The International Airline Group (IAG), parent of British Airways, Iberia, Vueling, and Aer Lingus, has decided against taking over the majority in Spanish carrier, Air Europa, in which IAG holds a 20% stake since mid-AUG22. The withdrawal follows EU concerns claiming that the deal would give the group an extremely strong market position in passenger and cargo traffic, particularly to and from Spain but also between the Iberian Peninsula and Latin America.

A pending decision for or against the intended takeover has been apparent since 25APR24. On that day, the EU Commission informed all parties involved of its concerns about the requested merger. Two main criteria stand out in the letter:
Does less competition equal higher prices?
The takeover may restrict competition in the market for passenger and cargo air transport services, in particular on routes within, to and from Spain. In its statement, the Commission spoke of price hike risks and/or decreased quality of services once Brussels approves the deal. It cannot be excluded that on several long-haul routes, particularly those connecting the Iberian Peninsula with South and North America, competition would be reduced sharply. For some of these routes, there is a growing risk that passengers would no longer be able to obtain tickets at standard market prices. And cargo customers might have to pay more to get their goods flown on routes served only by Iberia or one of its group members. On many other sectors, the IAG Group members may push competitors over the cliff due to their relatively high market shares.
Brussels speaks of negative market effects
In the EU Commission’s statement of objections, the Brussel policymakers argue that every year, millions of passengers travel on routes served today by Iberia and Air Europa, for a total annual expenditure of over EUR 3 billion. The Commission’s main objective is to ensure that the transaction does not lead to adverse effects for customers – consumers and businesses alike – including price hikes in cargo transportation. In its APR24 warning, the Commission expressed its worries that the disappearance of Air Europa as an independent airline may have negative effects on competition in these already concentrated markets. Despite these concerns, the airline has failed to present suitable remedies revealing how it intends to dispel fears of future price manipulations to the disadvantage of competitors, the Commission’s Statement of Objections reads. It is a formal step in an investigation, where the Commission informs the companies concerned in writing of the objections raised against them. As it now appears, the IAG Group obviously failed to dispel the EU Commission’s concerns.
With the end of the merger talks, the consolidation of Europe’s still fragmented air traffic suffered a setback. However, Lufthansa did recently receive the green light to take over Italian ITA Airways but had to accept many concessions demanded by Brussels competition watchdogs.
Air Europa and My Freighter partner
In JUN24, Air Europa and My Freighter Airlines have inked an interline agreement, giving both carriers access to each other’s networks. Trough this pact, Air Europa started selling cargo consignments to Uzbekistan and other destinations served by My Freighter in the Central Asian region. Conversely, the Tashkent-based freight carrier has added several Caribbean airports to its sales area, as well as Bogotá, Sao Paulo, Panama City, Miami, and New York. This partnership between a passenger airline that does not operate any freighter aircraft and a cargo carrier benefits both equally.
TAP would be a welcome addition
Following the crush of its Air Europa merger dreams, the IAG Group is likely to try to intensify takeover plans of the Portuguese carrier TAP. Yet, Lufthansa and Air France-KLM also have a keen an eye on this airline, predominantly because of its strong route network to Brazil.
Last week, Lufthansa CEO, Carsten Spohr announced plans to set up an additional MRO location. The favorite for this is Portugal. “The decision will be made shortly,” announced Spohr. The aim is “to expand our own production and maintenance capacity, but also to recruit additional skilled workers in the southwestern part of Europe”, the executive reasoned. Thus, TAP would certainly be a nice addition, in that case.