Maximise your Avios, air miles and hotel points

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

Links on Head for Points may support the site by paying a commission.  See here for all partner links.

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.

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 from UK credit cards

How to earn Avios from UK credit cards (April 2024)

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

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

Barclaycard Avios Plus card

Barclaycard Avios Plus Mastercard

Get 25,000 Avios for signing up and an upgrade voucher at £10,000 Read our full review

Barclaycard Avios card

Barclaycard Avios Mastercard

5,000 Avios for signing up and an upgrade voucher at £20,000 Read our full review

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

British Airways American Express Premium Plus

25,000 Avios and the famous annual 2-4-1 voucher Read our full review

British Airways American Express

5,000 Avios for signing up and an Economy 2-4-1 voucher for spending £15,000 Read our full review

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points. These points convert at 1:1 into Avios.

American Express Preferred Rewards Gold

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

The Platinum Card from American Express

40,000 bonus points and a huge range of valuable 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 10,500 Avios.

SPECIAL OFFER: Until 12th May 2024, the Capital on Tap Business Rewards Visa card is offering a bonus of 30,000 points, convertible into 30,000 Avios. You must have a Limited Company to apply. Click here to learn more and click here to apply.

Capital on Tap Business Rewards Visa

Huge 30,000 points bonus until 12th May 2024 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 30,000 Avios sign-up bonus.

British Airways Accelerating Business American Express

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

There are also generous bonuses on the two American Express Business cards, with the points converting at 1:1 into Avios. These cards are open to sole traders as well as limited companies.

American Express Business Platinum

40,000 points sign-up bonus and an annual £200 Amex Travel credit Read our full review

American Express Business Gold

20,000 points sign-up bonus and FREE for a year 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.

Category

Iberia and Iberia Plus

Comments (66)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • pauldb says:
    4 Nov4 November 13:24

    No sure I’d agree with you the Break Fee is particularly small. It would typically be higher for a listed target.

    A couple of recent brand-name example:
    Drax buying Scottish Power’s power generation assets for £702m: break fee £14m
    Restaurant Group buying Wagamama for £357m (EV £559): break fee £6m.

    … and then you get the opposite conclusion about completion risk. Or you could say the vendors have gone into this aware there will be compeition issues and don’t therefore want to look silly if/when IAG walk away: this way IAG are more liklely to accept the concessions required of them.

  • Patrick says:
    4 Nov4 November 13:58

    4% break fee is not low. It is quite standard these days…

    • Rob says:
      4 Nov4 November 16:35

      This is a small deal though. 40m won’t even cover their advisors.

      • Shoestring says:
        5 Nov5 November 08:16

        I can’t see that is likely – why would *Air Europa* be paying more than EUR40m to their advisors? They don’t have to due due diligence or anything, just decide if they are happy with the offer price and ensure that from an owner’s POV (ie Globalia), they as seller have not done anything that might come back to bite them if IAG find anything dodgy later.

        Think about selling a house – the acquiring party’s legal advisors have to do all the work whereas the seller’s lawyers basically just have to check the contract is watertight and that the seller will get their money.

        If it fails as a deal, I see Globalia banking a large proportion of the EUR40m as profit.

        • Rob says:
          5 Nov5 November 09:38

          You’re out of touch. You pay over £1m to your PR agency these days during an M&A process, before you start on the bankers and lawyers.

  • Tony says:
    4 Nov4 November 14:38

    One sentence in the final slide caught my attention; “Transaction does not require IAG shareholder approval” – I wonder why…

    • Shoestring says:
      4 Nov4 November 14:45

      Raffles can probs give a banking view but normally because it’s not an acquisition amount relative to the enterprise value of IAG (£15b)/ or market cap (£11b) where shareholder consent is required

      • pauldb says:
        4 Nov4 November 15:19

        Basically you need a vote if the target is sized at more than 25% of your gross asset, profits, capital or equity value.

  • ankomonkey says:
    4 Nov4 November 15:51

    Isn’t Istanbul yet a major European hub?

  • Journeying John says:
    4 Nov4 November 16:06

    OH dear, another 11million or so journeys about to be harmed through underinvestment, profiteering and slashed standards…
    Perhaps this is IAG’s new strategy, buy up the competition and degrade the service to BA levels so that people think it’s the norm?

  • C77 says:
    4 Nov4 November 20:08

    So purely from a curiousity perspective Amex UK has an airline partnership with BA and Air Europa allowing you to transfer MR points into either scheme. Is the ratio 1/1 for both (I know BA Avios is)? This is with the view that at some point Air Europa miles will transfer accross to Avios at some point and whether this might be a speculative time to transfer a chunk of MR into Air Europa with the view in time they’ll transfer accross to BA or IB at a heftier amount than 1/1. Thoughts anyone? I’m aware of course that this could also work in the negative and that you’d get less Avios for your MR than you started out with but might it be worth a try?

