British Airways owner IAG said on Monday it had agreed to buy Spanish carrier Air Europa for 1 billion euros (1.12 billion dollars) in cash, bolstering its ability to compete for European travel to Latin America and the Caribbean through Madrid.
Against the backdrop of a challenging environment for airlines globally, the deal is the latest by a big European carrier looking westward to boost traffic and average fares.
Air Europa offers domestic and international flights to 69 destinations, including long-haul routes to Latin America, the United States and the Caribbean.
“Acquiring Air Europa would add a new competitive, cost-effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership,” Willie Walsh, chief executive of IAG said.
Europe’s third-largest budget carrier Norwegian Air, which has shaken up the market for travel across the Atlantic with cut-price fares, last month signed a partnership with JetBlue Airways to enable European passengers to book straight through to around 100 U.S. cities.
IAG said the agreement with Air Europa was signed by its Spanish unit Iberia and added it expected the deal to close in the second half of next year.
The company, whose profits have taken a hit from pilot strikes, expects the deal to be earnings accretive in the first full year after completion and accretive to return on invested capital by the fourth year.