Tuesday 3 November 2020 3:06 pm

Air Europa lifeline loan may prove a headache for BA owner IAG

Low-cost carrier Air Europa has become the first firm to tap the Spanish government’s new emergency funding pot for companies endangered by coronavirus.

The airline, which is an acquisition target for British Airways owner IAG, will receive €475m in state-backed funding.

A spokesperson for the government said that the package would comprise a €240m equity-backed loan and a €235m regular loan.

Air Europa will have six years to repay the money, she confirmed. 

The rescue deal could well prove a challenge for IAG, which last week confirmed that it was still interested in purchasing the carrier.

It first agreed to buy Air Europa for €1bn a year ago, but has been trying to renegotiate the price due to the downturn in air travel caused by the pandemic.

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New IAG boss Luis Gallego told investors last week that the airlines group was still looking to do the deal.

“For sure if possible, we would like to do this deal”, he said. “We are waiting to see the package and the conditions attached, and at that moment, we will continue the negotiation.”

As a result of the pandemic, the number of flights operated by Air Europa dropped 95 per cent in the last quarter. 

The bailout means it is the latest in a line of European airlines to get government support. Lufthansa and Air France-KLM have both received huge support, while carriers such as Norwegian and Tap Air Portugal have had their finances bolstered.