The European Commission said on November 20 that it had opened an in-depth investigation to check whether the proposed acquisition of Spain’s Air Europa (UX) by Iberia (IB, Madrid Barajas), its sister carrier at IAG International Airlines Group, would reduce competition on routes from Madrid Barajas.
The Commission said that it had concerns about potential overlaps on routes between Madrid and other EU airports as well as “the reduced number of players” on key domestic links within Spain. The Commission has until April 6, 2021, to decide whether to clear or block the merger.
According to a Reuters report, the two airlines have requested regulatory clearance in Canada to integrate their flight schedules, sign joint business deals, and coordinate pricing.
However, European Commission objections cut short Iberia’s plans in 2010 to buy Spain’s third-largest airline at the time, Spanair, after which the flag carrier shut down, stranding thousands of passengers with unpaid tickets.
Although it will continue with the acquisition process, IAG will now have to wait for European Union regulatory approval for the takeover, a process that could take far longer than initially intended.
The fact that the Commission is pursuing a full-bore investigation implies that it believes that remedies proposed by the airlines to date sufficient to alleviate all its concerns, indicating that a final ruling may be some way off yet.
The Commission is said to have told the carriers earlier this year that the pandemic may be a factor in their decision and that they were free to revise the issue, though neither of the airlines wanted to alter the deal terms.
Analysts have said that carving out individual Iberia routes on which the two airlines operate together, especially to Latin America, is one possibility.
At the time of the deal’s announcement, IAG said that Air Europa would continue to operate as a standalone carrier under its current brand, led by Iberia CEO Luis Gallego, with the aim of positioning Madrid as Europe’s key hub while establishing links with new markets in Latin America and the Caribbean.
The deal includes an agreement inviting Air Europa’s owner, tourism group Globalia, and Iberia’s parent company, International Consolidated Airlines Group SA (IAG), to explore other forms of collaboration in aviation.
As we previously reported, Iberia’s parent company, International Consolidated Airlines Group (IAG), signed the letter of intent to buy the full-service carrier last November, for reportedly $1.12 billion.
The group originally expected the deal to clear some regulatory hurdles by the second half of 2020, allowing Iberia and Air Europa to start what they had called a “reconstruction process” as part of a wider effort to restore Spain’s tourism industry.
In April, Chief Executive Willie Walsh said the deal had been impacted by the coronavirus pandemic, as would-be passengers had either restricted their travel or shied away from it altogether.
The acquisition of Air Europa was expected to consolidate Iberia’s position as a leading international airline, particularly in America and the Caribbean, boost its growth over the coming years, and turn Madrid into a key European travel hub.