remedies required that made integration unfeasible.
Iberia has recovered all of its pre-pandemic capacity in the winter season (from October 29 to March 25), and in the first quarter of 2023 it will be at 105% of its 2019 capacity thanks to the arrival of new aircraft.
A good second semester
More sales. Air Europa foresees record revenues this year, with more than 2,000 million (1,200 million between June and December). Despite operating with less fleet, it says it is achieving better load factors than in 2019.
Commitment. The Globalia firm claims to be meeting the operational objectives contemplated in the business plan committed to Sepi to receive state loans for 475 million. The five million travelers expected between June and December exceed the 4.8 million in the same period of 2019.
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