The Spanish government is considering becoming a shareholder in Air Europa (UX, Palma de Mallorca) in order to guarantee the viability of the troubled carrier following the failure of its long-planned acquisition by Iberia (IB, Madrid Barajas) parent IAG International Airlines Group, Bloomberg News reported on January 14 citing unnamed sources close to the matter.

The objective would be to acquire a shareholding of up to 40% by capitalising part of the EUR475 million euros (USD542 million) that was delivered to the transatlantic specialist in Covid-19 state funding, a bailout that was approved in October 2020. About EUR240 million (USD274 million) of the sum consists of participatory loans convertible into this amount of equity.

According to the sources, IAG could also still acquire a stake in the restructured company, as discussions on Iberia absorbing the airline through a new mechanism have remained open. The Iberia and British Airways parent is eager to bolster ties to Latin America after LATAM Airlines Group departed Oneworld in May 2020 in search of new partners.

This would leave the Hidalgo family, Air Europa’s current owners via Globalia, with a small holding. However, talks are ongoing and there is no guarantee an agreement will be reached.

While Air Europa and IAG have declined to comment on the allegations, Nadia Calvino, Spain’s deputy prime minister and economy minister, told Bloomberg that the government was not ruling out such an eventuality in order to protect the public interest and added that “at this stage we are exploring all available options.”

Calvino acknowledged that such a proposal may not stand up to European Union antitrust scrutiny. Brussels said in a statement on December 16, the day after the IAG deal collapsed, that “the discussions with the companies and the proposed remedy package thus far were not able to adequately address the competition concerns identified by the commission.”

But Calvino argued that saving Air Europa would further Spain’s interests by ensuring its citizens have access to a sufficient range of routes at competitive prices. The government would ensure, she stressed, that taxpayers are reimbursed.

According to the ch-aviation capacities and ch-aviation fleets advanced modules, Air Europa currently operates 52 routes (31 international, 21 domestic) with a fleet of thirty-five aircraft (fourteen B737-800s, eight B787-8s, ten B787-9s, two A330-200s, and one A330-300).