IAG-Air Europa Deal May Have ‘Negative Effect on Competition’

The European Commission (EC) has issued a ‘Statement of Objections’ to the International Airlines Group (IAG) on IAG’s proposed acquisition of Spanish-based Air Europa. The Commission released a statement on Friday after opening an investigation in January 2024 ‘to understand the potential impact of the deal.’ IAG is an airline consortium that includes three Spanish airlines: Vueling, LEVEL, and Iberia.

Key concerns highlighted by the Commission include the possibility of reduced competition on Spanish domestic routes, short-haul routes connecting Spain with European countries and in the Middle East, and long-haul routes, particularly to North and South America. IAG had previously abandoned an attempt to acquire the 80 percent of Air Europa it does not currently own in 2021 due to EU regulator concerns.

The Commission’s current investigation involved ‘views from competing airlines, airports, slot coordinators and customers as well as from individual consumers and consumer representative organizations.’ In addition, the Commission was provided internal documents by IAG and Air Europa to analyze.

Concerning the domestic competition, the EC noted ‘routes between peninsular Spain and the Balearic and Canary Islands’ and those where there was no high-speed train alternative. Particular mention was made of the fact that on a number of the routes, there would be no competition once Air Europa became part of the IAG consortium.

Short-haul concerns noted a potential monopoly for IAG on some routes with limited competition on others provided primarily by low-cost carriers. British Airways (BA) and Aer Lingus are also members of the IAG family and operate on routes to and from Spain. BA and Aer Lingus also offer flights on fellow IAG carriers for sale on their websites.

Concerns with Long-Haul Partners

The Commission noted the presence of IAG airline partners on long-haul routes from Spain to North and South America as further compounding competition concerns. British Airways and Iberia are members of the oneworld global strategic alliance which has American Airlines as its main North American partner. The EC’s concerns were about the high market shares that IAG airlines and their partners currently have and the limited competition on other routes.

The EC stated: “The Commission is concerned that, absent suitable remedies, the removal of Air Europa as an independent airline may have negative effects on competition in these already concentrated markets.”

The statement continued: “IAG now has the opportunity to reply to the Commission’s Statement of Objections, to consult the Commission’s case file and to request an oral hearing. IAG also has the possibility to put forward remedies to address the preliminary competition concerns identified by the Commission. It can decide to submit remedies at any time of the proceedings until the remedy deadline, which currently falls on 10 June 2024.”

Reuters reported IAG chief executive officer Luis Gallego as stating that the consortium is prepared to give up 40 percent of Air Europa’s 2023 flights to alleviate competition concerns. The news agency quotes Gallego as adding: “Likewise, we commit to ensuring that no route is operated exclusively by Iberia and Air Europa. We remain committed to closing this transaction as quickly as possible in 2024.”

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John Flett

John has always had a passion for aviation and through a career with Air New Zealand has gained a strong understanding of aviation operations and the strategic nature of the industry.

During his career with the airline, John held multiple leadership roles and was involved in projects such as the introduction of both the 777-200 and -300 type aircraft and the development of the IFE for the 777-300. He was also part of a small team that created and published the internal communications magazines for Air New Zealand’s pilots, cabin crew and ground staff, balancing a mix of corporate and social content.

John is educated to postgraduate level achieving a Masters degree with Distinction in Airline and Airport Management. He has been the course director of an undergraduate commercial pilot training programme at a leading London university and a member of Heathrow Community Trust’s ‘Communities for Tomorrow’ panel.

John is currently living in Canada and is contracted as an external instructor for aviation-related organizations.

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