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November 29, 2023
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The news that IAG has agreed to acquire Air Europe for $1.1 billion will alter the competitive landscape in Spain. Madrid-based Air Europa will join IAG’s Iberia, becoming a standalone subsidiary and the Barcelona-based LCC Vueling in the IAG portfolio. This move will change the competitive balance at Barajas airport, which has lagged behind other European hubs.

It will also change the competitive balance of alliances, as Air Europa was a member of the Sky Team alliance with AirFrance KLM and Delta. With Air Europa likely moving to oneworld, that furthers the potential for LATAM, which has announced it is leaving oneworld, to perhaps join SkyTeam, as has been rumored. That would be a plus for SkyTeam, as LATAM is a much larger operation and could focus Latin America- European travel via Paris and Amsterdam with stronger onward connections than Madrid.

With the acquisition of Air Europa, Iberia will dominate the market in Madrid with the oneworld alliance, enabling additional connecting flights, potentially re-establishing market share leadership in the Europe-Latin America market for Iberia.

It is expected that Air Europa will be slowly integrated into the Iberia brand, albeit initially the Air Europa brand will be retained. This acquisition will likely turn Madrid Barajas into a fortress hub for Iberia, much like other airports like Amsterdam, Frankfurt, Paris CDG and Heathrow that are dominated by the national carrier.

The key to the new competitive balance may be whether LATAM joins SkyTeam to better compete with its former oneworld partners. The competitive impacts from this merger may affect more than one airline, and more than one alliance as the consolidating airline landscape in Europe changes once again.

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President AirInsight Group LLC

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