Brussels investigates purchase of Air Europa by IAG due to competition problems

The European Comission announced this Wednesday the opening of an in-depth investigation into the purchase of Air Europe by the IAG group, to which Iberia belongs, due to the suspicion that the operation could reduce competition on several short and long distance routes both inside and outside of Spain.

“We want to ensure that the operation does not negatively affect the prices or quality of passenger air transport services inside and outside Spain,” The vice president of the Community Executive responsible for Competition Margrethe Vestager explained in a statement.

The department headed by the Danish company now has 90 working days, until June 7, to issue a ruling, although this period can be extended if the parties consider it appropriate in sections of 15 or 20 days.

Brussels emphasizes that IAG and Air Europa are competitors “powerful and close” and suspects that the merger would reduce competition on Spanish national routes, especially those “where high-speed rail does not offer an alternative”as well as on the routes between the peninsula and the Balearic Islands and the Canary Islands.

He also believes that it could affect short-distance routes that connect Madrid with some of the “main” European cities, Israel, Morocco, the United Kingdom or Switzerland, since both airliness “offer a direct connection.”

Likewise, community authorities see potential problems on long-distance routes between Madrid and North and South America, a market in which both face “few competitors with non-stop connection.”

Furthermore, the Commission wants to analyze whether the “solid portfolio” of slots that the two companies have, especially at the Madrid-Barajas airport, could affect their rivals.

Second try

With this operation, IAG intends to acquire 80% of the capital of Air Europa that it does not yet control for 400 million and the operation was officially notified to the European authorities on December 11. This is the second attempt to obtain the green light from the Commission after they abandoned their first agreement in 2021.

Brussels then explained that the proposed concentration would not have been approved because of the modifications offered by the two airlines to obtain European approval. “they did not stop properly” the problems detected, mainly related to its negative impact on competition on national and long-distance routes to and from Spain.

Now, the group to which British Airways, Vueling, Aer Lingus and Level also belong considers that the new commitments it can offer are “substantially better” and defends that “various companies” They have shown “much interest” in awarding possible divestments, such as sale of routes, as explained by company sources when they notified the merger.

In addition, they pointed out that the economic situation in 2021 was characterized by greater “uncertainty” than the current one for a sector that had been weathering the movement restrictions imposed to stop the spread of the coronavirus for more than a year.

They also stressed that the purchase will contribute to strengthening the “hub” (air traffic distribution center) to compete alongside the major European companies (London-Heathrow, Amsterdam, Paris-Charles de Gaulle and Frankfurt) thanks to the existence of a single reference airline that will benefit consumers and optimize hours Of flight.