Renta 4 | After the government approved the rescue of Air Europa last week, with an injection of 475 million euros, several media outlets are claiming the executive intends to establish a series of conditions for the operation. In our opinion, these would complicate the acquisition of the airline by IAG. The conditions would include the appointment of two directors, authorisation to approve strategic operations, dismiss and even agree the appointment of the CEO. These limitations would not have pleased IAG, although the company will be awaiting an official communication.
In our view, these conditions could lead IAG to decide to abandon the purchase of Air Europa, after payment of a 40 mln euros clause. Particularly considering that IAG would have to pay back 615 mln euros to the State for loans (the 475 mln euros recently injected and 140 mln received in March through the ICO) within a maximum period of 6 years. It would also have to pay the price of the airline, which it would be currently negotiating for less than 500 mln euros. The operation would therefore lose its appeal, since the final price might not be less than the 1 bln euros initially agreed. And all this against a backdrop where Covid 19 has caused a collapse in air traffic from which it will take years to recover. Furthermore, the State could interfere in the management of the group by limiting key short-term aspects such as job cuts, restructuring and cost savings. In our opinion, the government should allow IAG to buy Air Europa without management conditions. We believe this is the best way to “save” the company’s viability.