The purchase of Air Europa moves away: the debt of the airline would make another bailout unfeasible

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The purchase of Air Europa by Iberia is complicated. The situation of the Globalia airline is increasingly borderline. There is some “concern” about its financial statements since it is estimated that its debt could be between 600 and 800 million euros and that the first rescue granted by the State Society of Industrial Participations (SEPI), worth 475 million, would have already been consumed, as this media has learned.

Hence, the airline itself considered the possibility of requesting a second rescue in the audit of the 2020 accounts, which closed with losses of 428 million euros. The point is that, according to sources close to the company, Air Europa would have very difficult access to a second public aid for two reasons.

The first is that the deadline for requesting aid from the SEPI Strategic Companies Rescue Fund ends this year – although it remains to be seen if it is extended due to the situation of some companies in pandemic. And the second is that new aid would have to pass through the filter, first, from SEPI and, later, from Brussels.

And that the first rescue skipped the European control because the airline founded by Juan José Hidalgo distributed the 475 million in a participative loan of 240 million and in another ordinary of 235 million. As these are subsidized loans and not direct capital injection, they should not be notified, according to the requirements of the European Commission (EC) for redemptions of more than 250 million.

In the latter case, as this media has learned, it would be practically impossible to bypass the filter again and even that the European Commission itself gave the go-ahead for the company’s financial situation.

In any case, the bailouts are not lost, that is, they must be returned and after the controversy with the Plus Ultra, public aid is being looked at with a magnifying glass. And the latter doesn’t seem very viable right now either. That is to say, a second bailout would not pave the sale of Globalia’s airline division; If not the opposite.

Lower the price?

For now, Iberia continues to publicly defend that the purchase of Air Europa is “strategic” for both the group and the Madrid hub.

Although with certain nuances that they have not hesitated to make public recently. The president of Iberia, Javier Sánchez-Prieto, In his last meeting with journalists two weeks ago, he warned that “what is the final photo to make a decision” will have to be seen since the purchase price, lowered from an initial 1 billion euros to 500 million, could even be lower.

“Right now there is a price that is fixed, the price that was agreed was 500 million euros. I think we have to look after the competition process, and see the evolution of the company, if it really needs capital to be injected to see what the final photo is and make a decision, “he added.

The problem is that lowering the sale price might even be unnecessary. Why? Still reducing it, the situation that Iberia would find itself when buying Air Europa would be complicated due to its high debt, the problems to pay suppliers, to return the money of the flights canceled by the Covid and the losses that it drags, among many other factors.

The situation is so extreme that the Hidalgo family airline “is cutting and adjusting costs by all possible means,” say sources close to the group.

To this is added that, the account auditor himself (KPMG) of Air Europa doubts the viability of the company due to the “high degree of exposure of the sector” in which society operates to the effects of the pandemic. These circumstances leave that strategic character in the air since Iberia will have to build a practically ruined airline.

It should be remembered that it would not be the first time that the company led by Luis Gallego failed in a purchase attempt. There have been other cases like that of Norwegian, which the company finally decided not to execute.

In addition, it is necessary to remember that in the initial contract signed there is a clause, which determines the payment of 40 million euros by IAG to the Hidalgo family tourism group as a penalty in case the operation is not carried out. A year ago it was unthinkable that it would be executed. In fact, the purchase would already be closed. Today it seems the opposite.

CE deadlines

For now, the next step in this operation has to be taken by the European Commission, which has until December 3 to decide on the purchase of Air Europa by Iberia. The initial legal deadline to complete the investigation was November 5, but it was extended at the companies’ request.

But even the new deadline could be extended if Iberia appeals the Brussels conditions, as EL ESPAÑOL-Invertia has learned.

The IAG group airline is waiting to receive the Statement of Objetions, that is to say, the document in which it establishes the clauses that the parties should comply with for the operation to be authorized. Before the summer, the Commission imposed 70 ‘remedies’ -such as the transfer of slots to airlines such as Volotea and World2Fly-. This document could also influence Iberia’s decision on the purchase.

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