Turkish Airlines' (THY) agreement to acquire a minority stake in Air Europa "will strengthen its network reach to Latin America and Spain, with minimal impact on leverage," credit rating agency Fitch Ratings said in an assessment on Tuesday.
The transaction is likely to close in six to 12 months, subject to regulatory approvals, which they believed should be obtained given the relatively small stake and limited network overlap between Turkish Airlines and Air Europa, the agency said. It described the move as "credit positive."
It also suggested that Turkish carrier will likely take a stake of "25%-30%" in Air Europa for 300 million euros ($352 million).
Turkish Airlines said last month its offer was accepted after remaining the sole bidder following the exit of Lufthansa and Air France-KLM from the race.
The exact percentage of the minority stake that Turkish Airlines will acquire would be determined following technical and financial adjustments at the closing stage, the company said at the time.
"The acquisition will support passenger and air cargo connectivity between Spain and Türkiye, creating opportunities for Turkish Airlines to tap into fast-growing Latin America/Europe routes," Fitch said on Tuesday.
Air Europa is much smaller than Turkish Airlines but much stronger in South American routes and benefits from having the second-largest position at Spain’s Madrid-Barajas airport, it also said.
"International Airlines Group (IAG) retains its 20% stake in Air Europa. Its 2024 bid to acquire the remaining 80% failed due to the significant anti-trust related concessions required, given IAG’s relatively high overlap with Air Europe through Iberia and Vueling," Fitch said.
"The transaction continues a trend among large European carriers to engage in minority stakes or bolt-on acquisitions, as in the case of Air France KLM (BBB-/Stable) and SAS, and Deutsche Lufthansa AG (BBB-/Stable) and ITA Airways," the credit agency also suggested.
Founded in 1986, Air Europa is Spain's third-largest airline, following Iberia and Vueling.
