The concentration of European aviation is suffering a setback in Spain. The IAG group, which includes British Airways and Iberia, is withdrawing a takeover offer.
The Spanish airline Air Europa is optimistic about the future after the planned takeover by the aviation group IAG fell through. This remains “sustainable and encouraging,” it said in a communiqué. Despite the instability of the market, Air Europa’s business model is “solid and viable.” The previous evening, British Airways and Iberia parent IAG withdrew the takeover offer. The reason was insurmountable hurdles due to the concerns of the EU Commission. IAG now wants to pay compensation of 50 million euros to the owner of Air Europa, the Spanish group Grupo Globalia.
The Brussels authority has taken note of the announcement, it said. Until the transaction was cancelled, the discussions with the companies and the proposed measures were not sufficient to allay its competition concerns.
Disadvantages for customers feared
Despite some concessions from IAG, European competition authorities continued to believe that the merger could reduce competition in the market for passenger flights on several domestic routes as well as short and long-haul routes to and from Spain. “We were concerned that the merger could have a detrimental effect on passengers – both business customers and consumers – in the form of price increases or a reduction in the quality of services,” said EU Competition Commissioner Margrethe Vestager. A final decision had not been made in Brussels.
Direct competition between Spain and the Canary Islands
IAG, which also owns Vueling, Aer Lingus and Level, and Air Europa operate an extensive network of domestic routes in Spain, short-haul routes within the EU and with Norway, Iceland and Liechtenstein – as well as long-haul routes, particularly to and from Latin America. They compete on routes between mainland Spain and the Canary and Balearic Islands, among others, and on routes within Spain where high-speed rail offers no alternative.
As part of the takeover plans announced around one and a half years ago, IAG wanted to acquire the remaining 80 percent of Air Europa’s capital for 400 million euros. The group already holds 20 percent of Air Europa’s capital. The Air Europa brand was to continue to exist under the management of Iberia.
With 52 aircraft and around 4,400 employees, Air Europa achieved a turnover of just over 2.7 billion euros in 2023 – around 18 percent more than in 2022. The net profit was 165 million euros. In 2022, the company narrowly avoided the red with a profit of 472,000 euros.
Source: Stern
