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Air France KLM makes a €300m offer for control of Air Europa

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Long-term HfP readers will remember that IAG, the parent of British Airways and Iberia, spent a long and ultimately fruitless period before and after the pandemic trying to acquire Spanish carrier Air Europa.

The European Commission eventually put the deal out of its misery – unsurprisingly, as it would have given IAG a virtual monopoly on domestic flights on Spain’s mainland.

Even a last minute offer by IAG to divest 52% of Air Europa’s routes was not enough to get the deal approved, since there was no single competitor big enough to take them on.

Air France KLM makes a €300m offer to buy Air Europa

The UK competition authorities had previously come out against the deal, since Air Europa competes with IAG carriers on various long haul routes via an aircraft change in Madrid.

With no IAG deal, Air Europa is talking to other suitors

It was reported last week that Air France KLM has submitted an offer of €300 million for a 51% stake in the airline, which is still privately owned by the Hidalgo family’s Globalia holding company.

Lufthansa Group has also expressed interest in the airline, but there is more commercial sense for Air France KLM to acquire it. The deal includes a guarantee to repay loans made by the Spanish Government to Air Europa during the pandemic.

Air Europa is already a member of the SkyTeam airline alliance alongside Air France and KLM. It is likely to follow the same playbook as we are seeing with Scandinavian airline SAS, which Air France KLM recently invested in.

There would likely be a sharp increase in flights between Spanish cities and Paris and Amsterdam, allowing passengers to connect to long haul Air France or KLM services.

Air Europa is larger than you may think given its low UK profile. It has 22 long haul aircraft (Boeing 787-8/9) and 26 Boeing 737-8 short haul planes, carrying 12 million passengers last year. British Airways carried roughly 4x that number for comparison.

There is, of course, a good consolation prize for whichever of Air France KLM or Lufthansa Group loses out. TAP Air Portugal is moving towards a sale and, whilst IAG will definitely be interested, a sale to whichever carrier does not acquire Air Europa would create the fewest competition concerns.

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Comments (30)

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

  • Jake says:
    16 Mar16 March 07:00

    Off topic but merger related: with Air Korea and Asiana formally merged, what happened to the new Virgin route to Seoul.

    Any news when / if it might be released?

    • Rob says:
      16 Mar16 March 09:42

      No, gone quiet.

    • G says:
      16 Mar16 March 18:19

      The CAA has approved the merger, KAL has to release slots at LHR and ICN for Virgin Atlantic to begin services, by no later than Summer 2026.

      The remedy period is a minimum of 6 “cycles” so potentially up to 6 years of VS services to Seoul.

      I seriously doubt whether this will be an effective remedy though, given VS and KE are both SkyTeam, and that KE has always charged more than OZ on the LHR-ICN pair.

      The text of the CAA agreement and remedy actions are all available here: https://assets.publishing.service.gov.uk/media/63ff1bb7e90e0740dd5ac0d3/Final_Undertakings_in_Lieu.pdf

      The only direct competition (LHR primacy / alliance / interlining) that I think can realistically be offered on LHR-ICN directly is if BA resumed services to Seoul – which for now looks unlikely.

      That being said, KAL offer an excellent inflight service but so does Asiana. It’s a shame to see them go.

      • G says:
        16 Mar16 March 18:25

        At best, VS will charge what Asiana does on the same routing – but can likely command a premium given how it can connect/interline easier with Delta, and commanding a primacy for English speakers on the UK’s alternative flag carrier.

        I think for BAC/OneWorld/Avios fliers; Finnair will remain the best option for flying to Seoul.

  • John33 says:
    16 Mar16 March 07:07

    IAG mustn’t get Air Europa. We need competition to Latin America. Iberia is falling short of expectations as it is when it comes to quality. At least prices are relatively low.

    • Lumma says:
      16 Mar16 March 08:23

      What’s the issue with Iberia long haul to Latin America? Big spacious lounge at Madrid, quality wines and spirits on board, modern planes with all aisle access.

      Only negative is the food in business class sometimes has a feel of economy meals on proper plates

      • Matt says:
        16 Mar16 March 12:01

        Recent flight to EZE the food was quite good. 3 meal services… breakfast, lunch and afternoon sandwich.

        The issue was the crew. Decent for first half of flight. Became miserable for second half. One particular lady was diabolical with everyone for last 3 hours.

        Oh and unfortunately delayed MAD to LHR causing missed connection and an overnight in MAD. IB refusing compensation claiming it was due to a delayed incoming aircraft.

    • Tim S says:
      16 Mar16 March 11:01

      My one RT experience of Air Europa was that the on board experience was the worst LH that I had ever been on. Suggesting that it competes on quality is laughable.

  • Stuart says:
    16 Mar16 March 07:29

    Flown UX a few times regionally in economy class, nothing special but it gets the job done for a reasonable price, and adds a little bit into my Flying Blue account. Downside with UX is that they use MAD T1-T3 and for connections it is below average. However, a quick count of the IB and UX destinations in South & Central America and the islands in that region and it is 20 vs 24, so UX pips IB on that front. But UX only fly to LGW in the UK, if UX started say MAN-MAD etc. routes then that would add comptition for more of the UK to Latin America.

    • Throwawayname says:
      16 Mar16 March 08:20

      +1, although I prefer the old, less swanky, terminals at MAD to the huge time sink that’s T4S. The other good thing about UX is that it tends to be pretty straightforward in its pricing structures- no clinging on to the Saturday night stay nonsense like LH, no attempt to penalise pax by excluding big carry-ons from the lowest fares a la SK etc.

