International Consolidated Airlines (IAG) has agreed to buy Spanish airline Air Europa for €1bn, in an attempt to boost the profile of the airline group’s Madrid hub and tap into the South American market. The Air Europa brand will be retained, and the airline will sit within IAG’s Iberia outfit. The acquisition will boost IAG’s exposure to the US, the Caribbean and Latin America.
The deal is expected to complete in the second half of 2020. IAG will fund the acquisition with external debt, taking its net debt to cash profits multiple up by 0.3 from its level of 1.2 as reported at the end of its third quarter. Joe Healey, investment research analyst at The Share Centre, said that the deal made sense owing to the strength of IAG’s balance sheet. But he described the deal as “a brave move in difficult market conditions with the stock underperforming over the past year”.
Berenberg forecasts full-year 2019 earnings per share of 1.1p, rising to 1.15p in 2020.
