Air Europa has requested 400 million euros from the public fund to rescue strategic companies to save itself from bankruptcy in the face of the strong impact caused by the effects of the pandemic and the lack of recovery in demand due to the quarantines decreed by several countries reported in sources of the administration.
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 the SEPI must justify that the aid with public money is used exclusively to avoid bankruptcy and ensure that the airline continues to operate.
And is that the company is pending the purchase by IAG, the holding company Hispano-British to which Iberia belongs, which agreed in November 2019 to purchase the company 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 ensure that it does not become a mere clean-up with taxpayer money for Iberia to execute the purchase of Air Europa from a lower price, the amount of which would also go to private investors such as the Hidalgo family. Companies such as Ryanair have already warned that they will denounce these aid to Globalia’s airline 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 and the company itself have declined to comment on the news.
The request is the second that is produced under the rescue fund after the one made by Duro Felguera. The reason 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 of many countries on passengers traveling to Spain.
450 million hole
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.
With only 35% of its activity, 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. At 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.
The news of the rescue request comes one day before the shareholders’ meeting of IAG – a group in which Iberia is integrated – is held, which must approve a capital increase of 2,700 million euros to address the lack of liquidity. With this injection of funds, the Hispanic-British group trusts that it will be enough to weather the crisis caused by COVID-19 and that it will not have to request any rescue.