German airline group Lufthansa is in talks with Spanish carrier Air Europa about the possibility of acquiring a minority stake, according to two sources with knowledge of the talks. This move also follows IAG’s failed attempt to fully acquire Air Europa due to EU regulatory concerns last year.
As per sources, the Lufthansa Group, which has been competing the acquisition of 20% of Air Europa with Air France-KLM for sometime now, has taken the lead at this time, increasing its offer to Globalia, the group to which the Spanish airline belongs.
The Spanish carrier is 20% owned by Aer Lingus and British Airways-parent IAG, which backed out of taking full ownership last year due to regulatory concerns.
In August 2024, International Airlines Group (IAG) terminated its agreement to acquire the remaining 80 per cent stake in Air Europa, stating that the decision was “in the best interests of our shareholders”.
Air Europa, known for its extensive network in South America and its modern fleet, was seen as key to IAG's growth. The termination move brought to an end a saga which has been running since 2019, when IAG announced plans to purchase the Madrid-based carrier for €1 billion.
A revised €500 million deal was agreed in 2021 as a result of a much changed aviation landscape due to the Covid-19 pandemic, but later that year the group confirmed it was in advanced discussions to terminate the agreement.
Now, on the latest development, while both Lufthansa and Air Europa are tight-lipped on the negotiations, the potential deal could be significant for Lufthansa, allowing it to tap into Air Europa's established routes and passenger data base.
Air Europa is seeking funds to pay an outstanding package of loans worth a total of €475m granted by the government during the pandemic.
This greater commitment made by the German company corresponds to the interest in one of the most prized destinations for Central European travellers, "the Balearic Islands".
Since the archipelago is the main destination for tourists of various nationalities with which it operates through its brands, Lufthansa, Swiss, Germanwings, Austrian Airlines etc.
Air Europa has to repay a €235 million loan to SEPI, contracted during the pandemic, in 2026, and that is the reason why it is now looking for a partner to enter with a capital injection by taking 20% of the shareholding.
If the acquisition by Lufthansa takes shape, Spanish aviation sector will see an increased competition in the future, that could benefit consumers with more options and competitive pricing. However, the path to acquisition won't be easy could also trigger regulatory scrutiny concerning market competition and fair practices.
It should be noted that Air Europa, owned by the Hidalgo family, has closed a successful 2024, transporting 12 million passengers (+4.4%), billing 6% more than in 2023, reaching 2,900 million euros. In addition, it has managed to increase its value by 30%, going from €500 million to €650 million between 2022 and last year.
Air Europa, which has 51 aircraft including 24 Boeing 787s, has an attractive network, particularly to South America. Lufthansa could end up in a strategic acquisition to increase its network to this growing air travel domain and increase market share on the continent.
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