The soap opera began over three years ago and remains unresolved. After negotiations, repeated extensions, sharp price cuts, and a reshaping of operating conditions that teetered near collapse several times, Iberia pressed ahead with Air Europa talks in pursuit of a national airline giant. Yet it is still unclear whether a final deal will be sealed.
Holding company IAG, which groups Iberia, British Airways, Vueling, Aer Lingus and Level, became a 20% shareholder of Air Europa after capitalizing a 100 million euro participant loan last summer. That stake provides exclusive negotiating rights for the acquisition until the end of March and a three-year window to reject other potential offers.
Iberia’s aim remains to absorb Air Europa, with negotiations continuing to bridge the final gaps between the Hidalgo family, the largest shareholders in Globalia, and the airline itself. IAG’s objective is to close a deal before exclusivity expires in three months, and to do so without major changes to the €500 million pre-agreed price at the airline’s latest valuation, according to a press statement from Iberia’s president. He noted that more than 600 million euros of debt should be incorporated into the assessment.
Still, Iberia remains open to other opportunities if a deal with Air Europa falls through. “It’s great if we have an agreement before March. But if we don’t, we will lay out our strategy clearly, whether to continue the operation or to pursue alternatives,” warned the executive. Led by Luis Gallego, the former Iberia president, IAG continues to pursue value-adding acquisitions and seeks opportunities across the sector.
At the end of 2019, Iberia and Air Europa agreed on a 1,000 million euro purchase price, later reduced to 500 million as the pandemic hit. “There is no fundamental difference in the terms of prior agreements regarding future cash flows and accumulated debt. Large deviations in the agreed price should not be expected,” commented Iberia’s head, addressing rumors of a higher price raised by the Hidalgo family in earlier rounds.
The operation has undergone extensive redesigns, with both sides extending timelines after shocks that threatened to derail the bid. Both companies are currently negotiating concessions needed to overcome European Commission scrutiny on competition issues.
precovid advantage in 2024
Iberia views 2022 as a year of recovery, reopening routes and restoring seat capacity after the pandemic, signaling a return on fleet renewal investments. By 2023, the company hoped to benefit from growth in the United States and Latin America, surpassing pre-pandemic flight levels and destination offerings. The target for 2024 is to recover margins and earnings to reach the 2019 pre-pandemic levels, which stood at nearly 497 million in operating results.
“We expect to succeed in 2023 by restoring capacity to pre-Covid levels,” Iberia’s leadership stated. “However, achieving those results is more challenging amid inflation. We anticipate cost reductions from suppliers, increased labor costs after new agreements, and fuel costs that are unlikely to decrease soon. 2023 will be a transitional year.”
negotiate an eré in 2023
Following a series of collective agreements with cabin crew and wage adjustments across worker groups, Iberia confirmed plans to begin talks with unions in early 2023 about an ultimate workforce reduction plan (ERE).
“There is no rush. For organizational reasons, there will be an ERE to align resources with next year’s competitive outcomes and capacity changes. Negotiations will begin in January or perhaps March,” stated Iberia’s leadership. “This will not resemble past Iberia lay-offs, where thousands were affected. It will be a measured adjustment, agreed upon next year.”
fleet expansion
Iberia continues renewing its aircraft fleet. This year the airline welcomed thirteen new aircraft, including six A320neo models and seven A350-1000s, the newer, more efficient version of the Airbus A350, noted as lighter and cleaner. Iberia was the first customer to place orders for this model.
New cabin standards accompany the A350s, with enhancements in business and premium economy. The plan calls for 20 A350 aircraft by 2024, eight of them configured with the updated cabin layout to enhance passenger comfort.