International Airlines Group (IAG) (IAG) announced its final agreement to acquire Spanish air carrier Air Europa for €500 million ($612.5 million) on January 19, 2021.

“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 acquisition is still subject to approval by European Commission. The completion of Air Europa acquisition is expected to take place in the second half of 2021, if all conditions of the Amendment Agreement are fulfilled, according to the statement.

“Being part of a large group is the best guarantee to overcome current market challenges which will also benefit Air Europa once the transaction is completed. I am pleased that we have reached agreement with Globalia to defer payment until well into the expected recovery in air travel,” CEO of IAG Luis Gallego said. 

IAG believes that the purchase of Air Europa would further expand the group’s network in Spain. The  group already controls a significant part of Spanish market, as it owns Iberia and Vueling. It also would increase the significance of IAG’s Madrid hub, transforming it into a major rival to Amsterdam, Frankfurt and Paris Charles de Gaulle airports. 

“This transaction makes perfect strategic sense to reinforce Madrid's hub competitiveness on a global stage. It will benefit consumers and Air Europa’s incorporation into the Iberia Group will improve the company's viability benefitting both Iberia and Air Europa employees,” Javier Sánchez-Prieto, Iberia’s chief executive, said.

On November 4, 2019, IAG initially agreed to buy Air Europa for €1 billion ($1.2 billion). However, due to the economic downturn caused by the COVID-19 pandemic, British Airways parent company IAG has been pushing to reduce the price.

In October 2020, CEO of International Airline Group Luis Gallego reaffirmed the group’s interest  in buying Air Europa. “For sure if possible, we would like to do this deal,” Gallego said. “We are waiting to see the package and the conditions attached, and at that moment, we will continue the negotiation.”

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British Airways parent company IAG reportedly reached an agreement to buy Air Europa.