Summary
- The European Commission (EC) could block International Airlines Group’s (IAG) acquisition of Air Europa.
- Despite offering remedies, the EC still had competition concerns that it has flagged previously.
- The EC began its investigation in January, sending a statement of objections to IAG and Air Europa in April.
The European Commission (EC) could potentially block the International Airlines Group’s (IAG) planned acquisition of Air Europa, with the EC expressing doubt whether the airlines’ offered concessions were not enough to alleviate anticompetition concerns.
High probability of being blocked
According to a report by the Financial Times (FT), sources familiar with the matter have indicated that while IAG and Air Europa offered remedies to alleviate the EC’s concerns about the acquisition, European officials said that they were not enough.
Sources have told the publication that following the meeting, where IAG and Air Europa were informed about the concessions that fell short for the EC to have no objections over the agreement, the chances of the Commission blocking the acquisition were very high.
Photo: Luciano de la Rosa | Shutterstock
At the same time, IAG and Air Europa could still offer more remedies to convince the EC that the merger would not impact competition from and within the EU.
FT quoted sources saying that the two airlines were ready to hand over around half of Air Europa’s slots to rival carriers.
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The EC had already issued a statement of objections to the Lufthansa and ITA Airways transaction.
Objecting to the merger
In April, the EC informed both IAG and Air Europa that the merger could restrict competition in the market for passenger air transportation services, especially on routes from, to, and within Spain.
“The Commission is concerned that customers may face increased prices and/or decreased quality of services after the transaction.”
The EC began its investigation in January. Following the investigation, the Commission presented its conclusions in April, saying that the merger could:
- Reduce competition on certain Spanish domestic routes with no high-speed train alternatives
- On routes between mainland Spain and the Balearic and Canary Islands
“On such routes, IAG and Air Europa compete head-to-head. For a few of these routes, there will be no direct competition after the transaction.”
- Reduce competition on a number of short-haul routes connecting Spain with Europe and the Middle East.
The EC stated that on such routes, the two airlines compete or will head-to-head in the future, with the only competition being low-cost carriers, including Ryanair. However, the Commission pointed out that in many cases, the no-frills airlines operate from more remote airports or from the incumbent carrier of the destination country.
Photo: Robson90 | Shutterstock
Lastly, the deal could reduce competition on a certain number of long-haul routes from Spain to North and South America, with the EC warning that on specific itineraries, the merged entity would have no direct competition.
At the time, the EC set a deadline for IAG and Air Europa to offer remedies until June 10, adding that its final decision deadline was July 15.
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The European Commission (EC) should publish its decision by early June 2024.
Clearing the Lufthansa and ITA Airways merger
Nevertheless, the EC had recently finished investigating another acquisition, namely of Lufthansa buying an initial stake in ITA Airways, with an option to take full control of the airline at a later date.
Similar to the investigation concerning the IAG–Air Europa merger, the EC initially sent a statement of objections to the two parties in March. However, after Lufthansa and ITA Airways offered extensive remedies, the Commission approved the transaction on July 3.
Photo: Vincenzo Pace | Simple Flying
These included slots for rivaling airlines for routes from Milan or Rome to certain airports in Central Europe, with the rivaling airlines also having access to ITA Airways’ domestic route for indirect connections.
Furthermore, the two sides, with ITA Airways being represented by its owner, the Italian Ministry of Economy and Finance (Ministero dell’Economia e delle Finanze, MEF), committed to improving competition on long-haul flights from/to Italy and giving up slots at Milan Linate Airport (LIN).
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