IAG and Iberia insist that the purchase of Air Europa is necessary to reinforce Madrid hub
Madrid’s growth as an aviation hub with global projection depends on the acquisition of Air Europa, the top executives of IAG, Luis Gallego, and Iberia, Fernando Candela, stressed today at a press conference in New York.
The purchase of Air Europa “is a very good deal for Spain and for the Madrid hub, so that we can compete with the major hubs in northern Europe,” said Gallego, “allowing us to have a more global hub that looks not only to the Atlantic, but also to Asia.
Gallego stressed that Asia, which is coming out of a long phase of route closures due to covid, presents enormous opportunities, but IAG is committed for the moment to strengthening alliances with other partners (and cited Qatar Airways) “that allow us to fly to Asia through Doha without deploying our own capacity”.
Candela added that the Doha route allows Iberia to open the door to more than 200 destinations in Asia “and is a preliminary step to understanding this market with many opportunities” but insisted, like Gallego, that the priority is to “consolidate the operation with Air Europa in order to have a critical mass” that allows Madrid to compare itself with the “hub” that KLM has developed in Amsterdam.
Air Europa, a purchase in the hands of the EC
Gallego explained that the process of buying Air Europa is now in the hands of the Brussels competition authorities, and involves defining the routes that will disappear due to “overlap” (concurrence of two airlines on the same route), a detail that he refused to specify, but said he was confident that during the month of November IAG will present the final file that will allow it to move forward.
The CEO of IAG – who is in New York to receive the award for “businessman of the year” presented by the Spanish Chamber of Commerce in the USA – explained that his group always has its radar open to acquire new companies that reinforce its presence in the world, and explained in the same context its interest in the privatisation of the Portuguese TAP.
The possible purchase of TAP offers IAG a “complementary” market in the form of its routes to Brazil, but Gallego cooled the mood by acknowledging that the change of government in Portugal puts this operation on hold, and in view of this new circumstance “we are going to decide whether we are interested or not”.
IAG expects a good year of results
Gallego described 2023 as “a good year barring a hecatomb” – his airlines have 75% of seats sold in the last quarter of the year – and acknowledged some concern about the tension in the Middle East, although it is only relatively impacting the group’s traffic, with flights to Tel Aviv still cancelled and reductions in traffic to Amman and Cairo.
But overall, IAG expects to close the year with 96% of the capacity it flew before covid, and this “with fewer aircraft, but more efficient”, thanks also to the fact that the group has reduced its net debt by 3,000 million euros, and has also reduced gross debt.
Gallego boasted that the company “survived covid without state intervention and without resorting to chapter eleven (bankruptcy code)”, and that even the £2 billion loan that British Airways needed has now been repaid.
However, he predicted that in the medium-term future flying will become more expensive due, above all, to the decarbonisation measures that are beginning to be imposed on airlines: “Flying will become more expensive because decarbonisation costs money”.
Regarding the insistence of some politicians in Spain to penalise or ban short-haul flights, Candela warned against the consequences that this could have, especially because these flights tend to be mostly connecting flights to other international flights and, if applied, this would mean a flight of customers to other European airlines, with the detriment that this would mean for Madrid as a platform.
