IAG and Air Europa cancel deal, examine alternative options

(Reuters) -Iberia-owner IAG and Air Europa are looking at alternative ways to work together, with a deadline set for the end of January, after they cancelled a takeover deal more than a year after it was struck.

IAG, which also owns British Airways, said on Thursday it would pay 75 million euros ($85 million) to Air Europa's privately held Spanish owner Globalia.

"IAG has also reached an understanding with Globalia to evaluate, before the end of January 2022, alternative structures that may be of interest to both companies and offer significant benefits for their shareholders, customers and employees," the company said.

IAG had announced plans to buy Air Europa from Globalia for 1 billion euros in 2019, but the price was cut in half this year after the airline industry was sent into a tailspin by the COVID-19 pandemic.

The British airline group this week said it was set to cancel its takeover of Air Europa after European regulators indicated they would not allow it to go through without further concessions.

IAG said it would pay 35 million euros, on top of the 40 million euros break-up fee, after agreeing that the amount would be used to reduce any future purchase price if a new deal is reached and to avoid litigation.

($1 = 0.8842 euros)

(Reporting by Yadarisa Shabong in Bengaluru and Kate Holton in London; Editing by Amy Caren Daniel and Paul Sandle)