Brussels also to investigate IAG’s acquisition of Air Europa

A day after the European Commission announced an in-depth investigation into the proposed acquisition of ITA Airways by Lufthansa, Brussels presents another one: IAG’s proposed acquisition of independent Spanish carrier Air Europa. Again, the EC is concerned that the acquisition might reduce competition in Spain and on various international routes, it said on Wednesday. International Airlines Group (IAG) notified the European Commission on December 11 of its intention to acquire Air Europa. The proposal dates back to November 2019, when IAG was prepared to pay €1.0 billion for the carrier that is owned by Globalia. Six months later and after the outbreak of the first COVID-19 wave, the cards were played very differently. IAG wished to lower its offer to €500 million, which was rebuffed by Globalia. In August 2022, IAG took an option to convert a €100 million loan into a 20 percent share of Air Europa. In February 2023, the two parties agreed in principle on an agreement that would see IAG buy Air Europa for €400 million plus the €100 million paid earlier. IAG CEO Luis Gallego repeated last October that the transaction was expected to take 18 months to conclude until Q3 or Q4 of this year, pending regulatory approval. Gallego reiterated that Air Europa would be a great asset to IAG: “This agreement will enable IAG’s Madrid hub to compete on an equal footing with other European hubs and consolidate its position in the South Atlantic. Madrid is the main gateway between Latin America and Europe and there are opportunities to expand its network, providing significant benefits to our customers, employees, and shareholders.” Reduced competition The European Commission is not convinced. “The preliminary investigation indicates that the transaction may reduce competition in the market for passenger air transport services on several domestic, short-haul, and long-haul routes. IAG and Air Europa are strong and close competitors in the provision of passenger air transport services on certain routes within, to and from Spain.” The EC fears that competition will be reduced on the domestic market, “notably on routes where high-speed trains do not provide an alternative, and on routes between peninsular Spain and the Balearic and Canary Islands.” But also outside Spain, the combination of IAG’s Spanish airlines Iberia, Vueling, LEVEL, and Air Europa could prove to be anti-competitive. “Short-haul routes between Madrid and some of the main EEA cities as well as on routes connecting Madrid and Israel, Morocco, the UK, and Switzerland, on which both parties offer a direct connection.” The same applies to long-haul routes between Madrid and North and South America, where competition is often low. Gallego said earlier that the network of Air Europa to South America would offer significant growth options for IAG and its Madrid hub. TAP Air Portugal is a main competitor to South America out of Lisbon. Brussels will also look at the slot portfolio of Iberia and Air Europa at Madrid Barajas Airport, which might affect options for competing airlines. Also to be assessed are the likely effects on indirect connections, and on routes “on which other airlines rely on access to the parties' domestic and short-haul network for their own operations, which could affect their services to international destinations also served by IAG.” As with the in-depth investigation into Lufthansa-ITA Airways, the European Commission has 90 working days to decide, or until June 7.

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