European Commission Objects to IAG Group’s Acquisition of Air Europa: Concerns over Competition and Potential Price Increases

2024-04-27 04:34:12

The European Commission (EC) announced last Friday the IAG Groupinvolving Iberia, objections to proposed acquisition Air Europe after an in-depth investigation, taking into account that passengers may have to face a price increase and/or a reduction in the quality of services.

Likewise, the Commission shared its preliminary assessment with IAG, in which it suggested that the acquisition “could limit competition in the passenger air transport sector, especially on flights operating within, to and from Spain”, as specified in a statement.

IAG and Aer Europa maintain an extensive route network that includes domestic destinations in Spain, short routes in European Economic Area and neighboring countriesand long-haul flights, particularly to and from North and South America.

Detailed investigation

In January 2024, the Commission launched a detailed investigation to determine whether IAG’s purchase of Air Europa would adversely affect competition in the passenger air transport service.

According to preliminary results, the operation could reduce competition on some national routes in Spain, especially those where high-speed trains are not a viable option, and in connections between the peninsula and the Balearic Islands and the Canary Islands where IAG and Air Europa direct competitors.

In addition, the European Commission (EC) warns that competition could be reduced on certain short-haul routes connecting Spain with countries in Europe and the Middle East, where the two airlines currently compete or are expected to compete with them.

For long-haul routes to North and South America, the operation could also restrict competition.

On these routes, the market shares of both parties are relatively high and competition from other airlines seems to be limited..

This statement of objections is a formal step in the investigation, enabling the companies concerned to be informed of the Commission’s concerns and does not determine the final outcome of the investigation.

The Commission’s objections can still be answered

The EC gave IAG the opportunity to respond to the objections, review the file and request an oral hearing, as well as submit proposals to address the competition issues identified by the June 10, 2024 deadline. .

The representatives of Iberia have confirmed that they have received the document and consider that, despite the possible adverse consequences in several ways, the competition will remain viable against other significant operators such as airlines and high-speed trains.

According to Iberia, His proposal includes ceding 40% of the flights operated by Air Europa in 2023 to other competitors, ensuring that Iberia and Air Europa will not operate any route alone.

The company defends that “healthy competition” between European ‘hubs’ will allow fair competition with markets in North America, Asia and the Gulf countries.

IAG seeks to acquire the remaining 80% of Air Europa for 400 million eurosafter officially notifying the European authorities of the operation on December 11, which represents the second attempt at approval by the Commission after a failed proposal in 2021.