DEAL DEAD: IAG scraps its plan to buy Air Europa

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• Graeme says:

  2 Aug2 August 05:29

  So Air Europa collapse on the horizon soon?

  • Marcw says:

    2 Aug2 August 06:27

    Nope. Otherwise EC would have approved the merger.

  • JDB says:

    2 Aug2 August 07:35

    Yes, Air Europa is in deep trouble now. It has been surviving on a loan from IAG. Not sure where future funding will come from and Globalia/the Hidalgos want/need out.

    • AJA says:

      2 Aug2 August 08:23

      What is the point of IAG continuing to hold a 20% stake in Air Europa if the airline is likely to fail?

      Also would IAG withdrawing funding causing the airline to fail be at odds with the 20% shareholding? Or is that a strategy to be able to potentially block LH acquisition ?

      • JDB says:

        2 Aug2 August 08:38

        @AJA – there’s a combination of factors. Not sure there are any buyers for that stake – Air Europa has been up for grabs for a long time. If another buyer were to emerge, the 20stake may not be a block, but will give them a seat at the table. The stake is carried at a slightly reduced (vs Dec 23) fair value of €179m so not a huge number if it all falls apart and the carcass would have some attractive pieces for IAG.

        • Marcw says:

          2 Aug2 August 08:46

          Air France has shown interest in the past. I wouldn’t be surprised if DL & AF/KLM agree buying Air Europe to (re)establsh a Mediterranean SkyTeam hub (now that they’ve lost ITA/Alitalia)

        • Richie says:

          2 Aug2 August 09:29

          But is IAG good at making the attractive pieces of the carcass succeed? BA Euroflyer at Gatwick has emerged following the demise of Monarch and currently cancels flights because of lack of pilots to fly planes. Does the I stand for incompetent?

        • BA Flyer IHG Stayer says:

          2 Aug2 August 09:45

          Marcw but don’t forget AF-KL have just bought into SAS so may not have the means or appetite for further acquisitions,

          JDB whilst IAG may own 20% they may not want to excert any direct influence, QR owns 20% of IAG and appoints two “propitiatory” directors onto the board neither of whom has any direct relationship / apparent employment with QR

          Richie – BA euroflyer emerged from BA itself during the pandemic as a cost saving measure.and is unconnected to Monarch.

        • JDB says:

          2 Aug2 August 09:49

          @Richie – that’s a bit ridiculous. It really has nothing to do with Monarch. BA has had a very long presence at Gatwick but couldn’t make money from the European operation. However, although the straightforward and logical decision would have been to exit LGW it has target rather obvious reasons for not doing so. Thus Euroflyer was set up to try and make the business viable with a lower cost base than its mainline operation. EasyJet, despite have added additional contingency plans for this season after last summer’s debacle is still facing issues. What you refer to as a shortage of pilots is actually part of bigger issues currently facing these holiday routes for all airlines. And re Air Europa, yes I’m sure IAG/Iberia can make great use of UX assets.

        • JDB says:

          2 Aug2 August 09:56

          @Richie – those slots were bought seven years ago, long before Euroflyer was created! What possible relevance does Monarch have to BA Euroflyer in 2024.

          In any event it will be IB, not BA dealing with any morsels from UX so your low opinion of BA doesn’t enter into the equation.

      • Chrisasaurus says:

        2 Aug2 August 08:39

        Well flip that and ask who’d be wanting to buy it?

        • Richie says:

          2 Aug2 August 09:48

          IAG bought Monarch slots https://news.sky.com/story/ba-owner-iag-buys-monarchs-runway-slots-at-gatwick-11147280

        • Richie says:

          2 Aug2 August 10:33

          BA seem to have realised they may have a pilot problem https://mediacentre.britishairways.com/news/23072024/new-21-million-fund-from-british-airways-to-put-200-aspiring-pilots-from-all-backgrounds-through-training

        • Londonsteve says:

          2 Aug2 August 13:10

          I doubt BA has a pilot problem due to their jobs being seen as unattractive, it’s more that there simply aren’t enough pilots to go round and long haul positions with the ME3, for example, are seen as more desirable that short haul from the likes of LGW. Globally airlines have hit the ceiling for numbers of willing, able and financially solvent trainees who can pony up the large upfront investment in their training. It has taken over 20 years since airlines ended their funded training schemes after 9/11, airlines have to now start investing in people’s training if they want to increase the pilot pool.

