International Airlines Group (IAG) has revived its interest in Spanish carrier Air Europa.

The group had initially agreed to purchase the smaller airline for €1 billion in late 2019.

However, the price was initially cut to €500 million before the deal was finally cancelled in the wake of the Covid-19 pandemic.

Now, however, it appears a potential tie-up may be back on the table.

IAG said today it will loan Air Europa parent Globalia €100 million with the option to convert it into a stake of up to 20 per cent in Madrid-based Latin America specialist.

The agreement provides for a one-year period of exclusivity while discussions take place.

IAG added that “this is accompanied by a right to match any third party offer for the airline in the next three years, together with a right to exit alongside Globalia should it sell Air Europa at any time in the future”.

The group said it maintained an interest in developing Madrid as a hub and committed to analysing “alternative arrangements” with Globalia.

IAG chief executive Luis Gallego said: “Since we started negotiations, the world has changed.

“This agreement will give us time to evaluate with exclusivity alternative structures that may be of interest to both companies and offer significant benefits for their customers, employees and shareholders.”