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Highlights
- The IAG Group’s planned acquisition of Air Europa is set to be reviewed by the UK’s Competition and Market Authority (CMA).
- IAG Group has been witnessing multiple headwinds since the Covid-19-led first lockdown and might see some turbulence in the coming days as well
FTSE 100 listed passenger and cargo carrier, International Consolidated Airlines Group’s (LON: IAG) planned acquisition of Air Europa, the third largest Spanish airlines, is set to be reviewed by the UK’s Competition and Market Authority (CMA). The regulatory authority will check whether the acquisition will lead to reduce, competition in the market especially on those routes that are common between IAG Group’s flights and Air Europa.
Iberia, which is part of the IAG Group, had originally announced the acquisition of Air Europa for €1 billion in 2019. However, the Covid-19 led pandemic impacted the overall airlines’ industry leading to a significant cut down in valuations and the acquisition price was revised to €500 million. However, after the announcement by the IAG Group, the European Commission in June 2021 started an investigation to examine if the proposed transaction will lead to reduce competition.
IAG Group has been witnessing multiple events since the Covid-19-led lockdown was first announced and might see a turbulent time in the coming days. The company’s share price reached its peak level of GBX 222.10 in April 2021. However, since then, the share prices has been declining to currently trade at GBX 151.5 on 22 November 2021 at 10:20 am GMT+1 with a market cap of £7,367 million.
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Let us see some of the key factors that might impact the company’s share price:
Low Earnings and losses
For the nine months to 30 September 2021, airlines reported total revenue of €4,921 million, a decline of 24.4%, while it reported an operating loss of €2,487 million. The passenger capacity in the third quarter was at 43.4% of 2019. The company is still recovering from the pandemic shock. Also, the company said it expects an operating loss of nearly €3 billion for the full year due to the current fuel price scenario, exchange rates and lower passenger capacity.
The fresh outbreak of coronavirus
Some parts of Europe have been witnessing a fresh rise in coronavirus cases. Austria has gone under nationwide lockdown for 20 days. The Airlines sector has just started to report recovery with some rise in passenger traffic. However, the recent rise in cases might impact the travel industry ahead of the Christmas festivals. If new travel restrictions are imposed, then it will adversely impact the overall airlines’ sector and IAG Group as well.
Impact on profitability due to high debt burden
The company reported net debt of €12,356 million as of 30 September 2021, a rise of 26.6% compared to a debt of €9,762 million in December 2020. Although the company said that it has a good liquidity position still investors are concerned because of rise in debt levels.
