The SEPI must justify that public money is not just a sanitation to lower the price of the purchase of the airline by Iberia
Air Europa has requested 400 million euros from the public fund for the rescue of strategic companies to save itself from bankruptcy due to the strong impact of the effects of the pandemic and the lack of recovery in air traffic demand due to the quarantines decreed by several countries. reported in Administration sources.
The proposal is already being analyzed by the Sociedad Estatal de Participaciones Industriales (SEPI), which manages the € 10 billion fund created by the Government to help companies it considers strategic. The main obstacle to granting the funds is that SEPI must justify that the aid with public money is used exclusively to avoid bankruptcy and ensure that the airline continues to operate, and not for other purposes that directly or indirectly benefit third companies or private investors.
And is that Air Europa is pending the purchase by IAG, the holding Hispano-British to which Iberia belongs, agreed in November 2019 for 1,000 million euros. The outbreak of the pandemic caused the operation to be paralyzed and IAG asked to renegotiate its terms downwards. The injection of public funds, regardless of the formula chosen (direct aid, loans or entry into capital) must guarantee that it does not become a mere reorganization with the taxpayer’s money to lower the cost of the operation for Iberia, the amount of which would also go to private investors like the Hidalgo family.
Companies such as Ryanair have already warned that they will denounce such aid to Globalia’s airline as illegal before the competition authorities of the European Union and if necessary before the courts. And it is because it is an aid of more than 250 million euros, it must be notified to the European Commission.
Both the Ministry of Transport, responsible for the negotiations, and the company itself have declined to comment on the news.
The request is the second that is produced against the rescue fund after the one made by Duro Felguera, who on August 28 requested 100 million euros. The formula used by the engineering company is a capital increase for 30 million and the granting of a participating loan for 70 million. Due to the capitalization of the Asturian firm, the State would have a majority stake of more than 40%.
In the case of Air Europa, the reason given is the pressing lack of funds of the airline after the stoppage caused by the confinement and the failed recovery of air traffic since the state of alarm was lifted in June, due to the imposition of restrictions and quarantines from many countries to passengers traveling to Spain.
In this way, only in the first semester, Air Europa would drag losses of 450 million euros, although the firm has not yet made these results official. The airline already requested a loan in mid-May of 140 million from a bank syndicate, endorsed by the Official Credit Institute (ICO), but it has not been enough to ensure its viability.
With just 35% of its fleet in the air, the Globalia company has been particularly affected by the blockade of several Latin American countries, where its most profitable markets reside, and has had to cancel all departures scheduled for September from and to Argentina , Bolivia, Colombia, Paraguay and Peru. For the moment, it maintains the rest of the long-haul flights that it reincorporated to its programming to Guayaquil, Miami, New York, Quito, San Pedro Sula, Santo Domingo and São Paulo, but with a very low occupancy.
Spain is not the only country that comes to the rescue of one of its airlines. The German Government has approved aid for 9,000 million for Lufthansa; Air France-KLM has received 10 billion from the French and Dutch States; Alitalia is going to be renationalised again at a cost of 3,000 million and the Portuguese TAP will receive a public injection of 1,200 million.
The news of Air Europa’s rescue request comes a day before the meeting of shareholders of IAG – a group in which Iberia is integrated – is held, which must approve a capital increase of 2,750 million euros to meet the lack of liquidity, after losing more than 3,800 million in the first semester. With this injection of funds, the Spanish-British group is confident that it will be enough to weather the crisis and that it will not have to request any bailout. Its largest shareholder, Qatar Airways, which controls 25.1% of the capital, has pledged to support this expansion.
The shareholders’ meeting, which will be held in Madrid electronically, must also endorse (in a consultative vote) that the Irish Willy Walsh – who will take over from the Spanish Luis Gallego as CEO, after 15 years at the head of the group – collects bonus of more than 880,000 pounds (almost one million euros) corresponding to 2019, which has sparked some controversy, according to the British press.