Bankinter| The airline has filed the application for the purchase of Air Europa with the European Commission. Thus, a two-phase process begins: (i) the first phase will take 35 working days and the EC is likely to request additional information; (ii) in the second phase, the relevant adjustments will be made and it is for an indefinite period of time, but IAG intends to close in 2024. IAG currently holds 20% and expects to acquire the remaining 80%, in a deal that would value the whole of Air Europa at €500m.
Assessment: We expect the deal to close successfully. IAG has agreed to divest certain routes to ensure strong competition and avoid too much concentration on both long and short haul routes. In addition, the purchase will allow 500 flight combinations between Spain and America and Asia, increase air traffic by 1.6 million passengers and create 1,500 direct jobs. Moreover, it will allow the creation of a large hub in Madrid, capable of competing with the major European capitals, and ensure the sustainability of Air Europa (it obtained €475 million in public funds). Finally, the purchase comes at a positive time due to the strong recovery in demand and the moderation in oil prices. We reiterate our Buy recommendation due to (i) Recovery of the Air Sector. (ii) It is attractive in terms of valuation. (iii) Healthy balance sheet. (iv) Strong 3Q 2023 results.