    • Stuart says:
      16 Mar16 March 08:39

      Since a bunch of BAEC members were status matched to AFKL FB, beware that when flying with UX and crediting to FB that the discount business class fare code O does not earn FB Miles and XP. Also UX is the most stingy earning into FB: no minimum mileage distance and all applicable business class fare codes only have an earning of 100%: https://www.flyingblue.com/en/earn/partners/airline-air-europa

  • Barrel for Scraping says:
    16 Mar16 March 10:49

    I don’t Lufthansa should be allowed to purchase any more European airlines. They already own the main carriers of Belgium, Switzerland, Austria, Italy and of course Germany. Plus they own a number of other airlines like Eurowings and Air Dolomiti.

    • Rob says:
      16 Mar16 March 11:53

      And yet the direction of travel is clear. IAG will buy Finnair at some point, Lufty will buy the rest of Air Baltic, Air France has a deal to buy the rest of SAS in time, TAP will go to someone this year, LOT will end up fully absorbed in Lufthansa. What’s left?

      Ryanair will continue to take share off all of them given that its unit costs are a fraction of the big three.

      • Throwawayname says:
        16 Mar16 March 15:12

        Is there any real indication of LOT being taken over? Even if they’re part of M&M, I don’t see them cooperating super closely with the LHG, for example they made a codeshare deal with SAS just before it left *A at the same time as LH were cancelling their own arrangements with them.

      • Charlie says:
        17 Mar17 March 01:42

        But that’s based on where we are now. Prior to Covid, the direction of travel was that SAS would likely be bought by Lufty and Italia/ITA would be bought by AF/KLM. Let’s see what happens to TAP. But, LOT, in particular, could go in either direction in my view, as it is a very well run operation. I’d wager IAG have a 50/50 chance of buying into LOT as much as Lufty does, especially if TAP goes Lufty and Air Europa goes Sky.

        • Peter says:
          20 Mar20 March 11:17

          I would not be so sure about LHG acquiring LOT, as there is a lot of anti-LH sentiment in the Polish national carrier. Yes, they share the same alliance and loyalty program, but that’s about as far as LOT can go. Moreover unlike TAP, the public support for privatization is close to none as for the first time in a while LOT is making money. I don’t see that happening with IAG either as it’s the completely opposite direction to the one IAG is looking at right now. The only big carrier interested in that part of the European network is LHG but that won’t happen in the foreseeable future.

  • Lady London says:
    16 Mar16 March 13:19

    Is Air Europs better to fly than Vueling?

    • Juan says:
      16 Mar16 March 13:43

      Yeah. Vueling is a low-cost carrier, while AirEuropa is not. Also, AirEuropa is usually considered even better than Iberia in terms of quality (food, seats…). Another difference is that while AirEuropa and Iberia operate transatlantic flighs, Vueling does not. Vueling is part of IAG as Iberia, but the brand used by IAG to operate those transatlantic flights is LEVEL, not Vueling.

      • Jetset Boyz says:
        19 Mar19 March 05:34

        Level is no longer a brand, it’s an airline with it’s own AOC.

    • Throwawayname says:
      16 Mar16 March 15:15

      I think so, particularly if you have SkyTeam status – after all, it is a full service airline (notwithstanding BOB).

    • RC says:
      16 Mar16 March 16:34

      Hard to be worse than the Vueling experience when Irrops happen.

    • ChrisBCN says:
      16 Mar16 March 23:23

      For Vueling think easyJet; the secret with Vueling is rows 2-5 for more leg room than BA business class (should that be important to you).

      Not really fair to compare Air Europa with Vueling as the route overlap is minimal (main hubs are Madrid for Europa and Barcelona for Vueling).

      Also, Air Europa is 100% Boeing, Vueling 100% Airbus.

  • Alex G says:
    16 Mar16 March 14:09

    “IAG will buy Finnair at some point”

    Time will tell, but I really hope you are wrong. There have been rumours that the Finnish Government might sell it’s majority stakeholding in Finnair for more than 10 years. Despite the longer flight times and costs of avoiding Russian airspace, the airline remains profitable. It would be bad for consumers if it gets swallowed up by IAG.

    • JDB says:
      16 Mar16 March 14:46

      A sale is being actively sought. While the airline has made a profit in the last couple of years, it’s not really very profitable. The share price tells the story – over €40 before covid, now €3.75 buoyed by takeover talk.

      • RC says:
        16 Mar16 March 16:32

        Source?
        Finnair is seen as a strategic asset in Finland.
        There is not any hunger to sell it ‘on the cheap’ to anyone, let alone IAG and its tired Mckinsey-advice-dependent management to asset strip the A350s (like Aer Lingus’s order) and dumb down Helsinki after Finavia’s investment at Helsinki.

      • RC says:
        16 Mar16 March 16:46

        This is very much way off course of what was being intimated in New York last week

      • Charlie says:
        17 Mar17 March 01:53

        The share price does, indeed, tell a story JDB, but not yours. Yes, over €40 before COVID, as it was over €40 in 2007. Compared to IAG, the peaks and troughs are near identical: it is only in the past six months or so that IAG has outperformed Finnair % wise. Add in contextual factors (pilot strike) plus the occasional Chinese whispers ‘….buoyed by takeover talk’… and one might assume you have a position on AY… 🙂

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