Air Europa is doomed to another bailout from the State or Iberia after exacerbating its crisis in 2021 & More Latest News Here – Up Jobs

IAG announced last Tuesday the conversion of its loan of 100 million euros to Globalia for 20% of Air Europa, as a preliminary step to take over the entire capital of the airline and its merger with Iberia. The media focus is now on Brussels, whose competition authorities must authorize the operation. But that permission may be the least of the problems Air Europa faces. And it is that the airline of the Hidalgo family is going through a critical financial situation after worsening its crisis in 2021, a year in which it barely recovered 38% of the income and passengers from before the pandemic, and in which the debt It shot up to almost 1,000 million euros. With these wicks, the company will urgently need another injection of capital, either from the State or from Iberia, to continue operating. In fact, the company has already postponed until 2028 the payment of the first package of public aid that it received at the beginning of the pandemic in the form of a credit for 140 million euros guaranteed by the Official Credit Institute (ICO).

The accounts of the last financial year of 2021 prove that Air Europa is far from the long-awaited recovery on which it based its public rescue request. Revenues amounted to 898 million euros, only 18% more than in 2020m -the worst year of the pandemic due to confinement- and, what is more serious, far from the 2,340 million that it billed in 2019. In parallel Due to this poor evolution of income, the passengers transported in 2021 amounted to 5 million, only 700,000 more than in 2020 and 38% of the 13.1 million who traveled in 2019.

Consequently, the operating result was -263.2 million euros, 40% less than the previous year. And the net losses amounted to 304.3 million, which are added to the red numbers of 427.7 million that it suffered in 2020, compared to the benefit of 27.7 million in 2019.

The 2021 balance, which the company has just deposited in the Mercantile Registry, reveals that the pandemic has done much more damage to Air Europa than to other competing airlines. For example, Ryanair recovered 63% of 2019 revenue in 2021; Iberia is already in quarterly profits and EasyJet has snatched its position in the first half of this year as the fourth airline for passenger transport in Spain with 5.93 million travelers compared to 5.8 for Air Europa. All of them have recovered their entire workforce while at the end of 2021, Air Europa only had 2,853 employees on staff out of the 4,238 it employed in 2019. And the fleet was made up of a total of 37 aircraft, six less than in 2020, and far from the 59 that operated in 2019.

SEPI loan and aircraft rental

And the worst thing is that, unlike those rival companies, Air Europa survives thanks to an artificial lung in the form of public aid that it will be very difficult to repay in due time. As of December 31, 2021, the airline accumulated a debt of 992 million euros, a slab that has already made a dent in its operations, and has led it to have to postpone the credit of 141 million euros signed with several banks in May of 2020, but endorsed by the ICO. The renegotiation agreement, signed during 2021 but neither the ICO nor the company made public, postpones the expiration from 2025 to 2028.

A kick forward because the principal of Air Europa’s debt is the 475 million euros that it received from the rescue fund for strategic companies of the State Industrial Participation Company (Sepi) whose term expires in 2026. The problem is that, at Unlike the bank loan guaranteed by the ICO, the conditions of this fund stipulate that if payments are not met, SEPI, that is, the State, can convert at least the participating loan amounting to 240 million euros into capital in that the aid was divided, together with another ordinary loan of 235 million.

This clause makes a possible renegotiation of the loan very difficult since it would also set a dangerous precedent for the rest of the companies that have accessed this aid, including Air Nostrum or Plus Ultra, which would request treatment similar to that of the family airline. Nor does it seem easy, in the midst of a merger with Iberia, to convert that debt into capital, which would give the state 48% of Air Europa, according to the valuation of the 100 million loan from IAG. Although the Vice President of the Government and Minister of Economy, Nadia Calviño, did not rule out that possibility.

By 2022, Air Europa has to face the payment of 348 million, of which 250 million correspond to those who rent the planes (lessors) whose payment cannot be met as certified by the account report. “The company has reached agreements with suppliers, mainly with aircraft lessors, for the deferral of payments of certain debts or in other cases, it is in the process of renegotiating conditions with them.”

In fact, the KPMG auditor notes that although the administrators consider that they have sufficient liquidity to continue operating in the foreseeable future, “given that compliance with the company’s treasury forecasts, approved by the board of directors, will largely depend on of the evolution of the situation, there are still uncertainties that could lead to having to rely on more financing in the face of more adverse scenarios[theevolutionofthepriceoffueltherecoveryofairtrafficortheexchangeratewiththedollaramongothersarecitedindicatetheexistenceofamaterialuncertaintythatmaycastsignificantdoubtonthecompany’sabilitytocontinueasagoingconcern”[secitanentreotroslaevolucióndelpreciodelcombustiblelarecuperacióndeltráficoaéreooeltipodecambioconeldólarindicanlaexistenciadeunaincertidumbrematerialquepuedegenerardudassignificativassobrelacapacidaddelasociedadparacontinuarcomoempresaenfuncionamiento”

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