Global airline group IAG, the parent company of Iberia, British Airways, Vueling, and Aer Lingus, has seen its stock slide more than 6 percent this year despite posting positive results for 2022 on a Friday that marked a turning point for investors. In early trading, the share price dipped as much as 3 percent to 1,819 euros following the announcement that IAG had reached an agreement with Globalia to acquire the remaining 80 percent of Air Europa for 400 million euros.
Investors and analysts weighed the move against the broader context of aviation equities. Ignacio Cantos, Director of Investments at Atl Capital, noted that the initial valuation of the Air Europa deal reflects a difficult state for the airline industry. He suggested that a price tag of 1,000 euros per share is unlikely given the current market environment and that the 400 million euros final consideration embodies the sector’s challenges. He added that while the latest financial results were solid, the market has already priced in these improvements as investors await the impact of future adjustments.
For Cantos, the pandemic era left a heavy scar on airline valuations, with a historic drop in equity values. A significant capital increase has taken place since then, yet the trajectory remains uncertain. Looking ahead, he pointed out that fuel costs have risen but that higher ticket prices could cushion margins if demand holds up as the network expands.
IAG ended 2022 with a net profit of 431 million euros, moving away from a loss of 2.933 billion euros in 2021. The results presentation indicated an anticipated recovery in operating capacity, measured as average seats-kilometers offered, with a target of 98 percent of pre-pandemic levels. In 2022 the figure stood at 78 percent, illustrating a strong rebound in activity as travel demand recovered.
Iberia emerged as a standout performer within the group, reporting an operating profit of 382 million euros in 2022. Among the IAG brands, Iberia posted the strongest operating result before exceptional items, surpassing a €234 million loss in 2021. British Airways, Vueling, and Aer Lingus also contributed to the overall improvement, according to the latest disclosure to the National Securities Market Commission (CNMV) on Friday.
Market positioning and strategic rationale
The Air Europa acquisition was completed after the remaining 20 percent stake was taken in August, ending a hold period that had stretched for three years. Market analysts see this consolidation as a catalyst for strengthening IAG’s competitive position and sharpening its strategic footprint for the coming years.
Regulatory approval is a prerequisite for the deal, with the first tranche of 200 million euros to be settled in two parts: 100 million in IAG ordinary shares and 100 million in cash. A further 100 million euros will be paid in each of the second and third years post-approval.
The strategic logic behind the purchase centers on expanding Iberia’s reach between Europe and Latin America. The plan is especially timely in markets where Iberia previously had limited access, such as Brazil, where Air Europa’s network helps broaden the group’s footprint. As explained by Professor Father Suau, economics and business studies and air transport specialist at the Open University of Catalonia, the deal enhances IAG’s ability to compete with northern European hubs and with peers like Air France and KLM that already leverage Latam connections. The Madrid-Barajas hub could emerge as a critical gateway linking Europe and Latin America.
Both executives note that regulatory clearances may take up to 18 months. The approval process involves competition authorities and state entities such as SEPI and ICO. The professor cautions that regulators will scrutinize the markets closely, as a softer competitive environment could emerge on certain routes. At the same time, the integration is expected to contribute to a broader industry consolidation wave that has persisted through the post-pandemic period, helping airlines withstand shocks and capitalize on scale benefits.
Industry observers view the Air Europa acquisition as a strategic move to streamline routes and improve network efficiency. The consolidation is seen as a step toward rebalancing capacity, expanding hub traffic, and creating a stronger platform for future growth. Analysts anticipate that the deal will enable IAG to negotiate more favorable access terms on key corridors, while also facilitating better coordination of schedules and connections across the Iberia network and its partners.
In summary, IAG’s improved 2022 performance, the robust outlook for 2023, and the Air Europa acquisition together signal a renewed emphasis on market resilience, geographic diversification, and integrated operations. The path forward will hinge on regulatory clarity, fuel and fare dynamics, and the ability to realize synergies from the combined network while maintaining disciplined capital expenditure and prudent financial management.