IAG has made a formal takeover offer for Spanish low-cost airline Vueling to help restructure Iberia's short haul operations and stem losses at its Spanish business.
International Airlines Group was formed by the merger of British Airways and Iberia.
IAG today said it had made a €113m - or €7 a share - offer for the 54.15% of Vueling that it does not already own.
This values Vueling, Spain's second largest carrier after Ryanair, at €209m, according to Thomson Reuters data.
The offer comes a day before IAG is expected to announce plans to cut up to 7,000 job cuts at Iberia, union sources said. Unions have been expecting layoffs of 4,000 to 7,000 workers for months due to Spain's challenging recession and the progressive shifting of Iberia's short to medium distance flight routes to its low cost carrier Iberia Express.
"This acquisition would be positive for Spain," said IAG chief executive Willie Walsh. "We would retain Vueling's Barcelona base and create new Spanish jobs."
IAG has been in conflict with Spanish pilots union SEPLA over pay and conditions for the last year. Earlier this year the Spanish government appointed an arbitrator to help resolve the dispute but the situation has yet to be resolved.
The botched arbitration process has resulted in uncertainty over IAG's ability to continue to grow Iberia Express.
IAG said Vueling would remain independent but analysts believe IAG will use Vueling to provide short haul feeder traffic for Iberia's long haul network and to take advantage of its lower cost base.
While IAG holds 46% of Vueling's capital, 23% is held by international institutional investors, 13% by Spanish investors and 18% by minority shareholders.
IAG, which plans to fund the deal using "internal resources", said shareholders representing 90% of Vueling stock would have to approve the transaction. It added that a deal would not need regulatory approval by the European Commission.
