October 1, 2022
IAG, Air Europa Owner Agree on Convertible Bond Structure

IAG, Air Europa Owner Agree on Convertible Bond Structure

DALLAS – International Airlines Group (IAG) has reached an agreement to provide a €100m (US$110.3m), seven-year unsecured loan to Globalia Corporacion Empresarial.

Globalia is the owner of Spanish airline Air Europa (UX). A previous IAG plan to acquire UX was derailed last December amid anti-competition concerns. Subject to regulatory approval, IAG has the option to convert the loan into a 20% equity stake in UX.

The deal is also conditional on the successful approval of syndicated banks that provided the loan agreement. It will be partially guaranteed by the Instituto de Crédito Oficial and by the Sociedad Estatal de Participaciones Industriales.

Under the terms of the agreement, IAG will have a period of exclusivity of one year while discussions take place, and this is accompanied by a right to match any third-party offer for the airline in the next three years. The firm will also have the right to exit if Globalia should sell UX at any time in the future.

Adolfo Suárez Madrid-Barajas Airport. Photo: Fabrizio Spicuglia/Airways

IAG interest in Air Europa’s network

Air Europa is Spain’s third-largest airline, following Iberia (IB) and Vueling (VY). UX operates out of its hub in Madrid (MAD) with a fleet of 34 aircraft. It is an all-Boeing fleet composed of 737-800 NG for the short-haul and 787-8 and -9 for the long-haul.

Data from airlinedata.com shows that UX operates a strong connection with South America from its hub in MAD, with 14 destinations served in the continent in Q1 2022. Comprising by a mix of scheduled services and chartered ad-hoc connections.

The agreement on the loan shows the renewed interest of IAG in increasing the group’s presence at MAD. On the deal and its strategic relevance, IAG Chief Executive Officer Luis Gallego commented, “We remain convinced of the strategic importance of this deal to the development and competitiveness of Madrid’s hub. Since we started negotiations, the world has changed.”

He continued: “This agreement will give us time to evaluate with exclusivity alternative structures that may be of interest to both companies and offer significant benefits for their customers, employees, and shareholders.”

Featured image: Air Europa Boeing 787-8, reg: EC-MMX. Photo: Max Taubman/Airways

A Milan, Italy-based commercial aviation enthusiast since discovering the world behind flying an aircraft. Always wondering what the latest airlines' strategy will be.

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