IAG has announced an agreement to buy Globalia's 80% stake in Air Europa's issued share capital for a staggering €400 million.

International Consolidated Airlines Company SA has announced an agreement to buy Globalia's 80% stake in Air Europa's issued share capital for a staggering €400 million.

The action should put the owner of British Airways (BA) in a better position to take advantage of attractive development prospects in the South American and Caribbean sector while improving connections to Asia.

It comes after IAG's choice to turn a €100 million unsecured loan to Globalia into a 20% equity investment in Air Europa last year.

The acquisition is expected to change IAG's base in Madrid as the airline looks to compete with some of the biggest airports in Europe.

Moreover, the move will strengthen IAG's position in the lucrative sector connecting Europe with the Americas and the Caribbean, as well as provide intriguing new routes to Asia.

The agreement, according to the business, would open more network potential and provide customers access to IAG's Avios reward programme, among other important consumer benefits.

Besides that, the transaction is expected to result in significant synergies and possible cost reductions comparable to those from other IAG acquisitions.

The transaction is likely to conclude in about 18 months, subject to regulatory permissions, and the Air Europa name will be maintained under the administration of Iberia.

IAG expects the transaction to have little effect on its financial leverage ratios, but the business still aims to share more strategic and financial details during a Capital Markets Day later this year.

Luis Gallego, the CEO of IAG, issued a statement that wrote: "This arrangement will strengthen IAG's Madrid hub's position in the South Atlantic and allow it to compete on an equal level with other European hubs.

"Because Madrid serves as the key crossing point between South America and Europe, there is room to grow the network, which would be beneficial to our clients, staff, and shareholders."

The agreement was disclosed simultaneously with yearly results, which revealed that IAG's airlines, including BA and Iberia, recovered from the pandemic's effects in 2022 and generated a profit.

With €23.1 billion in sales, it had an operating profit of €1.26 billion in the year ending December 31, 2022. The organisation, which has been long associated with an offer for easyJet, has €9.6 billion in cash on hand.

(Investing.com, Proactiveinvestors.co.uk, Reuters.com)