Air France-KLM Pursues Stake in Air Europa for Expansion
By Tim Hepher and Joanna Plucinska
PARIS (Reuters) - Air France-KLM has met with Air Europa and is continuing talks about taking a stake in the Spanish carrier as it looks to expand its footprint in the Iberian peninsula, Chief Executive Ben Smith told Reuters on Tuesday.
"We've had a meeting with Air Europa," Smith told Reuters in an interview in Paris confirming for the first time the French-Dutch carrier was interested in buying a stake.
He declined to disclose further details about the nature of the talks or the size of the stake.
In November, the airline said discussions were underway about commercial cooperation with Air Europa within the framework on the SkyTeam alliance, but it would not comment on any plans to acquire a stake.
Some analysts have valued the airline at up to 1 billion euros ($1.1 billion). The stake sale would be aimed at raising funds to pay back government loans worth about 475 million euros ($518 million) granted during the pandemic.
German airline group Lufthansa is also interested in acquiring a minority stake.
The stake sale would mark the next phase of the consolidation of Europe's fragmented airline industry, which executives say is needed to compete with U.S. and Middle Eastern rivals.
Doing smaller deals rather than buying an airline outright would also help get regulatory approval and expand Air France's business in the lucrative southern European market. Air Europa flies within Spain and between Madrid and large cities in Europe and Latin America.
In August last year, British Airways-owner IAG abandoned a plan for a full takeover of the airline after hefty regulatory scrutiny from the European anti-trust watchdog.
European regulators are worried major takeovers will lead to higher air fares and hit consumers. IAG bought a 20% stake in the airline, for 100 million euros in 2022.
Smith said Air France-KLM was also still interested in the privatisation of Portuguese flag carrier TAP, but it was waiting on further guidance from the Portuguese government.
"We like that geography. We think it can really help better position our group in terms of our competitors, but we're not going to pursue the consolidation operation just for the sake of enlarging," Smith said.
Lufthansa and IAG have also shown interest in TAP's privatisation, which the Portuguese government has said it wants to carry out this year.
($1 = 0.9162 euros)
(Reporting by Joanna Plucinska and Tim Hepher; Editing by Josephine Mason and David Evans)