    • Shoestring says:
      4 Nov4 November 20:13

      given the heavy question mark over deal completion, you risk having a great big chunk of points in an airline you don’t fly 🙂

      but given your arbitrage scenario, you’d have to have some reason to believe that Europa miles will be worth more than Avios come join-up day

      • C77 says:
        4 Nov4 November 22:27

        Yes it’s a big IF and I’m not confident enough to throw a massive amount of MR at the idea but I reckon I could spare say 5000 MR at the notion in the hope that one day I get more Avios back in a transfer than that. I don’t even have a UX frequent flyer membership at the moment and if there’s things such as 90 day rules like with IB to consider, it may not be straight forward.

        Rob/Rhys on the other hand may have slightly more insight however….

        • Marcw says:
          5 Nov5 November 00:30

          Isn’t it Spanish MR only?

        • Chrisasaurus says:
          5 Nov5 November 12:36

          If you’re as light on confidence so as to be talking about risking only 5k MR then you a) should know the answer already and b) your return would be next to nothing so why bother?

          If there was a credit card signup or somesuch that would be valuable and will disappear then thats one thing (eg *wood amex) but theres nothing relevant here I dont think?

    • Charlieface says:
      4 Nov4 November 20:43

      Not sure what you’re talking about, I don’t see an Air Europa transfer option.

      • C77 says:
        4 Nov4 November 22:21

        UX became a MR transfer partner in July.

      • C77 says:
        4 Nov4 November 22:34

        Collaborator information
        Login to see the registered contributors.
        1 Points Membership Rewards = 1 SUMA Miles

        Estimated transfer time:
        3 working days
        A minimum of
        1 MR points is required

        • Charlieface says:
          5 Nov5 November 00:00

          I don’t get it. I’m logged in and can’t see it. Nor is it there when I log out. A search fo Suma or Air Europa turns up nothing. This is a UK Gold credit.
          My airline transfers are:
          Alitalia MilleMiglia
          Asia Miles
          British Airways Executive Club
          Delta SkyMiles
          Emirates Skywards
          Etihad Guest
          Finnair Plus
          Flying Blue
          Iberia Plus
          SAS EuroBonus
          Singapore KrysFlyer
          Virgin Atlantic Flying Club

          • guesswho2000 says:
            5 Nov5 November 01:08

            Looks like they’re part of Amex MR in Spain. They’re not a UK, ICC or AU Membership Rewards partner, having checked my own accounts!

  • Yorkieflyer says:
    4 Nov4 November 21:35

    I struggle with the concept of Iberia as a full service carrier frankly if the comparison is to Air Europa. Short haul they road tested the road to the bottom that BA BOB A320 Neo is and long haul if my two recent sectors in J are typical is a disgrace. The flat bed is fine but food would have been rejected by the sadly department British Home Stores Cafe and the service was at a depth unplumbed since my Dad used to try to get his Austin Allegro fixed under warranty

    • BFT01 says:
      5 Nov5 November 12:31

      Well you do know what happened to British Leyland.
      There are still a few Allegros around and some of them are going for between £1,500- £5,000
      and they are now considered a classic car, (who knew) I know quite a few guys and some gals in my various classic car clubs love the BL vehicles and the various shows that I go to each year there is usually at least 3 Allegros, which are in good condition as they are well looked after.

      • Yorkieflyer says:
        6 Nov6 November 10:15

        I wonder whether the square steering wheel would have taken off if developed by VW?

  • Jamie says:
    4 Nov4 November 23:28

    What’s a break fee please Rob, for us uneducated plebs that aren’t ‘..in the City’?

    • Charlieface says:
      5 Nov5 November 00:01

      Cancellation fee, says an uneducated pleb

      • Charlieface says:
        5 Nov5 November 00:02

        Or did you mean he’s also an uneducated pleb, just he’s in the City and you’re not
        🙂

    • Rob says:
      5 Nov5 November 09:49

      A compensation fee you pay to the company you want to buy if you back out later.

    • Northern Pleb says:
      6 Nov6 November 17:19

      +1 clearly nobody outside of “the city” could possibly even know what a break fee is…

This article is closed to new comments. Feel free to ask your question in the HfP forums.

New to Head for Points?

Welcome!  We’re the UK’s most-read source of business travel, Avios, frequent flyer and hotel loyalty news. Let us improve how you travel. Got any questions? Ask them in our forums.

Latest Forum Posts

Get 40,000 bonus points (worth 40,000 Avios) and £300 dining credit with The Platinum Card

Check reward flight availability instantly for free!

See a whole year of reward seat availability on one page at SeatSpy.com

Get £10 when you spend £150 on your free Currensea card

Booking a luxury hotel?

Our luxury hotel booking service offers you GUARANTEED extra benefits over booking direct. Works with Four Seasons, Mandarin Oriental, The Ritz Carlton, St Regis and more. We've booked £1.7 million of rooms to date. Click for details.

SME? EARN POINTS WORTH 10,500 AVIOS WITH CAPITAL ON TAP

Get 20,000 bonus points, four airport lounge passes and your first year free with American Express Gold

The UK's biggest frequent flyer website uses cookies, which you can block via your browser settings. Continuing implies your consent to this policy. Our privacy policy is here.

Got it!