The airline group also reported a year-over-year increase in profit.
An Air Europa Boeing 787 in Madrid (Photo: AirlineGeeks | William Derrickson)
International Airlines Group (IAG) has withdrawn from an agreement to purchase the remaining 80% share of Spanish carrier Air Europa. Reuters reported the decision was made public on Thursday as IAG announced its half-yearly trading figures. Chief Executive Luis Gallego said: “It doesn’t make sense for our shareholders and that’s the reason we are abandoning the operation.”
The consortium, the parent company of British Airways, Iberia, Vueling, Air Lingus, and LEVEL, had offered €400 million ($432 million) to complete the full acquisition of Air Europa. However, ongoing European Commission regulatory concerns would have required IAG to make some concessions on routes operated by its carriers.
Though IAG had been prepared to make some concessions, as detailed two months ago, Gallego confirmed that these were insufficient to satisfy the authorities. As a result of the termination of the purchase agreement, IAG will pay Air Europa a €50 million ($54 million) fee. The consortium will retain its 20% stake in Air Europa and potentially turn its attention to acquiring another European carrier.
According to analysts spoken to by Reuters, Portuguese airline TAP Air Portugal may become more of a focus of IAG’s attention. When the Portuguese government announced its intention of privatizing at least 51% of the state-owned carrier in 2023, Gallego stated that TAP would ‘fit right into the group’s profile, but the company still needed to see the conditions of the sale.’ Along with IAG, Air France-KLM and the Lufthansa Group are also reported to be interested in TAP Air Portugal. The Lufthansa Group recently gained European Commission approval to buy into Italian carrier ITA Airways.
In non-airline acquisition news, IAG posted a higher profit for the first half of 2024 compared to the same period in 2023. The €1.309 billion ($1.414 billion) operating profit for the half-year is €49 million more than that achieved in the first six months of 2023. The positive performance will result in shareholders receiving a dividend with Gallego noting “reflects our confidence in the business, our performance and our transformation. We are delivering on our strategy and our commitment to sustainable shareholder returns.”
In its outlook for the remainder of 2024, Gallego said, “We see continuing strong demand for travel in the attractive core markets in which we operate: North Atlantic, Latin America and intra-Europe.” Capacity is predicted to remain at the forecast level of +7% with non-fuel unit cost expected to “increase slightly overall.”
Unlike other competitor airlines operating from the European region, IAG has very little exposure to the Asian region which has been slow to recover from the pandemic. As a result, the market has seen an over-capacity with variable demand impacting airline revenues and yields. “The capacity that we have in those markets is very reduced,” said Gallego. “So, for the time being, the projections we have for the year are in line with our forecast.”
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