Air France-KLM Wants To Invest In Air Europa, Makes Offer

Global aviation in Europe is very much controlled by the “big three” European airline groups — Air France-KLM, IAG, and Lufthansa Group. These airline groups often try to buy up independent airlines, both to further their strategic interests, and to prevent competitors from doing the same.

Recently, we’ve seen Air France-KLM acquire a stake in Scandinavian Airlines, and we’ve also seen Lufthansa Group acquire a stake in ITA Airways and in airBaltic. We know that there’s appetite for more deals in the region, and we’ve just learned the details of the latest offer that has been made.

Air France-KLM eyes 51% stake in Air Europa

In November 2024, there were reports that Air France-KLM was pursuing an investment in SkyTeam partner Air Europa. At the time, this interest was even confirmed by Air Europa parent company Globalia, but the company noted that “there is an interest, but there is also interest from other airlines and funds,” and that “nothing is sealed.”

There’s now a significant update, as El Confidencial reports that Air France-KLM has made an offer to acquire a 51% stake in the airline. Air France-KLM has reportedly offered €300 million for the stake, in addition to taking over €475 million of debt that Air Europa owes to the Spanish government.

A 51% stake would require approval from European Union regulators, and that could be a time consuming process that also requires some concessions. When this was first being floated several months back, the belief was that Air France-KLM was looking at a smaller, minority stake.

Now, it’s worth noting that Lufthansa Group is also reportedly interested in acquiring a stake in Air Europa, and is believed to be offering €240 million for a 25% stake in the airline. Any investment in the Madrid-based SkyTeam carrier would be about increased commercial cooperation between airlines.

The backstory here is interesting. In 2019, IAG (the parent company of British Airways, Iberia, etc.) intended to acquire Air Europa. This would’ve been a major shakeup for aviation in Spain, and for the general dynamics in the industry, given that we would’ve seen the same company controlling Spain’s two biggest long haul airlines.

That deal never ended up happening as intended. First there was a major delay due to the pandemic, and then regulators ended up blocking the deal, due to concerns over lack of competition. IAG did manage to acquire a 20% stake in Air Europa, though there’s not closer cooperation between Iberia and Air Europa.

Air Europa is actually doing pretty well financially. In 2023, the company reported a profit of €165 million, and in 2024, the company reported a profit of €205 million. For what it’s worth, IAG purchased its 20% stake in Air Europa for roughly €100 million, though that was at a time where the airline wasn’t doing as well.

This closer cooperation makes a lot of sense

If you ask me, there’s huge merit to Air France-KLM investing in Air Europa, and closer cooperation would be a win-win:

• Air Europa is already in SkyTeam, so it would be easy enough for the two companies to work more closely together, as a lot of those systems are already in place
• The biggest potential benefit here is Air France-KLM being able to extend its network to Central and South America, given Air Europa’s extensive network to Latin America
• I’m not sure if Air France-KLM would try to get Air Europa into the transatlantic joint venture with Delta and Virgin Atlantic, but presumably that could be on the table as well
• Air France-KLM has already acquired a stake in Scandinavian Airlines, so the airline group would really have some strategic geography advantages if this deal happened

Personally I think this would be positive for consumers, and I also think that Air France-KLM is the best fit for Air Europa in terms of airline groups.

While Lufthansa Group is also interested in an Air Europa investment, the airline group is also reportedly looking at a stake in TAP Air Portugal. There’s obviously similar merit to that deal, as Portugal has great geography across the Atlantic, particularly for South America, and TAP also has a low cost structure.

Bottom line

We’ve known for some time that Air France-KLM has been looking to invest in Air Europa. The airline group has now reportedly made an offer to acquire a 51% stake. The goal would obviously be closer cooperation between airlines, and the ability to strengthen the airline group’s position in Latin America. For that matter, it’s also about preventing the competition from making a deal. Between this and the Scandinavian Airlines investment, Air France-KLM could potentially have much better geographic coverage in Europe.

I’m not usually one to root for consolidation, but I hope this does happen, as there’s merit to this. There’s competition for this deal, though, as Lufthansa is also interested. I still think it’s more likely that Air France-KLM gets Air Europa, and Lufthansa Group gets TAP Air Portugal.

What do you make of the possibility of Air France-KLM acquiring a stake in Air Europa?