The European Commission (EC) has opened an “in-depth” probe into the acquisition of the third-largest Spanish air carrier Air Europa by International Airlines Group (IAG) (IAG) on June 29, 2021. The European body is concerned that the purchase of Air Europa may “reduce the competition” on Spanish routes and international routes to and from Spain.
The European Commission is eager to assess whether the Air Europa takeover could “possibly lead to higher prices and reduced quality for travellers”, as IAG and Air Europa are respectively the first and third-largest providers of scheduled passenger air transport services in Spain. At this stage, the Commission is concerned that the proposed takeover could reduce “competition on 70 origin and destination city pairs within, to and from Spain”.
“Although the financial situation of many airlines is still fragile, there are signs that demand for air transport services is recovering from the coronavirus crisis. It is important to ensure that the recovery of the sector takes place in a competitive environment preserving sufficient choice for travelers,” Executive Vice President Margrethe Vestager, responsible for competition policy, was quoted in a statement.
On January 19, 2021, International Airlines Group (IAG) announced its final agreement to acquire Spanish air carrier Air Europa for €500 million ($594 million).
IAG believed that the purchase of Air Europa would further expand the group’s network in Spain. The group already controls a significant part of the Spanish market, as it owns Iberia and Vueling. It also would increase the significance of IAG’s Madrid hub, transforming it into a major rival to Amsterdam, Frankfurt, and Paris-Charles de Gaulle airports.
“This transaction makes perfect strategic sense to reinforce Madrid’s hub competitiveness on a global stage. It will benefit consumers and Air Europa’s incorporation into the Iberia Group will improve the company’s viability benefitting both Iberia and Air Europa employees,” Javier Sánchez-Prieto, Iberia’s chief executive, said at the time.
On November 4, 2019, IAG initially agreed to buy Air Europa for €1 billion ($1.2 billion). However, due to the economic downturn caused by the COVID-19 pandemic, British Airways parent company IAG has been pushing to reduce the price.
The IAG’s acquisition of Air Europa is still subject to approval by the European Commission.