The parent company of British Airways and Iberia, International Consolidated Airlines Group (IAG), has bought rival Spanish airline Air Europa for 1 billion euros (£860 million).

Bosses said the deal is aimed at transforming IAG’s Madrid Airport base into a “true rival” to the four major European hubs of Amsterdam, Frankfurt, Heathrow and Paris Charles De Gaulle.

The company also said it hopes the deal will help IAG re-emerge as a significant player in the Europe-to-Latin America and Caribbean markets.

Air Europa and its 66 planes will continue to trade under its own name for the time being but will be overseen by Iberia chief executive Luis Gallego.

IAG boss Willie Walsh said: “Acquiring Air Europa would add a new competitive, cost-effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership, therefore generating additional financial value for our shareholders.

“IAG has a strong track record of successful acquisitions, most recently with the acquisition of Aer Lingus in 2015, and we are convinced Air Europa presents a strong strategic fit for the group.”

Mr Walsh has made clear in the past that he believes consolidation of airlines in Europe is expected to continue as smaller brands struggle.

He also recently revealed that IAG has been looking at the landing slots left vacant at Gatwick Airport following the collapse of Thomas Cook.

The deal, likely to be completed next year, is expected to generate cost savings across the group, with full synergies achieved by 2025.

Air Europa operates scheduled domestic and international flights to 69 destinations, including European and long-haul routes to Latin America, the United States, the Caribbean and North Africa.

In 2018, Air Europa generated revenue of 2.1 billion euros (£1.8 billion) and an operating profit of 100 million euros (£86.2 million), carrying 11.8 million passengers in 2018.

SOURCE PA MEDIA/YAHOO