EDreams Plunges After Iberia, British Airways Halt Ticketing

EDreams Odigeo SL lost more than half its value in Madrid trading after Iberia Airlines said it would stop marketing its tickets with the Spanish online travel service alleging the site breached European law.

Bonds of a related company, Geo Travel Finance SCA, plunged.

EDreams stock fell 59 percent to 1.02 euros, the biggest drop since its April 8 initial public offering, before being suspended for trading by regulators. Geo Travel’s 129 million euros ($163 million) of 10.375 percent notes slumped 57 percent, according to data compiled by Bloomberg.

The move by Iberia and partner airline British Airways Plc affects only 3 of EDreams Odigeo’s 67 websites, the travel service said in an e-mailed statement. “The core issue at stake has nothing to do with compliance, but with commercial negotiations,” it said. Talks with Iberia and British Airways continue, EDreams added.

“People deem this could be a game-changer for the business model in the worst-case scenario,” said Henry Craik-White, an investment analyst at ECM Asset Management in London. “There’s very little liquidity in the market at the moment and when there’s a lack of information, nobody wants to stand behind the bond. When you get these shock pieces of news the understandable initial reaction seems to be sell and don’t buy until you’ve got some certainty around what’s going on.”

Ticket Transparency

The decision to remove ticketing from the sites was made due to EDreams “not fulfilling its obligation to transparently report total ticket prices to clients from the start of the booking process,” Iberia said today in an e-mailed statement.

Iberia said tickets from its partner British Airways also will be withdrawn from the Barcelona-based travel operator’s websites, which a BA spokeswoman in London confirmed. BA and Iberia are both units of International Consolidated Airlines Group SA.

EDreams said bookings with Iberia and BA on the affected sites accounted for 1.42 percent of total EDreams bookings in the last three months.

The bonds fell 40 cents on the euro to 30 cents in Madrid, pushing the yield up to a record 51.9 percent, data compiled by Bloomberg show. The company’s 325 million euros of 7.5 percent bonds slumped as much as 31 percent.

EDreams went public in April at 10.25 euros a share. In June the company said that its 2015 earnings before interest, tax, depreciation and amortization would be “difficult to discern” after it was affected by changes to Google Inc.’s search algorithm.

The decision to remove its tickets from the EDreams and the related Opodo websites follows weeks of negotiations, Victor Moneo, head of Spain sales for Iberia and BA, said in the statement.

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