IAG gets huge cut in Air Europa deal.
British Airways owner IAG announced it has slashed the price it was going to pay for Air Europa by €500m, down from a previous price of €1bn.
In addition, the company will not make payment until six years after the deal is complete.
“Under the terms of the Amendment Agreement, the parties have agreed that the amount to be paid by Iberia for Air Europa will be reduced from an equity value of €1 billion to €500 million with payment deferred until the sixth anniversary of the Acquisition’s completion,” the statement read.
“The board of IAG continues to believe that the acquisition remains strategically important for the future of IAG and Iberia and positions the group to benefit from growth opportunities as the industry emerges from the unprecedented impact of the COVID-19 crisis.”
The massive price cut is due to the coronavirus’ crippling effect on the travel sector in the past ten months.
Air Europa has been supported by loans from Spain’s state-owned industrial holding company SEPI during the crisis – who as a result now hold the cards in determining whether the deal goes ahead.
The airline currently has an operating fleet of 52 aircraft, compared to 68 at the end of 2019.
It operates regional flights to Europe and long-haul routes to Latin America, the US, the Caribbean, and North Africa.
IAG’s plan is to increase the importance of its Madrid hub, transforming it into a “true rival” to Amsterdam, Frankfurt and Paris.