Iberia will cede nearly half of Air Europa's flight rights , If they buy Air Europa !

Location: Madrid , Spain.
By FL360aero --
08-04-2024 --
1 Comments
Time To Read: 3 minute(s)

Iberia's parent company IAG has doubled the volume of assignments submitted to the European Commission in the previous attempt.
"If we buy Air Europa, there won't be a single route on which it and Iberia operate alone," says Luis Gallego
IAG and Air Europa operate an extensive network of domestic routes in Spain, short-haul routes within the European Economic Area, long-haul routes to and from Latin America.
The Commission now has 90 working days, until 7 June 2024, to take a decision.

On Feb 23 2024, Iberia-owner International Airlines Group agreed to pay 400 million euros ($423.84 million) to Spain's Globalia for the remaining 80% of airline Air Europa it did not already own.

Iberia remains optimistic about the "Iberia-Air Europa" merger’s benefits, believing it will strengthen Spain’s connectivity and reinforce the Madrid hub. However there have been concerns !

The IAG backed carrier anticipated presenting a ‘remedies’ proposal to address the identified competition concerns. Sources said earlier, the proposal could include selling rights for specific routes, aimed at maintaining a healthy competitive environment.

Photo Courtesy : LSZH Spotter

Recently, Luis Gallego, the CEO of IAG, reveals what the proposal he has made to convince the European Union's Directorate-General for Competition consists of, on whose opinion it depends solely and exclusively whether Iberia can proceed with the integration of Air Europa (Iberia-Air Europa: Brussels will issue its first opinion this month).

The top executive of the airline holding company explains in statements to Cinco Días that they have proposed "ceding 40% of the flights operated by Air Europa to competition in 2023". This is, as he points out, the double remedies offered in the previous purchase attempt, which did not go ahead due to the demands of Brussels.

On this occasion, Gallego pledged that,

"if we buy Air Europa, there will not be a single route on which it and Iberia operate alone". "We understand that we must favour competition".

What happens to the Spain’s aviation market after acquisition ?

This question looms as the European Commission (EC) embarks on a thorough investigation into this significant merger, which was first announced in 2023.

On Wednesday, January 24 2024, the European Commission had initiated a detailed probe into the Iberia group’s purchase of Air Europa.

The Commission’s concerns centre on several national and international routes. Particularly, Spanish internal routes are under scrutiny, especially those lacking high-speed train alternatives.

The merger’s potential impact is also under review on routes between mainland Spain and the Balearic and Canary Islands.

Concerns extend to key European destinations, including Israel, Morocco, the United Kingdom, and Switzerland, as well as vital long-distance routes to North and South America.

European Commission's preliminary concerns

As per EC ,the preliminary investigation indicates that the transaction may reduce competition in the market for passenger air transport services on several domestic, short-haul and long-haul routes. IAG and Air Europa are strong and close competitors in the provision of passenger air transport services on certain routes within, to and from Spain.

In particular, the Commission found that the transaction may reduce competition on:

Spanish domestic routes, notably on routes where high speed trains do not provide an alternative, and on routes between peninsular Spain and the Balearic and Canary Islands.

Short-haul routes between Madrid and some of the main EEA cities as well as on routes connecting Madrid and Israel, Morocco, the UK and Switzerland, on which both parties offer a direct connection.
Long-haul routes between Madrid and North and South America, on which both parties offer a direct connection and face competition from only few other competitors with a non-stop connection.

During its in-depth investigation the Commission will also assess:

If the parties' strong slot portfolio, in particular at Madrid-Barajas airport, could make it harder for other carriers to provide airline services.
The likely effects of the transaction on indirect connections, in particular on long-haul routes to South America, where either one or both of the parties have a convenient one-stop connection and where non-stop connections are limited.
The likely effects of the transaction on routes on which other airlines rely on access to the parties' domestic and short-haul network for their own operations, which could affect their services to international destinations also served by IAG.

Margrethe Vestager, Executive Vice President and Competition Commissioner, explained,

‘IAG and Air Europa are leading airlines in Spain and key providers of connectivity within the country and with the rest of Europe and Latin America.With our exhaustive investigation, we want to ensure that the operation does not negatively affect the prices or quality of passenger air transport services.’

The statements of the former president of Iberia a few weeks before the European Commission pronounces itself for the first time on the operation. As reported by Preferente, the EU executive plans to publish its report (Status of Objections) in the final stretch of this month of April.

The document, which will not be final, will contain his provisional opinion on possible violations of European competition law. Once published, the recipients of the publication shall have the right to express their opinions, including, but not limited to, objections. And it will be at that time when the issue of the transfer of routes to third parties by Iberia and Air Europa will be analysed in detail.

The European Commission will have to decide whether the remedies offered by IAG cover all its concerns. If this is not the case, it will require further concessions from the parent company of Iberia and Vueling until a point of consensus is reached, as long as its demands are not unacceptable to the parent company of Iberia.