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IAG finally agrees to buy Air Europa, brand to remain, leaving SkyTeam?

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IAG, the parent company of British Airways, has finally struck a deal to buy the remaining 80% stake in Spanish airline Air Europa that it does not own for €400 million.

The seller is Spanish leisure conglomerate Globalia group.

This is a real coup for IAG, because there had been substantial political push back since the deal was first attempted in 2019. It gives IAG virtual dominance of domestic flights in Spain with the top three Spanish airlines by passenger numbers – Vueling, Iberia and Air Europa – now under its control.

IAG finally agrees to buy Air Europa, brand to remain

The European Union came out against the acquisition of Air Europa in July 2021. It said:

The Commission is concerned that the proposed transaction could significantly reduce competition on 70 origin and destination (O&D) city pairs within and to/from Spain, on which both airlines offer direct services. On some routes, IAG and Air Europa have been the only two airlines operating.

The Commission is also concerned about the effect of the proposed transaction on routes on which other airlines rely on Air Europa’s domestic and short-haul network for their own operations at the Madrid airport and a number of other EU airports. Without Air Europa’s feeder traffic, some airlines may decide to terminate their services to international destinations also served by IAG, reducing choice for travellers.

Whilst probably not the killer blow, the UK Competition & Markets Authority also decided to flex its muscles, announcing an investigation in November 2021.

This was due to the potential for:

  • reduced competition, either now or in the future, between the UK and Madrid
  • reduced competition for British Airways on long-haul routes where Air Europa offers low fares for UK customers willing to change aircraft in Madrid

Once acquired, 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 will operate 73% of all domestic flights. The next biggest airline is Ryanair with 15%. The fourth biggest is BinterCanarias with 9% which is focused on the Canary Islands.

IAG finally agrees to buy Air Europa, brand to remain

IAG’s view had been that, by adding Air Europa to Iberia, it could create a hub in Madrid that could eventually compete with Heathrow, Amsterdam and Frankfurt.

In truth, the reason the deal is expected to be nodded through is that Air Europa would probably not have survived otherwise. The Spanish Government is believed to have been working to ensure approval. The European Commission may still have other ideas, of course.

Air Europa will become part of Iberia

Whilst Air Europa will keep its existing branding, it will be managed by Iberia. It will allow IAG to expand further into Latin America, the Caribbean and Asia from Madrid.

The airline owns 50 aircraft with a further 15 on order, comprising five Boeing 787-9 and ten Boeing 737 MAX planes. Deliveries are due between 2024 and 2026.

IAG will be staggering the €400 million payment, of which €100 million will be in IAG shares. IAG’s initial 20% shareholding was obtained in March 2022 when it provided the stricken carrier with €100 million as a convertible loan.

Given that IAG had initially agreed to pay €1 billion for the carrier in 2019, it is an attractive result, equivalent to the British Airways acquisition of bmi British Midland a decade ago.

What happens on the loyalty front?

Air Europa is a little known member of the SkyTeam alliance, which includes Delta Air Lines and – from next week – Virgin Atlantic.

IAG had previously confirmed that Air Europa would be leaving the SkyTeam alliance and adopting Avios if the deal succeeds.

Air Europa currently has its own frequent flyer scheme called SUMA.  You can find full details on the Air Europa website here.

As a member of SkyTeam, you can currently credit miles from any SkyTeam flight to Air Europa SUMA – Delta, Air France, KLM, Vietnam, Aeroflot, Korean etc.

There is a little game here you could play. Any SkyTeam flights you credit to Air Europa SUMA in the period between now and when it resigns from SkyTeam should be converted into Avios at some point.

I would expect SkyTeam airlines in Europe to launch some sort of status match programme to mop up Air Europa elite members.

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Comments (69)

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

  • BA Flyer IHG Stayer says:

    I really don’t see Air Europe remaining in ST if it becomes part of IAG. IAG aren’t going to want to run two separate schemes and the complexities that would bring.

    It may not even become part of One World if it’s a standalone airline within IAG rather than part of IB.

  • Thywillbedone says:

    No surprise they are keeping the Air Europa branding …maintains the illusion of competition.

