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IAG to buy Air Europa in a €1bn deal – Air Europa to leave SkyTeam and adopt Avios

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IAG, the parent company of British Airways, has announced the acquisition of Air Europa for €1bn.

Air Europa is the 3rd biggest airline in Spain.  The acquisition, according to IAG, will turn Madrid into a genuine ‘5th European hub’ city alongside London, Frankfurt, Paris and Amsterdam.

Importantly, IAG will become the largest airline group flying between Europe and the Caribbean and Europe and Latin America.  Even more importantly, if you live in Spain, is the fact that IAG will operate 73% of all domestic flights in Spain.

IAG to buy Air Europa

I met the Air Europa CEO last Autumn at an event he sponsored in Mallorca, and later got a tour of their facilities at Palma (see above).  I must admit that I was surprised by the size of the airline, especially the long-haul network, which had gone under my radar.

Note that the acquisition does NOT include the travel agent, ground handling and hotel businesses owned by the parent company, Globalia.

To quote IAG:

“Air Europa is one of the leading private airlines in Spain, operating scheduled domestic and international flights to 69 destinations, including European and long-haul routes to Latin America, the United States of America, the Caribbean and North Africa.

In 2018, Air Europa generated revenue of €2.1 billion and an operating profit of €100 million. It carried 11.8 million passengers in 2018 and ended the year with a fleet of 66 aircraft.

The Board of IAG believes that the transaction would:

• Increase the importance of IAG’s Madrid hub, transforming it into a true rival to Europe’s big four hubs: Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle;

• Unlock further network growth opportunities and re-establish IAG’s South Atlantic leadership; and

• Result in significant customer benefits through providing increased choice and schedule flexibility and greater opportunities to earn and redeem miles”

The Air Europa brand is to be retained, at least for the medium term, and the airline will be a stand-alone profit centre inside IAG.  Despite this, there will clearly be very close co-operation with Iberia covering everything from flight scheduling to codesharing.  It is worth noting that Air Europa is NOT a full service airline in the mould of BA or Iberia (it is nearer to Aer Lingus) and would need substantial changes to its operating model if it was to rebrand as Iberia.

Air Europa will also, subject to approvals, be joining the existing revenue-sharing joint venture agreements, such as the one between BA, American, Iberia and Finnair between Europe and North America.

IAG has confirmed that Air Europa will be adopting Avios.

Are there competition concerns?

Oh yes.

This deal increases the size of Iberia by 50%, assuming you treat them as one airline.

There is no mention of ‘regulatory concerns’ in the IAG press release, but the competition regulators will clearly be taking a close look at this, especially in terms of the Spanish domestic market.

You can tell from the tone of the announcement that IAG will be pushing this as ‘enhancing Madrid’s position in European aviation’ and if there is a price to pay in terms of IAG running the majority of domestic flights in Spain, then so be it …..

Eight airlines control 99.6% of Spanish domestic flights, according to CAPA.  Unfortunately for regulators, IAG will now own the three biggest, running a total of 73% of all domestic flights:

  • Vueling – 32%
  • Iberia – 26%
  • Air Europa – 15%

Ryanair comes joint third, also with 15%.  You then drop to BinterCanarias with 9%, which mainly operates in and to the Canary Islands.

HFP readers in the City will note that the ‘break fee’ on the deal is only €40m.  This is peanuts compared to the size of the transaction and implies to me that IAG expects to have ‘issues’.

And what about Air Europa and SkyTeam?

Intriguingly, the press release (PDF) issued by IAG seems to have forgotten to make any mention of SkyTeam.  However, the full presentation made available to analysts confirms that it will leave in a one-line statement – no further information is given.

With LATAM recently quitting oneworld and presumably switching to SkyTeam following its partnership with Delta, there will be a wry smile on a few faces this morning.

However, there is also no guarantee that Air Europa joins oneworld.  Aer Lingus is not a oneworld member, for example, and the relationship between Air Europa and Iberia will be similar to the one that BA has with Aer Lingus.  If the plan is to fully integrate Air Europa with Iberia within five years or so, there is no point having it join oneworld for a short interim period.

There will be a notice period to serve out with SkyTeam which is probably longer than the time it will take to complete the Air Europa deal (H2 2020).  IAG will probably find itself with a SkyTeam partner for six months or so.

From the point of the view of the average HfP reader, the key benefit here will be an increased number of places to redeem Avios – although this won’t be happening for at least 18 months I imagine.

How to earn Avios points from UK credit cards

How to earn Avios from UK credit cards (January 2022)

As a reminder, there are various ways of earning Avios points from UK credit cards.  Many cards also have generous sign-up bonuses!

There are two official British Airways American Express cards with attractive sign-up bonuses.

There are special sign-up bonuses on both of the BA American Express cards until 28th February 2022. The bonus on the free card is doubled to 10,000 Avios and the bonus on the Premium Plus card is increased from 25,000 Avios to a huge 40,000 Avios.

British Airways BA Amex American Express card

British Airways American Express

10,000 Avios for signing up (SPECIAL OFFER) and an Economy 2-4-1 voucher for spending ….. Read our full review

British Airways BA Premium Plus American Express Amex credit card

British Airways American Express Premium Plus

40,000 Avios (SPECIAL OFFER) and the UK’s most valuable card perk – the 2-4-1 voucher Read our full review

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points, such as:

Nectar American Express

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review

American Express Platinum card Amex

The Platinum Card from American Express

30,000 points and an unbeatable set of travel benefits – for a fee Read our full review

Run your own business?

We recommend Capital On Tap for limited companies. You earn 1 Avios per £1 which is impressive for a Visa card, along with a sign-up bonus worth 30,000 Avios.

30,000 Avios is a special offer which runs to 4th February 2022.

Capital on Tap Visa card

Capital On Tap Business Rewards Visa

30,000 points bonus – the most generous Avios Visa for a limited company Read our full review

You should also consider the British Airways Accelerating Business credit card. This is open to sole traders as well as limited companies and has a 45,000 Avios sign-up bonus.

45,000 Avios is a special offer which runs to 28th February 2022.

British Airways Accelerating Business American Express card

British Airways Accelerating Business American Express

45,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.

(Want to earn more Avios?  Click here to visit our home page for our latest articles on earning and spending your Avios points and click here to see how to earn more Avios this month from offers and promotions.)

Comments (66)

  • Fenny says:

    Slightly OT, but related to Avios. I’ve just tried to redeem e-rewards points for Avios and both IB and BA avios redemptions are showing as “Out of Stock”. Anyone got any ideas?

    • AJA says:

      Fenny, Thats a weird message. I am curious how you can redeem.for both IB and BA. I thought you could only be signed up to e-rewards through one FF scheme?

      With BA you can only redeem once every 30 days. It wont allow you to redeem again until the last redemption disappears from your statement page.

      Are you sure you’re it is 30 days since you last did a redemption?

      • Fenny says:

        Yes, last redemption was 3 Oct, which is why I wanted to do it now, to avoid wasting time.
        I’ve been with e-rewards for years. I don’t remember who I signed up with, but it wasn’t tied to a specific FF scheme. I get various airline & hotel options as well as non-travel related companies. IB is the better option for avios.

    • AJA says:

      Meant to add I am in the UK, not sure if US based accounts are different.

    • TokyoFan says:

      Same here – accounts set up through accor years ago got BA and IB options for converting to avios but as of this week all ‘out of stock’ 🙁

  • Heathrow Flyer says:

    The link to the investor presentation is now dead.

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