Air Europa would take more than 20 years to return public aid with its last benefits | National and International Economy

An Air Europa plane.
An Air Europa plane.

Air Europa registered a net profit of 27.7 million euros in 2019, 43.2% less than that obtained in the previous year, in which it achieved a positive result of 48.8 million euros, according to the accounts deposited in the Mercantile Registry. The most worrying data in these accounts is not the decrease in profit but the fact that, with these results, the airline owned by the Hidalgo family will be unable to return the public aid it has received for more than 600 million in a maximum period of six years established by the rescue fund.

The Government approved last November the injection of 475 million euros of public money into Air Europa on account of the new solvency fund aimed at supporting strategic companies that have been impacted by the covid-19 pandemic. Previously, last May, Air Europa had obtained a loan of 140 million euros guaranteed by the Official Credit Institute (ICO). In these ways, with the level of benefits reached in 2019, and without taking into account the pandemic, the company would take more than 20 years to return these aid.

The situation is far from normal in 2019. The recovery of the prepandemic air traffic levels is not expected until 2023 or 2024, so it is difficult for the airline to earn money again until then. In 2020 alone, losses are expected to skyrocket to 600 million euros. With these figures, Air Europa needs external help: either the State converts the loans into equity upon maturity and becomes a shareholder of the company, or IAG assumes that debt if it finally completes the purchase of the airline agreed in November 2019 for 1,000 million euros, but which is renegotiating downwards since the outbreak of the pandemic.

The Hidalgo family is the sole shareholder of the airline through the Air Europa Holding company. A status that can radically change if it cannot face the repayment of the aid, since the State would become the first shareholder of the company, a situation that already occurs in other European airlines such as Lufthansa, Air France-KLM or Alitalia rescued by their respective States. The other possibility is for IAG to assume the debt and agree to the sale of Air Europa with payment in shares instead of cash as stated in the original agreement. Also in this case, the Iberia parent company would be the main or even the only shareholder of the company.

Revenues and passengers

The coronavirus crisis has broken all the expectations of the second Spanish airline. In 2019, its income reached 2,340 million euros, 10.7% more than in the previous year. The highest growth in revenue (+ 14%) came from flights to America, the main market, which billed 1,458.8 million euros, compared to 504 million for domestic flights or sales of 368 million for flights with the European Union. It is precisely this market structure that also makes the airline more exposed to the crisis, since the routes most affected by the restrictive mobility measures are those of long haul.

Operating profit fell 11.8% to 82.9 million euros. The number of passengers transported reached 13.13 million, 1.3 million more than in 2018, with an occupancy rate of 83.6% in 2019, very similar to that of the previous year.

Although the accounts correspond to 2019, the airline has had time to include in the annual report a first balance of the effects of the pandemic whose future consequences it admits that it is currently unable to assess. Thus, it states that the net amount of turnover for the first five months of the year has been reduced by 42.6% compared to the previous year “and is significantly below the budgeted amounts”. And, in addition to the credits guaranteed by the ICO, the airline indicates that it is renegotiating certain debts with suppliers on which deferrals have been obtained for a total amount of 31.6 million euros.

Regarding personnel, it reports on the application of the temporary employment regulation file for 91.9% of the workforce, which represents 76.7% of the total hours. The average workforce reached 3,490 employees at the end of 2019, of which 600 are pilots and 1,747 flight attendants.