British Airways owner International Airlines Group (IAG) has agreed to acquire Spanish carrier Air Europa in a €500m deal.

IAG announced the original agreement on 4 November 2019 and valued the carrier at €1bn.

Under an amended deal, Iberia will acquire Air Europa for only €500m. The companies have agreed to defer the payment for six years from the acquisition date.

IAG chief executive Luis Gallego said: “Both Iberia and IAG are demonstrating their resilience to face the deepest crisis in aviation’s history.

“Being part of a large group is the best guarantee to overcome current market challenges which will also benefit Air Europa once the transaction is completed.

“I am pleased that we have reached an agreement with Globalia to defer payment until well into the expected recovery in air travel following the end of the pandemic and when we expect to be realising significant synergies resulting from the transaction.”

The deal is subject to satisfactory negotiation between Iberia and state-owned industrial holding SEPI regarding non-financial terms associated with loans provided by SEPI.

During the pandemic, SEPI has been supporting Air Europa with loans.

Completion of the transaction would be subject to approval by the European Commission and is expected to be completed in the second half of this year.

Air Europa is currently operating a fleet of 52 aircraft. All its aircraft are on operating lease except one.