Summary
- IAG’s acquisition of Air Europa may face potential objections from the EC due to competition concerns.
- The Commission should issue a state of objections in a few weeks.
- The preliminary concerns of the EC regarding the merger included reduced competition on domestic, short-haul, and long-haul flights from Spain.
The International Airlines Group’s (IAG) acquisition of Air Europa’s remaining shares might be in jeopardy, with the European Commission (EC) not being convinced by IAG’s proposed remedies to alleviate competition concerns on routes from/to Spain.
Potential statement of objections
According to an exclusive report by Reuters, which cited sources familiar with the matter, the EC did not even ask for feedback from other stakeholders about the proposed remedies that were put forth by IAG.
As such, the EC should issue a statement of objections by the end of April 2024, added the publication, noting that sources have indicated that IAG was willing to give up slots at airports and cede certain routes. Furthermore, the group was willing to provide competing carriers with aircraft to address competition concerns.
Photo: Fasttailwind | Shutterstock
The EC began investigating the proposed transaction between IAG and Globalia, the parent company of Air Europa, in January 2024. The group, the parent company of Aer Lingus, British Airways, Iberia, Vueling, and other aviation companies, proposed acquiring 80% of Air Europa for €400 million ($434.5 million).
The payment is split between four €100 million ($108.6 million) transactions, namely to acquire the remaining 54.06 million shares of Air Europa, with IAG already owning 20% of the airline, give out cash to Globalia, and another two tranches on the first and second anniversary of the completion of the merger.
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Preliminary concerns
When the EC announced its in-depth investigation into the transaction in January, the Commission said it had preliminary concerns about the merger as it could reduce competition for travelers on domestic, short-haul, and long-haul flights out of Spain.
“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.”
At the time, the EC highlighted that it was concerned about routes without high-speed train alternatives, as well as flights to the Balearic and Canary Islands, as well as short-haul flights from Madrid Barajas Airport (MAD) to Israel, Morocco, the United Kingdom, and Switzerland. Furthermore, long-haul routes connecting Spain and North and South America caused concern for the Commission.
Photo: Toni M. | Shutterstock
The in-depth investigation has been looking at the two carriers’ – Iberia and Air Europa – slot portfolio at MAD, the effects of the transaction on indirect connections on long-haul routes to South America, and the effects on routes where other airlines rely on access to the parties’ domestic networks. The EC said it would finalize its decision on the transaction by June 7, 2024.
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Europe Is Now Also Investigating IAG’s Planned Takeover Of Air Europa
The European Commission (EC) should publish its decision by early June 2024.
Statement of objections to Lufthansa/ITA Airways
The EC had already issued a statement of objections to Lufthansa and the Italian Ministry of Economy and Finance (Ministero dell’Economia e delle Finanze, MEF) over Lufthansa’s purchase of an initial shareholding in ITA Airways.
At the time, the commission said that after it launched an in-depth investigation in January, its findings indicated that the transaction would reduce competition on a number of routes from/to Italy to/from Central Europe, as well as on numerous long-haul flights to the United States, Canada, and Japan. Lastly, it would further strengthen ITA Airways’ position at Milan Linate Airport (LIN).
Photo: ITA Airways
A Lufthansa spokesperson told Simple Flying that the German airline group was willing to cooperate with the EC, adding that the company will examine the conclusions presented by the antitrust regulator and potentially submit remedies to the Commission.
At the same time, the EC approved the merger between Asiana Airlines and Korean Air with certain conditions, which included the sale of all Asiana Airlines Cargo assets, including aircraft and customer contracts, and making assets available to South Korea-based T’Way to begin flights on certain routes to the EU. The latter merger is yet to be approved by US-based antitrust regulators.
Related
EU Regulator Says Lufthansa Airlines, ITA Airways Deal Could Harm Competition
The EC expressed concerns about short-haul and long-haul competition from/to Italy, as well as ITA Airways’ dominance at Milan Linate Airport (LIN).