    • Bernard says:

      2 Aug2 August 14:04

      Perhaps check facts first?
      IAG retains 29Pct
      Government had said it will assist – if needed.

      • Bernard says:

        2 Aug2 August 14:05

        20pct – typo

• Mouse says:

  2 Aug2 August 06:01

  I wonder whether IAG’s HQ and primary listing being outside the EU was a (political, not legal) factor and could be a factor again with TAP?

  • Marcw says:

    2 Aug2 August 06:33

    Pretty convinced Portuguese Government won’t favor IAG, but LH Group or Air France/KLM.

  • BA Flyer IHG Stayer says:

    2 Aug2 August 08:24

    IAGs Registered Office is in Madrid.

    It is a registered company, holds its board meetings and is domiciled for tax in Spain.

    • Dev says:

      2 Aug2 August 09:17

      You can always ask a Portuguese department store to own TAP and lease out the revenues to IAG

    • Mouse says:

      2 Aug2 August 11:58

      All of which is window dressing for a company headquartered at Heathrow and traded in the City. The EU Commission are not morons.

      • JDB says:

        2 Aug2 August 13:01

        It’s hardly window dressing and the fact that IAG is Spanish is strongly supported by the Spanish government. You also have IB, EI, VY and Level all operating as clearly EU airlines. I agree with your overall sentiment but I think its more that the LH group has been very opportunistic and gets significant multi governmental support rather than IAG being disadvantaged.

        • Richie says:

          2 Aug2 August 13:33

          Did LEVEL get an AOC or is it still just a brand?

        • JDB says:

          2 Aug2 August 15:28

          IAG announced in November that Level would get its own AOC. Not sure that it will make any difference or be observable to the passenger but it potentially addresses some internal issues and union issues.

• Peter says:

  2 Aug2 August 06:03

  A similar domination in the Austrian, German, Italian and Swiss markets by Lufthansa group doesn’t seem to have caused much concern on the part of the European Commission.

  • Marcw says:

    2 Aug2 August 06:28

    Completely different transactions in nature. Afaik, none of the LH group of airlines are direct competitors of ITA

    • LittleNick says:

      2 Aug2 August 07:11

      How is it different?

    • JDB says:

      2 Aug2 August 07:24

      @Marcw – I think that’s a rather narrow and naive interpretation! LH has been sucking the lifeblood out of the Italian long haul traffic for some time and its position as the flag carrier of DACH + Belgium and soon Italy is the most extraordinary competition eradicator. When you add to that the humongous covid subsidies/bailouts received by the group, they do seem to be somewhat privileged.

      • Nico says:

        2 Aug2 August 07:29

        Feels like different treatment for sure

      • Marcw says:

        2 Aug2 August 07:34

        Air Europa is an airline with the exact same strategy as Iberia. Look at their operations, look at their destinations… Like for like. Same hub, same route network (except for a few unique destinations), same target market… Same strategy (connecting Europe to Latin America).

        LH Group purchasing ITA is similar to IAG buying Aer Lingus – or let’s say hypothetical, Finnair.

      • Marcw says:

        2 Aug2 August 07:37

        Seems like all analysts were not surprised by IAG giving up. So in essence, Luis Gallego was (is?) rather naïve thinking that this transaction woild go through. The reason the former CEO and President of Iberia, Sanchez-Prieto abruptly left the company was (1) Failure to acquire UX (he already predicted this), and (2) expected disaster in the IB handling division.

        • Charles Martel says:

          2 Aug2 August 08:24

          Perhaps buying extra capacity in the face of falling demand isn’t seen as wise. Air Europa might be available on better terms in a recession with less regulatory interference as politicians fret about collapse and job losses.

