British Airways owner IAG makes shock €1 billion swoop for Spain’s Air Europa

British Airways’ owner IAG’s boss on Monday showed he has no intention of going quietly before his looming retirement, by unveiling a shock €1 billion (£862 million) swoop for a Spanish rival.

FTSE 100 airlines giant IAG said it has agreed a cash purchase from tourism group Globalia to buy Air Europa.

That deal will bring together Spain’s third-largest airline, comprising 66 planes and long-haul routes to Latin America and the Caribbean, with IAG’s brands including Iberia, Aer Lingus and Vueling.

Shares in IAG rose 6.4p to 549p after IAG’S long-standing chief Willie Walsh announced the deal.

Details emerged just days after the outspoken boss said he plans to end a 15-year career at the firm within two years. He outlined the retirement plans as IAG warned recent pilot strikes at BA cost it £118 million, hurting profits.

Walsh today said: “Acquiring Air Europa would add a new competitive, cost-effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership, therefore generating additional financial value for our shareholders.”

His company reckons the acquisition could help Madrid rival airports, including Heathrow and Amsterdam.

Walsh, 58, added it is “a good deal for IAG, good deal for Air Europa, good for Spain, good for consumers”.

He has previously predicted further consolidation in Europe as smaller brands struggle with increased competition and higher fuel costs.

Most recently he said IAG is looking at the landing slots left vacant at Gatwick following the collapse of Thomas Cook.

The deal, likely to be completed in the second half of 2020, is expected to generate cost savings across the group.

Boosting IAG’s Latin American work will also help it to respond to rival Delta Air Lines’ September deal to buy a stake in South American carrier Latam.

Davy analyst Stephen Furlong said: “We see this as a prudent acquisition, which will add to the group’s mid-term attractiveness. Key to the success of the deal will be the achievement of synergies, where IAG has a strong track record.”

Air Europa, which recorded revenues of €2.1 billion and an operating profit of €100 million in 2018, will continue to trade under its own name for the time being. It will be led by Iberia chief executive Luis Gallego.