Despite governmental aid, Air Europa to follow Norwegian’s fate?

Shutterstock / Vytautas Kielaitis

After receiving €475 million rescue package from the government, Spanish carrier Air Europa might face a discontinuation of bailouts. 

On November 3, 2020, the Spanish government approved two credits for Air Europa: a loan worth €235 million and another participatory loan of  €240 million, in which the state must receive remuneration for the money linked to the eventual benefits of the company. The state also reserved a right to appoint two directors for Air Europa and will have a last say in case of a company sell out. Both loans must be returned in six years. The airline will receive the bailout money in small settlements. 

However, on November 9, 2020, Spanish newspaper ABC reported that Air Europa might not be receiving more bailouts. According to the publication, the Spanish government would not provide additional financial support to its largest airline, arguing that it would be too risky. It remains unclear whether “more bailouts” include the agreed-up support or only the aid that might be needed in the future. After a similar decision by Norwegian government, Norwegian Air Shuttle announced lay-offs and a possible run-out of cash in the first quarter of 2021. 

The Spanish government expects Air Europa to be bought by Iberia airlines. On November 4, 2019, Iberia, which is wholly owned by International Airlines Group (IAG) (IAG), has reportedly agreed terms to buy Air Europa for almost €1 billion. Due to the current coronavirus crisis, IAG is demanding a price reduction from Air Europa’s owner, the holding company Globalia.

If IAG proceeds with the deal, it would be an opportunity for the Spanish government to recover the credit given to Air Europa. For that reason, the government is ready to negotiate the conditions of the repayment with a new owner. IAG would have options of returning the full credit, subrogate it or reduce the repayment period. 

Air Europa connects Spain with Europe, Latin America, North America and Africa with a fleet of 66 aircraft carrying almost 12 million passengers in 2019. In 2018, the airline obtained a net profit of €50 million. However, in 2020, it foresees losses close to €600 million due to the second wave of the pandemic.

“In the case of Air Europa, the impact of the pandemic is evident, due to the drastic reduction in air traffic caused by reduced mobility and fewer tourist arrivals,” government spokeswoman Maria Jesus Montero said in a public statement, adding the number of flights operated by the airline plunged 95% in the second quarter of 2020. 

Meanwhile, rival companies, as Evelop Airlines, are already planning to offer regular flights between Spain and Latin America. 


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