The UK’s competition regulator is examining the proposed €500m (£420m) takeover of Air Europa by British Airways owner International Airlines Group, adding another potential hurdle to the long-trailed acquisition.
IAG first announced its intention to buy the Spanish airline in late 2019 for €1bn, but in January it announced a renegotiated deal at half that price after the coronavirus pandemic caused enormous losses among airlines.
IAG owns both Iberia, Spain’s flag carrier airline, and Vueling, meaning that it has a significant crossover in their networks’ crossover with Mallorca-based Air Europa.
If the takeover goes ahead IAG will not have to pay until well into the expected recovery from the pandemic, as British Airways slowly returns to a full transatlantic schedule. It would also allow IAG to target the South American market as well as potentially setting up Madrid as a hub airport. The deal was planned by former chief executive Willie Walsh, who left just as the pandemic was hitting.
The UK’s Competition and Markets Authority has invited comments from the companies on whether the deal “may be expected to result, in a substantial lessening of competition” within the United Kingdom.
The companies have a week to submit their views on the merger, and the CMA has until 19 January to decide whether to pursue a phase 1 investigation to decide whether the merger will reduce competition.
The takeover is already the object of an in-depth investigation by the European Commission. Opening the investigation in June it said it was concerned that the deal would reduce competition on 70 routes on which both companies run flights. IAG has already offered concessions to the commission, although it has not made these public.
In the UK Air Europa flies from London Gatwick to a range of cities in Spain and from Edinburgh to some South American destinations. Iberia and Vueling fly some of the same routes.
The British union Unite, which represents some ground crew, has previously expressed its opposition to the deal, on the grounds that IAG was pushing through cost savings to the detriment of staff while also spending £420m on a takeover.
“We will collaborate with the CMA. The London-Madrid route is highly competitive and is already part of the European Commission [investigation] process,” IAG said on Monday.