IAG’s purchase of Air Europa for integration into the Iberia group faces pricing tensions. The latest estimate of 500 million for the capital, which would add financial debt of more than 600 million, is being discussed within the Hidalgo family. Sources familiar with the talks comment that the owner of Globalia, Juan Jose HidalgoHe defends that his airline is worth more now than it was at the worst of the pandemic.
For its part, Iberia is unwilling to give a euro over the aforementioned 500 million agreed by both parties in January last year. In any case, the buyer is willing to discuss the form of payment, which can range from a one-time delivery in cash to a commitment to other terms.
IAG’s 20% stake in Air Europa’s capital in August was capitalized on a loan of 100 million contributed by the current holding company Luis Gallego. The point was that the targeted airline could survive the last blows of the demand crisis. The equity value of 500 million was approved and the transaction, with the associated exclusivity commitment to handle the integration, frightened Lufthansa and Air France’s interest in Air Europa. Previously, Iberia paid 40 million for breaching the October 2019 takeover agreement and another 35 million to prevent the Hidalgos from denouncing this lapse.
Iberia’s lawyers are working on the ‘cure’ while the price is being agreed
Battling for a final price now, four months after the end of the year of Iberia’s exclusivity, Air Europa is aiming to maintain its recovery after a summer of strong flight demand.
The airline, which doesn’t seem to have officially claimed any improvement yet, announced weeks ago that it would reach 160 million ebitda in the second half of the year and be close to breakeven for the full year (it lost 830 million between 2020 and 2021). ). .
The summer (third quarter) resulted in an ebitda of 87 million for Air Europa, which means that it is 27% above the value of 2019. And the forecast for this fourth quarter is 73 million, four times the last quarter of 2021. This is supported by the easing of tensions with Boeing, which in August restructured an order for 15 aircraft (five 787-9 Dreamliners and ten 737 MAX), the AerCap is now buying to lease them to Air Europa itself.
different visions
Sepi shuts down loan tap and prioritizes recovery of Air Europa bailout
At IAG headquarters, they estimate that Air Europa could not even repeat the best year in its history to pay off the debt it incurred to defend itself against Covid: 475 million from the Sepi rescue and the 140 million , borrowed from banks with ICO guarantee.
Air Europa’s management ensures that no refinancing is considered given the long payback periods, nor is re-borrowing necessary given that money has returned to the treasury. Contrary to this version, financial sources confirm that the airline Globalia 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 claim Sepi turned off the faucet entirely and prioritized repayment of the loan. And greater debt, which Air Europa could use to delay its decision to sell it to Iberia in search of greater visibility for 2023, could derail the operation.
The first problem with the Hidalgo company is that it has no backing for a fuel that will remain expensive for months to come. He couldn’t sign them when he was in serious financial trouble, and now he doesn’t have them. Also, the rise in interest rates and the strength of the dollar against the euro are not helping a company that bears a large part of its costs (fuel and fleet) in US currency.
“Traditional airlines will struggle in a high cost environment; Consumers will keep their travels going but look for value across the network of major airports,” predicted Johan Lundgren, CEO of Easyjet, on Tuesday when presenting the UK Low Cost results. This expert referred to the prioritization of the ticket price in times of high inflation.
Air Europa’s future is in the air as Iberia’s lawyers, with the support of Garrigues, prepare concessions (remedial measures) on routes, slots and even aircraft that could benefit from the green light from competition authorities. The buyer’s intention was to submit the filing to the Markets and Competitions Commission (CNMC) in November or, in any case, before the end of the year. The company is aware that the passage of months, with the alleged growth in the activity of companies, could again assign a decisive role to the Directorate-General for Competition of the EU, where operations were already parked some necessary remedial measures that made integration impossible.
Iberia has regained all its pre-pandemic capacity during the winter season (from October 29th to March 25th) and will reach 105% of its 2019 capacity in the first quarter of 2023 thanks to the arrival of new aircraft.
A good second semester
More sales. Air Europa expects record revenues of more than 2,000 million (1,200 million between June and December) this year. Although operating with a smaller fleet, better utilization factors are achieved than in 2019.
Obligation. The Globalia firm claims to meet operational targets envisaged in the business plan, which has committed Sepi to receive 475 million in government loans. The five million travelers expected between June and December exceed the 4.8 million for the same period in 2019.