The Government is now the key interlocutor for the purchase of Air Europa by Iberia

The rescue of Air Europa with public money through the funds provided by the Sociedad Estatal de Participaciones Estatales (SEPI) has some keys that mark the future of the Hidalgo family airline. The injection of ?475 million, in addition to the ?140 million provided by the public entity ICO, is accompanied by a series of conditions imposed by the State on the operation. The plan as a whole may save the company, as it is considered a strategic company, but it makes it difficult for Iberia, which is part of the IAG holding, to buy it.

The Hidalgo family resisted the appointment of "civil servants" to the board of Air Europa, which prevented SEPI from entering its capital, but has not managed to maintain the independence in the management of the airline. They wanted public money, but without too much control. However, the State will have the capacity to control the strategic operations, the labour policy and will have two directors, as well as the power to participate in the appointment of the CEO. Air Europa has obtained a participative credit of 240 million and an ordinary credit of 235 million.

Behind these conditions, which are required by the government's own regulations, are also Air Europa's current problems and the poor prospects for the airline industry with the spread of the pandemic and restrictions on the movement of citizens in several countries. Some analysts doubt Air Europa's ability to repay the ?600 million provided by SEPI and the ICO. At least in the short and medium term, not even based on its performance in recent non-pandemic years, although the return should be made within a period not exceeding six years.

In this context the purchase of Air Europa by Iberia becomes even more complicated. The scenario of last November when the IAG group company agreed to acquire it for 1,000 million euros is far from over. With the pandemic devaluing the company, Iberia indicated that it would not pay more than 500 million, while at the same time making the transaction conditional on the reorganisation of the Globalia subsidiary.

Later, with the presentation of IAG's results last week, Luis Gallego, its CEO, stressed that the operation would have to be reviewed, depending on issues such as the conditions of the Spanish government.

It also remains for the injection of public money to pass the Brussels test. There are two factors, one positive and one negative. Air France-KLM and Lufthansa have received the green light from the Community authorities for public aid, in very different ways and through different channels; Ryanair's interventions to try to torpedo Air Europa's rescue plan are in opposition.