This was to include Air Europa resigning from the SkyTeam alliance and adopting Avios.
Air Europa is the 3rd biggest airline in Spain. The acquisition, according to IAG at the time, would turn Madrid into a genuine ‘5th European hub’ city alongside London, Frankfurt, Paris and Amsterdam.
IAG would 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 would operate 73% of all domestic flights.
In recent months, IAG has faced strong questioning about its acquisition of Air Europa given some of the cost cutting measures taking place across the group (the latest update of which is here). What outgoing IAG CEO Willie Walsh has made clear, however, is that this acquisition is happening under Iberia’s wing. He feels that it has no impact on pay and contract terms negotiations at British Airways.
IAG “wants a 50% discount”
In recent months IAG has been hedging its bets and said it would be ‘reviewing’ the acquisition of Air Europa.
It doesn’t look like IAG has been put off. Reuters, quoting Spanish newspaper Cinco Dias suggests that IAG and Iberia are keen to proceed. They are close to an agreement with Air Europa owners Globalia to halve the €1 billion acquisition price to around the €500 million to €600 million mark.
The Reuters report is here.
Is this too much or little? It isn’t clear. You’d need to factor in:
how much of Air Europa’s debt will be taken on by IAG and
what assets (basically unmortgaged aircraft) are included
As Globalia is a private company, this information is not easily available.
On the face of it, Globalia should be delighted that IAG still wants to pay €500 million given how the aviation industry has changed since November 2019. Even if the deal does come with a number of debt-free aircraft included, it is not as if IAG is short of planes at the moment ….
Are there competition concerns?
Concerns about competition haven’t gone away, and this deal increases the size of Iberia by 50% assuming you treat Air Europa and Iberia as one airline.
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. There has been talk of IAG creating a new domestic airline from parts of Air Europa, Iberia and Vueling which it would then sell, in effect creating a competitor to itself.
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.