IAG hopes to close the purchase of Air Europa in early 2021

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The Iberia and British Airways group indicates that it has all the permits to operate in Europe even in the face of a hard Brexit

The president of International Airlines Group (IAG), Antonio Vázquez, took advantage of the holding of the general meeting of shareholders this Tuesday to highlight his interest in closing the purchase of Air Europa “in the second half of this year or early 2021”, although He insisted that they continue to negotiate a “restructuring of the agreement” reached last November, “including the price and financing needs.”

Neither Vázquez nor the still CEO of the group, Willie Walsh, made reference to Air Europa’s request for help of 400 million euros from the public fund for the rescue of strategic companies that can significantly smooth the closure of the operation, whose price of 1,000 million agreed in November 2019 will be significantly reduced, even below 500 million given the critical financial situation that the airline owned by the Globalia group is going through.

The IAG president also confirmed that the group complies with Europe’s air traffic rules that require the majority of the capital to be owned by EU shareholders, even in the event of a no-deal Brexit. “In compliance with the European Union’s connectivity regulations, last year our airlines submitted their ownership and control plans to the respective national regulators in Spain and Ireland. The regulators confirmed that these plans comply with the regulations in the event of a hard Brexit, ”said Vázquez.

For his part, Walsh was once again pessimistic about the recovery of air traffic that will not arrive until 2023 or 2024, after a new slowdown due to the declaration of quarantines between different countries, with special impact on travelers who want to visit Spain. “The rebound in traffic in Spain, intra-European or long-haul traffic is limited,” said the executive.

The board approved a capital increase of 2.75 billion euros to strengthen the liquidity position of the company, which has a cash outflow of 20 million pounds a day, backed by Qatar Airways, the group’s main shareholder. The increase will dilute the participation of the current shareholders to 50% if they do not attend to subscribe it. Vázquez also did not clarify when they will distribute dividends again – “at the right time,” he said – after the suspension of the last complementary dividend of 338.6 million euros.

The company received a rating downgrade from Moody’s on Monday, which cut its rating from Ba2 to Ba1 due to the “slow pace of recovery of passenger demand in Europe due to the pandemic” and IAG’s high exposure to long-haul flights , cross-border and business customers. “Although the proposal to issue a capital increase is positive for credit, the liquidity margin continues to be a variable to consider, if the outbreaks of coronavirus and travel restrictions are extended,” the firm indicated.

The board also approved by 72% of the votes the bonus granted to Walsh of 880,000 pounds (almost one million euros) corresponding to 2019, which has sparked some controversy, according to the British press.

The meeting, held on a thematic basis in Madrid, gave the green light to the election of Luis Gallego – today the head of Iberia – as CEO of IAG to replace Walsh. This appointment, initially scheduled for March 26, was postponed along with the general meeting of shareholders as a result of the coronavirus pandemic.

Vázquez thanked Walsh on Tuesday for staying at the head of the group and for his “availability, commitment and professionalism until the last moment.” And he recalled that together they built, “from airlines, British Airways and Iberia, plagued by structural difficulties”, a business model “unique in the industry” that Walsh “has managed to manage under the highest standards of efficiency and leadership”.

Regarding Gallego, Vázquez said that he will assume his role as CEO of the group “with the absolute confidence of the board in his knowledge of the industry, in his management capacity and in his exceptional leadership skills.” In addition, he highlighted his credentials after having carried out in Iberia “a transformation process that is a benchmark in aviation worldwide.”

Walsh, for his part, said “delighted” with Gallego replacing him. “He has been running as a natural successor for years,” he said. “He is a first-rate leader. I have no doubt that he is the ideal person for the position and an excellent choice ”. He also described it as “gratifying” that the internal succession plans “have borne fruit once again” with Javier Sánchez Prieto, the president and CEO of Vueling, taking over from Gallego at the head of Iberia, as well as the director until now. Iberia sales representative, Marco Sansavini, who becomes Vueling’s leadership position. Walsh was convinced that both “are the right people for their new positions.”

Likewise, Vázquez alluded to his retirement as chairman of the company’s board, a position he has held for more than nine years. Next January, when he is ten years in charge of the group’s council, he will be relieved by Javier Ferrán. Both have been re-elected this Tuesday as independent non-executive directors. Vázquez pointed out that his successor has a “brilliant professional career as a director and CEO of multinationals.

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