A year after the purchase of Air Europa by Iberia was announced, both with operations between Spain and Latin America, the Spanish airlines are working “by the piece” in the final hours of the deadline that had been given to close the acquisition.
Who is negotiating what is the great unknown in this final stretch, once Juan José Hidalgo, president and main shareholder of Globalia, owner of Air Europa, pointed out this week to the EFE news agency that he is not at the table nor is he willing to sit down to deliver the company he founded in 1984 at a bargain price.
The president stated that he was prepared to take the company forward alone, since he has a growth plan that will allow him to meet his payment obligations and without making layoffs.
Neither side wants to talk. Iberia only points out that they have daily meetings and work “by the piece” and the spokesmen for Air Europa do not speak.
Iberia wants to lower the price
The positions are known: Iberia, integrated with British Airways, among others, in the International Airlines Group (IAG), wants to close the operation at all costs to strengthen itself against the large European operators, such as KLM-Air France and Lufthansa.
But he wants to close it at a much lower price than the one he initially agreed, of 1,000 million euros (around 1,127 million dollars) in 2019, before the pandemic, and also the one renegotiated a year later, in full expansion of the Covid- 19, of 500 million euros (approximately 563.5 million dollars).
It also wants the Spanish Government to “help” it, because it would mean making Madrid a great hub (air traffic distribution center) and not losing importance compared to the great Europeans, such as Paris, Amsterdam or Frankfurt, as both the President of Iberia, Javier Sánchez Prieto, as well as that of IAG, Luis Gallego.
Public ownership?
The Spanish Government, through the State Society of Industrial Participations (SEPI), in 2020 granted Air Europa a loan of 475 million euros (about 85 million dollars) in a fund to help companies in the face of the drop in activity by Covid-19.
Recently, the first vice president of the Spanish Government, Nadia Calviño, indicated that she is analyzing different options, including the possibility of participating in the capital of Air Europa.
The formula being considered is the conversion of the SEPI loan into capital, a solution that would substantially alleviate the financial burden of the company, which has a debt of over 700 million euros (almost 793 million dollars) due to the sharp fall in pandemic flights.
hidalgo does not yield
For its part, Air Europa is reluctant to give in and wants hard cash. It cost him to cut the amount of the operation in half and now he considers that he has room to continue operating autonomously thanks to the 475 million state funds, the 75 million euros (about 85 million dollars) that Iberia paid him for undoing the initial operation and the recovery of air traffic, especially in the last quarter of 2021.
Hidalgo, owner of 52% of Globalia, which in turn has 100% of Air Europa, explained to EFE that he is complying with SEPI’s conditions for the loan.
In case players were missing, the European Commission announced that it was analyzing the operation because it saw supply concentration problems on some 70 routes after the integration of the two companies, and demanded that Iberia get rid of some.
His final statement did not come about because the operation declined last December, days before the deadline that Brussels had given itself to publish its analysis.
IAG, Iberia’s parent company, explained that it is now evaluating other structures “that may be interesting for both companies.”
Meanwhile, Hidalgo has traveled to the Dominican Republic, where he spends part of his time and where he has personal investments, away from the table where the future of Air Europa is being negotiated.
The merger would affect flights connecting Madrid with the United States or Latin America, since Iberia and Air Europa compete in the Latin American market and, before the pandemic, they overlapped in many destinations such as the Dominican Republic, Cuba, Panama, Asunción, Bogotá, Buenos Aires , Miami or New York.
