Air Europa and the admirable Pepe

Seems to be, but he has hinted that there might be negotiations going on without his consent, these negotiations concerning the sale to Iberia (IAG) or indeed a Spanish government stake in Air Europa. In a statement to the media, he has said that “the only thing that counts is what Pepe Hidalgo says”, and Pepe is neither minded to sell to Iberia nor to let the Spanish government take a stake. While Nadia Calviño, the first deputy prime minister (and minister of economic affairs), is the principal target for his rebuttal, the minister for industry, trade and tourism, Reyes Maroto, has been saying that the government will “guarantee the viability of Air Europa, as it is strategic”.

Negotiations with Iberia about the sale of Air Europa broke down a week or so before Christmas. Negotiations to “rescind” the deal were at an “advanced stage”, Air Europa anticipating a 75 million euro compensation package from Iberia for failure to consummate the deal. But this 75 million also appeared to be an advance payment for a future purchase at some point in an unspecified future.

More recently, Pepe has been insisting that, by law, Iberia cannot buy Air Europa. This is because of foreign capital, IAG’s, and the UK is no longer part of the EU. He argues that there is a growth plan in place for Air Europa. There will be no sackings at the airline. Repayment of the government’s loan (which bailed Air Europa out because of the pandemic) doesn’t take effect until 2026, and the Iberia 75 million will see the airline through until June.

The June date is significant in that a government moratorium on bankruptcies due to Covid is set to expire. Third parties could force the issue. But even then, Pepe believes there will be a further government bailout, while all the time - and still in the background - is the possibility that Iberia could yet buy the airline, despite his opposition. This purchase might even be in the form of a joint venture with the government. An option spoken about is that the two both take a 40% stake, leaving 20% with the Hidalgo family.

Throughout all the talk of an Iberia purchase, the founder of Air Europa has seemed to be the member of the Hidalgo family least impressed by the possibility. The European Commission’s raising of objections and demands on the offloading of routes in order to permit a sale (merger) made a breakdown in negotiations almost inevitable, but Pepe, for one, doesn’t seem to be saddened by this.

The situation as it now stands is that the government does indeed continue to view Air Europa as a strategic asset, as it has all along looked upon a tie-up with Iberia as strategically beneficial. The government, therefore, has no desire to see Air Europa go to the wall, despite its debts.

Although the European Commission has made the amalgamation difficult, it would seem as though negotiations are taking place, the assumption being that Pepe’s son, Javier, even though he has been sidelined to some extent, has been maintaining contacts with Iberia from his Los Angeles home. Senior management at Air Europa are understood to agree with Javier that a sale is necessary because of the airline’s financial situation.

Pepe clearly doesn’t agree. In this regard, he could either be seen as being foolhardy or celebrated for his determination to keep Air Europa independent. For the latter reason, one does have to admire him, and one hopes that he succeeds. Whether, realistically, he can is another matter.

Meanwhile, and wouldn’t you just know it, Michael O’Leary has been offering his views. In the end, and after all the money pumped into Air Europa by the government, he believes it will become inevitable that Iberia ends up buying the airline - and for a small price.

The Ryanair CEO gets to the crux of the matter in terms of competition, and that is that slots at both Madrid and Barcelona would have to be given up. Relinquishing these would reduce the strategic sense for amalgamation and also any sale price. Everyone seems to appreciate this, including Pepe Hidalgo.