Air Europa Takeover By IAG At Risk

International Airlines Group’s (IAG) proposed acquisition of Air Europa is facing fresh concerns following the European Commission initiating an investigation into the acquisition under merger regulations.

Initially, IAG said it would pay USD 423 million for the remaining 80% of Air Europa with the belief the complete acquisition of the airline would allow it to cement its place in the South Atlantic.

The Concerns

As part of the new evaluation, some concerns have been identified, focusing on the impact that’ll be felt across Europe and especially within Spain for short-haul routes. The fear of the effects of services towards the Spanish Islands is another key focal point for the European Commission.

However, away from just short to medium-haul services, negative implications are likely to be felt on long-haul routes to North and South American destinations.

The primary concern relates to the reduction in competition, the impact of the portfolio of slots in key airports, and how this will influence other airlines across multiple networks.

The European Commission will have until June to come to a verdict. Away from the impact on competition, if this deal is likely to hurt consumers with increased prices or even the quality, it’ll be rejected.

Investigations Into Merger

Mergers are becoming more common within the industry, whether a complete takeover, integration or another form of consolidation.

This consolidation within the market can be viewed as a way out of financial difficulties for several airlines or as an opportunity for airlines/groups to come together to offer better service.

However, competition watchdogs will heavily criticise these tie-ups, analysing every element to see if it will negatively impact the flying public.

On several occasions, watchdogs find reasons to reject the proposed acquisition under investigation and deal a blow to the airline or group. Spirit’s recent tie-up with JetBlue was denied; while the two airlines will appeal, they’ll face an uphill battle to reverse the reasons the rejection initially came about.

Air Europa isn’t the only focus within Europe, with Lufthansa Group’s attempts to take hold of ITA Airways on a firmer basis through a stake also under close investigation for similar reasons.