Brussels anti-trust regulators are set to object to the attempted purchase of Spanish airline Air Europa by IAG, British Airways owner, according to inside sources reported by the Financial Times.
Lack of competition
The lack of other large competitors on relevant routes led the European Commission to open an investigation last month into the deal IAG signed last February to purchase Air Europa for €400 million. Under the microscope is its impact on international and domestic Spanish aviation, amid “preliminary concerns” over potential harm to consumers.
Those concerns include price inflation and reduction in service variety and direct connections, since IAG and Air Europa are currently competitors on a number of domestic, short-haul and long-haul routes.
“IAG and Air Europa are leading airlines in Spain and key providers of connectivity within the country and between Spain, the rest of Europe and Latin America. With our in-depth investigation, we want to make sure that the transaction does not negatively affect the prices or the quality of passenger air transport services in and out of Spain,” said Margrethe Vestager, Executive Vice-President in charge of competition policy.
Trend for consolidation
As well as British Airways and three other airlines, IAG already owns Spanish flag carrier Iberia and is already in possession of 20% of Air Europa. It is the second time IAG has tried to buy out the airline in full. A previous attempt to become sole owner ended during the Covid-19 pandemic due to similar red flags over competition. According to insiders, the purchase is “more problematic” this time round because Europa is in better financial shape this time round.
The trend for post-pandemic consolidation in aviation has been marked. Air France has gained 20% of beleaguered Scandinavian airline, SAS. And Lufthansa has signed up for 41% of ITA Airways, the new incarnation of Italy’s Alitalia, a deal also under Brussels scrutiny since January, with the EU and consumer groups insisting on tougher rules for mergers. To make the deal go through significant concessions and assurances are likely to be needed.
“We remain committed”
The Commission’s decision is due by 7 June. In a statement last month by chief executive Luis Gallego, IAG said it was preparing mitigations to address the Commission’s challenges.
“We remain committed to closing this transaction as quickly as possible in 2024 to start delivering the deal’s benefits for consumers and the wider Spanish economy, and increase Madrid’s competitiveness with other European hubs,” Gallego said.
