DAVY VIEW

IAG’s agreement to acquire Air Europa reaffirms its ability to transact on M&A. The deal will be earnings accretive from year one and, with revenue and cost synergies like prior IAG acquisitions to follow, it will be ROIC accretive from year four. It will also bolster the Madrid hub to the point that it competes with Europe’s four main hubs. We see this as a prudent acquisition, which will add to the group’s mid-term attractiveness. Key to the success of the deal will be the achievement of synergies, where IAG has a strong track record.