Iberia’s parent company, IAG, has decided not to press forward with the planned purchase of Air Europa after more than four years of negotiations. The decision, disclosed by IAG in a statement to the Spanish market regulator CNMV, states that the board concluded that under the current regulatory environment continuing the deal would not benefit shareholders. As a consequence, the group will pay Globalia 50 million euros to terminate the agreement.
European competition authorities had shown reticence about greenlighting the operation. This resistance persisted despite Iberia’s proposal to cede up to 52% of Air Europa’s routes in 2023, addressing the competition concerns. Iberia had also presented a list of airlines interested in preserving these connections to the European Commission. Yet, the regulatory hurdle proved insurmountable, and the deal collapsed. In a press conference, Iberia’s chief executive Luis Gallego explained that there was no room to push further; maximizing shareholder value required ending the pursuit. In July, Brussels had approved Lufthansa’s purchase of a stake in the Italian ITA, which had briefly offered hope that a similar fate awaited Iberia’s offer for Air Europa, but that was not the case and the Iberia-led bid was halted.
Punctuating the fallout, IAG will retain a minority stake of 20% in Air Europa, a holding secured on August 16, 2022, following a seven-year, 100-million-euro loan to the owner Globalia. IAG intends to keep that stake as a purely financial investment, with no plans to sit on Air Europa’s board or influence its day-to-day management. Gallego stressed that the group will continue to compete with Air Europa as before, and that the decision does not alter Iberia’s competitive stance.
Madrid’s strategic hub remains a core objective for Iberia. The rationale behind the aborted deal was to enlarge the Madrid airport so it could rival other major European hubs like Paris, Frankfurt, and Amsterdam, where dominant carriers drive connectivity. At those hubs, market shares for long-haul routes typically range from 60% to 74%, while Iberia’s Madrid share stood around 45% and Air Europa held roughly 19%. By aligning with Air Europa, Iberia hoped to strengthen Madrid’s hub status and level the playing field against Western Europe’s strongest gateways. Gallego noted that the plan was to create a robust, competitive Madrid hub; however, the outcome did not meet expectations. He remained confident that organic growth would continue to bolster Madrid’s profile, citing a 14% year-over-year increase in seats per kilometer and ongoing expansion of the fleet, including more Airbus A350-900 aircraft in service for North and South American routes.
When pressed about alternative trajectories, Gallego avoided discussing potential buyers for Air Europa and maintained that Iberia would pursue other opportunities if they made strategic sense. He reinforced that no current discussions regarding Air Europa’s sale were underway, and that the group would continue exploring growth options that align with its broader strategy. The market’s attention then shifted to what the decision means for Air Europa and its competitive landscape, with analysts noting that the European airline market continues to evolve in a post-pandemic environment.
Historical momentum underscored the deal’s long arc. The agreement originally emerged in November 2019 when IAG announced a 1 billion euro purchase of Air Europa. The pandemic forced many aircraft to stay grounded and left Air Europa in urgent need of state aid, including a 475 million euro government rescue and a 140 million euro ICO loan. Those interventions compelled Iberia to rethink the price, moving from 1 billion to a revised 500 million euros over five years in January 2021. As the process wore on, the conditions and valuation kept shifting, complicating renegotiations.
Later, at the end of 2021, as traffic started to rebound, the anticipated agreement began to crumble. In late 2021, Iberia paid 75 million euros to the Hidalgo family’s airline to reopen talks, higher than the 40 million euro contingency in the original contract. A fresh round of negotiations ensued through January 2022. In March 2022, IAG extended a 100 million euro loan to Globalia with an option to convert into as much as 20% of Air Europa, a step that culminated in August 2022 with IAG becoming a minority shareholder. The deal’s final stage aimed at acquiring the remaining 80% for 400 million euros, but that agreement dissolved in the latest development. The path to consolidation at Madrid’s premier airport thus remains open but unsettled, with Iberia pursuing other growth avenues while continuing to evaluate strategic moves in the European market.
Note: The narrative reflects corporate disclosures and regulatory commentary up to the termination of the agreement. The emphasis is on strategic hub development, competitive positioning, and the evolving structure of Iberia’s corporate holdings.
Return to Dividend Distribution
IAG, the parent company that also includes British Airways and LEVEL, reported a 905 million euro profit for the first half, slightly down by 1.7% versus the prior year. It has announced a return to paying dividends in cash after five years without shareholder distributions since the pandemic. A dividend of 3 euro cents per share has been approved and will be paid in September. Operating profit reached 1,309 million euros, up 3.9% from the first half of the previous year.
Demand for travel remains robust in the group’s core markets—North Atlantic, Latin America, and intra-European routes—and that healthy demand is reflected in a 2.9% rise in unit revenues. Net debt stood at about 6.4 billion euros, down from 9.2 billion at the end of 2023, aided by seasonal capital inflows. In Spain, Iberia delivered a 17.4% increase in capacity on a per-kilometer basis, supported by more Airbus A350-900 aircraft operating on North American and South American services, totaling 22 aircraft at mid-year, up from 16 a year earlier. The group closed the period with an earnings before interest, taxes, depreciation, and amortization of 362 million euros, slightly below the prior year’s level, while Vueling posted a 97 million euro profit, up one million from the previous year.
In sum, the early-year financials signal resilience and a clear path toward dividend reinstatement, even as the company navigates a transformed competitive landscape in Europe and recalibrates its strategic priorities around hub development, fleet expansion, and selective growth opportunities.