International Airlines Group (IAG) has agreed to acquire Spanish carrier Air Europa for €1 billion through its Iberia subsidiary.

The British Airways owner said the deal will transform its Madrid hub into “a true rival to Europe’s four largest hubs: Amsterdam, Frankfurt, London Heathrow and Paris Charles de Gaulle”.

Announcing the agreement with Air Europa’s current owner, Spanish tourism group Globalia, IAG chief executive Willie Walsh said: “Acquiring Air Europa would add a new competitive, cost-effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership, therefore generating additional financial value for our shareholders.

“IAG has a strong track record of acquisitions, most recently with the acquisition of Aer Lingus in 2015, and we are convinced Air Europa presents a strong strategic fit for the group.”

The group plans to retain the Air Europa brand initially as a “standalone profit centre” within Iberia and run by Iberia CEO Luis Gallego. It will be integrated into the latter’s existing hub structure at Madrid.

Gallego added: “This is of strategic importance for the Madrid hub, which in recent years has lagged behind other European hubs. Following this agreement, Madrid will be able to compete with other European hubs on equal terms with a better position on Europe to Latin America routes and the possibility to become a gateway between Asia and Latin America.”

Air Europa operates scheduled domestic and international flights to 69 destinations, including long-haul routes to Latin America, the US, the Caribbean and North Africa. In 2018, the airline generated revenue of €2.1 billion and an operating profit of €100 million. It carried 11.8 million passengers that same year and currently has a fleet of 66 aircraft.

Globalia CEO Javier Hidalgo commented: “For Globalia, the incorporation of Air Europa to IAG implies the strengthening of the company’s present and future that will maintain the path followed by Air Europa in the last years. We are convinced that the incorporation of Air Europa to a group such as IAG, who over all these years has demonstrated its support to the development of airlines within the group and the Madrid hub, will be a success.”

IAG expects the sale to complete in the second half of 2020, subject to regulatory approval. If the group gets the go-ahead, it will own three Spanish airlines in addition to Iberia and low-cost carrier Vueling.

The group has attempted other take-overs in recent years, including bids for Niki following the collapse of Air Berlin and failed negotiations with Norwegian.

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