    • Krishnan R. Iyengar says:

      My hunch is that longer term the real reason ISH want to hold on to the Air Europa brand is to use it to replace the Vueling brand, a brand which – in my opinion is by far the worst among all IAG-owned brands, difficult to pronounce properly for non-Spanish speakers and doesn’t mean anything to most non-Spanish speakers as well. Longer term, it also wouldn’t make any sense to split mainline operations ex-MAD between the Iberia and Air Europa brands, without a clear differentiation between the two, in terms of the product and market segment each is targeting. Otherwise, they’ll end up like former Indian carrier Jet Airways, where nobody could tell the difference between the main Jet Airways brand, Jet Lite and Jet Konnect.

  • Andrew Light says:

    over €1bn in enterprise value for a shoddy Latino airline, but still incapable of running BA in time, properly staffed, or with IT that works.

    • ChrisBCN says:

      It’s not latino.

    • pedro says:

      Neither is it shoddy! We now use it frequently since BA has stopped offering a codeshare on the Iberia Express MAD-LGW service.
      The MAD-LHR total monopoly exercised by Iberia and BA is one of the most abusive in the European market.

      • Krishnan R. Iyengar says:

        Has BA really stopped code-sharing on the Iberia Express LGW-MAD service? It still appears as a BA-IB-I2 (Iberia Express) codeshare on the Gatwick departures / arrivals board inside the South Terminal, and last time I checked, it also still showed as a codeshare albeit reduce from two flights to one flight per day each way from the start of the new summer timetable in late-March.

    • Colin MacKinnon says:

      Hispanic, please. If you must!

      Latino is usually Latin American, but some people in Haiti or Jamaica would not see themselves as Latinos, even though the countries are in Latin America.

      Hispanic usually referred to Spanish speaking and culture. So you can have – presumably – our daughter whose mother is Spanish, who was born in Edinburgh and speaks Spanish with a Scottish accent, as Hispanic. But not Latino.

      I love words. While they have precise meanings, there is also another level in the way they are used. And then people use short forms in a demeaning way.

      So usually safer to say Spanish to avoid any impression of an insult.

      • PeteM says:

        I got the impression Latino was, for some reason, used by @Andrew as a derogatory, term.

      • Rui N. says:

        While sometimes (but not very often) Haiti is included in Latin America (usually it’s just ES and PT speaking countries), Jamaica would be a first…

        • Thomas Atkins says:

          Yh, agreed; Jamaica 🤦🏿‍♂️ better off saying the ‘no, she went on her own accord’ line…

  • vlcnc says:

    From a consumer perspective this is appalling and terrible in particular for those living in Spain. Also shows how pointless these competition authorities are if they are willing to approve a deal whereby one conglomerate will have a 73% monopoly in a market.

    • JDB says:

      Anybody who has interacted with the competition authorities will tell you they are no pushover, but they also have to be pragmatic. In Air Europa you have an airline that the owners can no longer fund. It has effectively been up for sale for 4-5 years with no other airline seriously interested except IAG and the Spanish government would prefer a Spanish solution. The LH group has been allowed to consolidate the national airlines of four countries so another strong European group is good for Europe. From a consumer perspective and particularly a staff perspective, this is the least bad option and better than the fallout of a bankruptcy.

  • Richie says:

    If this goes through it’s a bit predictable what will happen on LH routes where IB and UX currently compete from Madrid, they’ll shuffle aircraft around so demand pushes fares up and launch new routes. Forums will have moans about being changed from IB A350s to A330s or B789s, don’t hang around if you want to spend your 241 vouchers on IB flights from Madrid.

  • Colin MacKinnon says:

    Actually, I am looking forward to the expansion towards Asia that is promised.

  • Patrick says:

    They have one thing in common: IT! Back in the days when in was working for airline IT, in the age of Windows 7/Windows 8, we had to adapt the checkin system for UX so that it could work …on Windows 2000!

  • Erico1875 says:

    What is surprising in the UK, Loganair operate the most domestic flights, followed by easyJet.
    BA only have 16% of domestic flights flown.
    Passenger no’s may be higher though

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