IAG’s interest in buying Norwegian is now history. But its interest in consolidation? Anything but. The latest move is a €1b deal to buy Spain’s Air Europa, a carrier specializing in Latin America flights from Madrid. The opportunity came as Air Europa’s parent company felt heightened pressure to sell. In 2018, it earned just a 5% operating margin, no better than troubled Air France/KLM. But far from having the scale of an Air France/KLM, Air Europa was increasingly haunted by existential worries as credit card processors, spooked by the failure of Thomas Cook and others, began holding back cash from advance sales. That’s a concern when you’re trying to pay for expensive B787s. At least as troubling was the downturn in South American markets that affected Level in Buenos Aires, which happens to be an important Air Europa market as well. The carrier also has lots of precarious Brazilian exposure (FYI: it once said Bogota was its most profitable Latin route).
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