IAG set to buy Air Europa for €500m - report

IAG had originally agreed to buy Air Europa for €1 billion in November 2019

Aer Lingus and Iberia owner IAG has agreed to buy Spain's Air Europa for €500m with payment deferred until 2026, Spanish website El Confidencial reported. 

IAG, its Spanish unit Iberia and Air Europa owner Globalia declined to comment on the El Confidencial report, which cited unnamed sources saying that the deal was at half the original offer price. 

After originally agreeing to buy Air Europa for €1 billion in November 2019, IAG but has been pushing to cut the price as the coronavirus pandemic threw the airline industry into crisis. 

International travel restrictions have brought the global transport sector to a grinding halt, pushing several airlines to rely on state aid. 

For the sale to proceed, the Spanish government must waive its right to appoint two directors to Air Europa's board, one of the conditions of a €475m euro state aid package approved last month. 

Spanish brokers JB Capital viewed this potential new deal as largely positive due to the payment deferral. 

"We saw a potential cash outflow for IAG in the following months as a bigger risk for this transaction, given the current uncertainty in the aviation industry," JB Capital said. 

El Confidencial said the reason for the deferral was to give Air Europa time to repay the state aid package. 

Spain's state-owned industrial holding company SEPI, which provided the funds for Air Europa, declined to comment.

JB Capital also said, however, that the potential agreement "might be viewed negatively by the market" as the sum reportedly to be paid would be above €350-400m previously reported by the same news outlet.