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Air Nostrum and CityJet are about to close their Joint Venture after having received the approval from Brussels, second time. The European Commission has given the green light to the operation by certifying that it would not generate competition problems, since each of the companies has a "moderate" market share.
The airline is moving decisively to resume the merger process with the Irish CityJet, which was aborted in 2020 due to the arrival of the pandemic.
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To move further, the directors of the Iberia franchisee had sent a renewed file to the European competition authorities to analyze the viability of the operation. They were confident that the result will be positive, and that the approval will be given before the end of March.
This new group will have about one hundred aircraft and an annual turnover of approximately 700 million. The managers of Air Nostrum and Cityjet will shortly decide on the operational headquarters of the new holding company as well as the distribution of shareholdings.
European Commission release read ,
The European Commission has approved, under the EU Merger Regulation, the creation of a joint venture by Fortress Investment Group (‘Fortress') of the US, and Air Investment Valencia (‘AIV') of Spain.
The joint venture will combine the activities of Fortress' CityJet of Ireland and of AIV's Air Nostrum of Spain. Fortress is a global investment management firm, which manages assets on behalf of institutional clients and private investors worldwide. AIV is an aircraft dry lessor and provider of fleet supply services to air operators, among other. It is also active in the operation of air routes between Europe and Africa, mainly through charter flight and wet-lease services.
The transaction was first announced in June 2019, with the Commission approving it “unconditionally” the month after, even though the carriers “overlapped in the provision of wet-leasing services to airlines and charter flights”
The transaction was initially notified in June 2019 and in July the same year, the Commission approved it unconditionally. It concluded that, although the activities of CityJet and Air Nostrum overlapped in the provision of wet-leasing services to airlines and charter flights, the transaction would raise no competition concerns, because the companies have moderate market shares, a sufficient number of competitors remains on the market and the barriers to entry are low.
In January 2023, the parties re-notified the transaction as the deal has not been yet executed. The Commission has now concluded that the competitive landscape and market conditions remained broadly the same, and that the transaction would still not raise competition concerns.
As per European Commission, the transaction was examined under the normal merger review procedure. More information is available on the Commission's competition website, in the public case register under the case number M.10970.
The Spanish company believes that this new authorization is "a milestone" in the whole process. The intention is to form a joint venture with shares of the two airlines, but maintaining the brands. Also, incorporation of other independent companies to the alliance in the future is possible.
However, they must pass the filter of the SEPI, since it still has to return the 111 million of the state rescue received in May of last year. In this regard, the president of Air Nostrum, Carlos Bartomeu, trusts that it will not put obstacles in the Joint Venture, since this type of operations are those that the company exposed in its viability plan to endorse the economic support.
Air Nostrum has not curtailed its fleet size even after the Pandemic battering, has maintained the employees as well. However, it has incurred high level of debts. In the case of CityJet , its fleet has been affected, since they were about to go to competition, but it does not have any outstanding debt.
