The one that is destined to become one of the great corporate operations of the year despite the crisis, the acquisition of Air Europa by Iberia, is receiving momentum from both, and from the Government itself, while the business is degraded by the effect of the coronavirus.
The Hidalgo family airline, independent of the greats holdings European air, is in check like so many others. It is in this context that the Ministry of Transport has received the request for help, according to different sources consulted, to press as much as possible in favor of urgent supervision of the operation by the EC.
Iberia continues to work on the acquisition, but both the company and its holding company IAG are aware of the deterioration that Air Europa is suffering. The box disappears even with the planes on the ground and, worse still, there are no expectations in sight about when and how the air sector will come out of the paralysis and the serious crisis for tourism.
The EC, which will receive the final exdiente in May, will enter a period of laxity regarding measures to support the air sector, among others
The negotiation of a new appraisal by Air Europa is served, although sources close to the operation affirm that There has not yet been an exchange of views on this matter between the President of Iberia, Luis Gallego, and the CEO of Globalia, Javier Hidalgo., who conduct the operation personally. The same sources consulted explain that the sale contract includes price review clauses in the event of serious deterioration in assets, results or business environment.
Gallego and Hidalgo agreed last October, after an express negotiation, a single payment of 1 billion in cash (ten times the ebit) by Air Europa, a scenario that improved the possible offer in different terms with which air France he had groped Globalia. The contract includes a penalty clause of 40 million in the event that Iberia backs down.
“Globalia, focused on the tourism sector, does not solve anything for its survival by charging the break fee, so it is foreseeable that it will open up to a certain transfer in the price that will facilitate Iberia’s investment. It must also be careful with its liquidity during the crisis ”, they point out from the environment of the transaction.
The two candidates for an integration that would be historic in the Spanish air sector are currently going through the pre-notification phase to the European Commission. It will be in May, with the required information already sent to the regulator, when the IAG airline has to send the final file in search of the place to this movement of concentration.
The pre-pandemic timetable set the Brussels decision for later this year, but the urgencies of the crisis could put the project on track ahead of time. Legal sources state that the EC is going to enter a lax period as regards state aid, as long as it is temporary, and concentration operations that could now be seen as defensive.
The Ministry of Transport will play a key role in Brussels in defense of Spain’s air connectivity in the face of the weakening of its airlines
In the airline sector, it is beginning to take for granted that there are many months ahead, even more than a year, for business to return to normal. A situation that will require the existence of an effective vaccine and treatments against Covid-19.
Among the big European airlines, Lufthansa, Air France, Virgin and KLM they are seeking support from their respective governments; Norwegian has debt capitalization on the table; TAP Air aims to be nationalized, as is the case of Alitalia, and Easyjet it is raising extra liquidity in a context where it spends £ 40m a week even with planes parked.
This harsh situation, and the uncertainty weighing on the entire business, would have convinced the Government both of the need to draw up a recovery plan for the air sector and of the need to have a local airline capable of promoting the hub of Madrid-Barajas.
Shield Barajas. One of the keys that explains the taking of Air Europa by Iberia is to prevent any other rival, especially Air France, bought and disputed the domain of the Madrid hub and routes to Latin America. The IAG holding company entered the Covid-19 crisis with cash and credit lines not available for 9.3 billion; now it maintains the bet of strengthening Iberia while it has made other decisions such as the suspension of the complementary dividend. A step back in this operation is penalized with 40 million and would leave Air Europa in the showcase, possibly at a price of balance.
Globalia supports Air Europa. The Hidalgo family airline was the first to apply a temporary adjustment of employment in Spain in the current crisis, it maintains most of its fleet on land and has Globalia, strongly impacted by the crisis, as support. His last registered accounts, those of 2018, indicated income of 2,100 million and a net profit of 49 million.
Market domain. With data prior to the pandemic, the sum of Air Europa and Iberia represents the control of 66% of domestic traffic. Iberia has already presented its willingness to transfer routes to its rival Volotea to the EC.