The European Commission has raised concerns regarding the proposed acquisition of Spanish airline Air Europa by International Airlines Group (IAG). The EC argues that this merger would harm competition, particularly in the markets between Spain and the Americas, as well as in the domestic Spanish market and short-haul international markets from Spain. This could potentially lead to increased prices and decreased quality of services for customers, according to the EC’s Statement of Objections issued on April 26.
IAG currently owns 20% of Air Europa and has entered into an agreement to purchase the remaining 80% for 400 million British pounds. This is not the first time IAG has attempted to acquire Air Europa, as a previous attempt between 2019 and 2021 fell through due to competition-related scrutiny from the EC. The airline group acknowledges that the Statement of Objections is a normal regulatory step for complex transactions and is working on offering remedies to address competition concerns.
In an effort to secure EC approval, IAG has proposed several remedies to alleviate the competition issues. This includes transferring 40% of Air Europa’s flights in 2023 to other airlines and committing to ensuring that no route is exclusively operated by Iberia and Air Europa. These actions are aimed at preserving competition and ensuring that consumers benefit from the transaction while enhancing Madrid’s competitiveness as a European hub.
The EC highlighted concerns about competition on certain routes between Spain and the Americas where Air Europa operates. In particular, the overlap between Air Europa and IAG’s Iberia on routes like Madrid-Miami and Madrid-New York JFK could hinder competition. The presence of joint venture partners like American Airlines, Delta, and others on these routes adds another layer of complexity to the competition dynamics.
IAG has stated that its proposed remedies go beyond just divesting slots on designated routes. The airline group plans to provide aircraft, maintenance technicians, ground crew, and even existing bookings to airlines that take over the divested routes. This effort is aimed at ensuring that a competitive and viable business can continue to operate on all the affected routes post-acquisition.
The opposition from the European Commission to IAG’s acquisition of Air Europa underscores the importance of competition in the airline industry. While mergers and acquisitions can bring benefits in terms of efficiency and economies of scale, they must not be allowed to stifle competition and harm consumers. IAG’s proposed remedies will be crucial in addressing the EC’s concerns and ensuring that competition is preserved in the markets affected by this acquisition.
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