IAG May Face Severe Debt After Air Europa Purchase

DALLAS — The International Airlines Group (IAG), the mother company of big airlines such as Iberia (IB), British Airways (BA) or Vueling (VY), has raised alarms on the international business market, as its financial health may be compromised after the official purchase of the second largest Spanish airline Air Europa (UX).

According to the Iberian finance publication Finanzas, the debt IAG will have to face after the finishing of the merger may rise to up to €2.800m (US$2.950m), which includes leasing charges and other financial factors that the Hidalgo family, the previous owner of UX, has been dragging throughout the years before this transaction.

Big international finance entities such as Barclays or JP Morgan have discussed the topic, "We do not share the IAG management's view that this would be a constructive move; we think that it should let the financially troubled Air Europa sink or fail". At the moment of writing, the International Airlines Group's share price has started to fall a 1.3%, now showing a value of €1.71 on the international stock market.

The takeover of UX has received wide criticism due to the potential monopoly position the company may end up with on many national Spanish routes, such as Madrid (MAD) to Gran Canaria (LPA) or Tenerife (TFN/TFS). On these routes, IAG will end up operating almost 90% of flights between the two regions on a typical day, only having Ryanair (FR) as the competing airline, with no more than five daily flights on average.

About The IAG-Air Europa Agreement

The idea of the sale of Air Europa to IAG first appeared in 2019, when it struck the news as one of the largest mergers in the financial history of Spain and Europe. The merger was going to be made through the Spanish flag carrier Iberia, a founder member of IAG since January 2011.

However, the extraordinary complexity of the entire process, the arrival of the COVID-19 pandemic, and worldwide travel restrictions forced the two companies to pause the transaction. At that moment, many thought the merger would not happen.

Nevertheless, on February 23, 2023, IAG and UX announced that the agreement was not only ongoing but was officially confirmed, and the complete purchase would be made within 18 months. The brands of Iberia and Air Europa will eventually remain untouched and independent.

Read more about this contentious operation in our latest story, pinned below.

Air Europa and Iberia operate the most efficient long-haul airliners on the market.