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IAG expected to terminate €500m Air Europa takeover

By Jenni Reid

13:05, 15 December 2021

An Air Europa jet in the air
IAG expected the Air Europa acquisition to expand its Madrid hub – Photo: Alamy

International Airlines Group (IAG) confirmed it is in advanced discussions to terminate an agreement to acquire Air Europa for €500m. 

IAG’s Spanish subsidiary Iberia previously was set to acquire the entire share capital of Air Europa from Spain’s Globalia Group.

The agreement was signed in November 2019 with an equity value of €1 billion, but that was cut in half in January 2021, with payment to be deferred for six years due to the pandemic. 

Spain’s transport ministry told news agency EFE it would now look at options to guarantee the continued activity of the airline due to its importance for the country’s aviation and tourism sectors. 

IAG also owns British Airways, Aer Lingus and Spanish low-cost airline Vueling.

Deal challenges

IAG stock, which has dropped 13% this year amid ongoing international travel restrictions and Covid-19 concerns, was down 1.5% to 130.52p in mid-day trading Wednesday on the London Stock Exchange. 

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The group previously said the Air Europa acquisition would help it expand its Madrid hub, which it wants to rival hubs in Amsterdam, Frankfurt and Paris.

The deal already was under scrutiny from European and UK regulators over the potential damage to competition on domestic, short-haul and long-haul routes to and from Spain.  

IAG CEO Luis Gallego told an online conference today the company was considering other options for a tie-up, according to a Reuters report. 

Gallego reportedly said the company would not “continue with the current structure” but confirmed IAG is looking at new structures for the deal.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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