IAG entered into discussions with Air Europa in November 2019 over a potential €1 billion deal, which would have seen BA stablemate Iberia acquire Air Europa.
This €1 billion valuation, though, was cut to €500 million in January 2021 owing to the effects of the Covid crisis on Air Europa.
The group said the move would allow it to create a hub in the Spanish capital to rival Heathrow, Schiphol and Charles de Gaulle, and strengthen its market position on routes to Latin America and the Caribbean.
However, IAG walked away from the deal in December 2021 amid scrutiny from European and UK competition authorities.
IAG agreed instead, back in March, to loan Air Europa parent Globalia €100 million in return for a one-year exclusivity option should it wish to revive its interest.
At the time, IAG chief executive Luis Gallego said the ground "remained convinced about the strategic importance of the deal to the development and competitiveness of Madrid’s hub".
On Tuesday (16 August), IAG confirmed it would convert the loan into a firm stake in Air Europa.
"Further to the announcement made by International Airlines Group on 17 March 2022 relating to the convertible loan to Globalia, IAG announces that it has exercised its option to exchange the group’s €100 million seven-year unsecured loan to Globalia for a 20% equity stake in Air Europa."
