Iberia to buy out Air Europa: Madrid airport to compete 'on a level with' Heathrow

International Airlines Group (IAG), which owns Spain's main national carrier and also British Airways, is expected to be the new owner of the Globalia airline by the second half of next year.

The deal now has to be approved by the National Markets and Competition Commission (CNMV) to ensure the takeover will not lead to a monopoly or near-monopoly situation, but details of the acquisition seem to suggest it will be considered above board and duly signed off.

Air Europa's brand will be maintained initially, and the company will remain as a separate entity within the Iberia umbrella and will continue to be run by its current CEO, Luis Gallego.

Founded in 1984 under the trading name of Air España, S.A., before changing its brand to Air Europa two years later, the Spanish carrier has a fleet of 42 aircraft and is owned by Globalia Corporación Empresarial, S.A.

It operates flights from most Spanish airports to destinations on every continent.

The takeover will mean IAG's Madrid airport hub will become a fierce rival for the four largest hubs in Europe – London Heathrow, Amsterdam Schipol, Frankfurt, and Paris Charles de Gaulle, all of which serve long-haul destinations directly and are the most common connection points for flights from elsewhere on the continent.

Also, the transaction will place Iberia as market leader for European connections to Latin America and the Caribbean, and offer 'significant potential synergies' in terms of cost-saving and investment, according to a press release from IAG.

The firm forecasts a share price rise for the first complete year and an investment return for the fourth consecutive year by the end of 2020.

IAG justifies its strategy by stating that the Air Europa acquisition will add a 'new, competitive and profitable' airline to the firm's base, turning Madrid into a leading European hub ad allowing the corporation to become a market leader in the southern Atlantic, generating 'added value' for shareholders, according to CEO Willie Walsh.

Globalia CEO Javier Hidalgo says the move will strengthen Air Europa's present and future and it will 'continue in its current line' for the foreseeable time to come.

Luis Gallego says Madrid, as a hub, has 'been left behind' by other major European international airports, and the purchase will allow it to compete on a level playing field as well as 'possibly becoming a connecting point between Latin America and Asia'.

IAG points out that Air Europa is one of the main privately-run airlines in Spain, with regular national and global flights to 69 destinations, a turnover as at the close of 2018 of €2.1bn, net profits of €100 million, and 11.8 million passengers in one year.