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ARCHIVED - Spanish airline Iberia will renegotiate with Air Europa after suspending merger
The Spanish airline and Globalia’s Air Europa are negotiating the termination of their current agreement to draw up a new pact
The Covid pandemic has thrown a spanner in the works of one of the biggest mergers in Spain’s airline industry, the purchase of Air Europa by Iberia.
IAG, the group that owns Iberia, and Globalia (Air Europa) announced on Wednesday December 15 that they are negotiating the termination of an agreement signed more than two years ago to start from scratch and agree on a new pact that “suits the current circumstances”.
The renegotiation of the agreement could not have come at a worst time for Air Europa, which is currently being sustained following public aid of around 600 million euros.
Iberia had been negotiating for more than a year with Globalia, the Spanish government and the European competition authorities to find a good solution for all parties, but various conditions imposed by Brussels have complicated the deal.
Now “it is a question of finding a new structure or new conditions to make the numbers work”, according to sources.
The purchase of Air Europa was announced more than two years ago, when the situation was radically different. The merger would have allowed Iberia to “eliminate its rival” on routes to Latin America, and to position Madrid-Barajas airport as an international hub.
But the merger of the two airlines has hit a number of obstacles, the first of which was the price which was agreed at one billion euros at the end of 2019.
However, the outbreak of the coronavirus pandemic led Iberia to force a downward renegotiation of the conditions of the initial agreement in light of the decline in Air Europa’s activity, meaning the figure no longer reflected its true value.
And Brussels also raised concerns that the alliance would lead to a dominant position for Iberia, thus violating “free competition rules and limiting consumer choice”.
The airline industry is in the midst of its biggest crisis ever with global passenger traffic plummeting due to mobility restrictions and airlines suffering historic losses and having to rely on multi-million state bailouts.
Amongst these airlines is Air Europa which is being kept afloat with funding from the Fund for Supporting the Solvency of Strategic Companies (SEPI).
The fund was created by the government to support companies in financial trouble due to the pandemic. This bailout with public money “commits” the government to guarantee the airline’s activity and employment.
The details of the new pact between the two airlines is expected to be announced within the next week.
Image: Iberia.com
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