        • JDB says:

          2 Aug2 August 08:29

          @CharlesMartel – that’s the irony, IAG may end up in a better position and the EU not get what it wants if Air Europa fails.

        • Bernard says:

          2 Aug2 August 14:10

          You should retract that.
          None of that is correct, so it maybe best to stop making up your own narrative to suit your alternative facts.
          Iberia handling is marginal contribution business. It doesn’t swing profits materially hence Iberia doesn’t bid unprofitably.

      • Rob says:

        2 Aug2 August 08:25

        Ryanair is the dominant player in Italy. ITA is a bit of a sideshow.

        • JDB says:

          2 Aug2 August 08:51

          Ryanair is the dominant player in Europe. It carries c.180m pax pa vs LH Group c.125m and IAG 115m.

• Charlie says:

  2 Aug2 August 06:11

  The idea that hubs compete against each other is a joke and should never have been accepted as an argument by competition authorities for things like the bmi deal – just look at how BA prices ex LHR vs ex CDG for example.

  • JDB says:

    2 Aug2 August 08:26

    Many/most hubs do compete against each other. LHR is different to any other European hub and has commanded premium pricing (for all, not just BA) for over forty years owing to the enduring strength of our underlying market. If, for example, LH attempted to charge LHR prices ex Germany, many pax would choose to fly via another hub. Some UK passengers of course choose to fly long haul ex-EU to take advantage of this lower pricing and save £200pp APD as well.

    • Paul says:

      2 Aug2 August 08:36

      Accepting that you said “as well” I have never flown Ex EU to save APD. I fly ex EU to save on the ludicrous fares charged ex LHR. It would rarely make sense in time and effort to position to save £200 but it is often cited as the reason.

      • JDB says:

        2 Aug2 August 08:43

        @Paul – you talk about “ludicrous fares charges ex LHR” but they are simply the price established by the market and the disparity has existed, to my certain knowledge, for over forty years. I noted in my post that some UK based pax flew ex-EU to save both on the fare and APD. I agree £200 alone wouldn’t usually be a sufficient difference.

      • Throwawayname says:

        2 Aug2 August 09:27

        I do fly exEU to save on the APD when redeeming miles, also helped by award availability being much better from LIS/MAD/CPH/Italy than from my local airport and being unable to be arsed to travel to London and change various trains and tubes with suitcases in tow.

  • David says:

    3 Aug3 August 11:48

    Of course they do compete if you’re not in SE England where LHR is a home airport. Otherwise, LHR is just another hub and one definitely not worth paying any kind of premium for – quite the opposite.

• G says:

  2 Aug2 August 06:54

  More gobbling up of airlines/flag carriers by LH Group – fine

  IAG – not fine

• David Cohen says:

  2 Aug2 August 07:17

  The rumour goes that the LH Group’s acquisition of ITA was waved through as a quid pro quo for Meloni supporting von der Leyen’s second term as President of the Commission.

  • JDB says:

    2 Aug2 August 07:28

    Except that Meloni didn’t support von der Leyen! Meloni didn’t like the apparent stitch up behind her back for vdL to be reappointed, so abstained in the initial vote. The two are now in another spat about the annual Rule of Law report.

• Chabuddy Geezy says:

  2 Aug2 August 09:27

  I think this was another interesting nugget from IAG’s H2 financial statement:
  “focusing on encouraging its customers to ‘earn and burn’ more Avios. Over 23% more Avios were issued in the six months to 30 June 2024 than in the prior year and we have 13% more active customers than at the same point last year. Our non-airline partnerships are a key factor in financial performance and spend on UK Avios-earning credit cards is growing at four times the rate of the wider UK credit card market.”

• Throwawayname says:

  2 Aug2 August 09:33

  This is great news for consumers. In terms of viability, believe that UX is currently profitable in its operations and the Hidalgos are very shrewd businesspeople. I wouldn’t be surprised if they were able to identify an unexpected strategic investor in the shape of a non-EU airline (e.g. the group that owns Avianca is expanding pretty aggressively), or even a company outside of aviation like MSC cruises that had been involved in the original LH bid for ITA.

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