Iberia would crush Air Europa with half the price of its purchase

If Brussels were to veto the absorption of Air Europa, Iberia could undermine the Globalia airline by assuming losses for one or two years to take away demand with very low prices.

IAG’s airline could spend around 200 million euros to bring its competitor to a standstill, compared to the 400 million that the purchase, which is currently in the hands of the European Commission, would cost.

Brussels may decide to veto IAG’s integration into Air Europa, but in doing so the community body would be exposed to blame in the event that the Globalia airline faced an uncertain future due to the lack of support that Iberia would provide (Iberia-Air Europa: they regret that Brussels does not specify what else it wants).

Air Europa’s future is determined by its potential to generate profits that can cover its debts, and by the list of realistic buyers that could help it sustain its financial balance (Iberia-Air Europa: the concessions are insufficient for Brussels).

Air Europa’s EBITDA in an average year, between 100 and 200 million euros, is compromised by financial interests of around 7 percent of the debt of almost 1,000 million euros, which amounts to around 70 million euros per year.

In addition, Globalia’s airline must gradually face the repayment of debts both with banks and, above all, with the State after the SEPI rescued it with a public loan once the entities closed the credit tap.

This scenario makes it difficult for the only two possible candidates, along with IAG, to buy the airline, such as Air France-KLM and Lufthansa, to consider that an acquisition would be worthwhile for them and to convince their shareholders that it could make as much strategic sense as the more obvious one for Iberia.

If Brussels prevents Air Europa from joining Iberia, its 25 Boeing 787 Dreamliners will be one of the keys to survival, even though this model represents two faces for them.

On the plus side, getting 25 long-haul aircraft for any airline in a short time was until recently an attractive option, although this interest may now have slowed.

Weakening demand in regions such as Asia has led to European stock market giants such as Lufthansa plummeting on the stock exchange after announcing a reduction in its profit forecast.

Furthermore, and on the less favorable side, the long-distance model from the American manufacturer is becoming the most problematic in its segment, due to the multiple problems with its engines, as has been reported. REPORTUR.us.

In fact, Air Europa itself is seeing its entire fleet of the aforementioned model severely affected by the overhauls and repairs of these engines, which discourages the interest of potential candidates for what could be its main asset.