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British Airways owner IAG’s takeover of Spain’s Air Europa is close to unravelling after EU officials signalled that the airline group had still not done enough to ease concerns over the impact of the deal on competition.
Remedies offered by the companies — which included handing over around half of Air Europa’s slots to rivals — are still not enough to clear the proposed merger, commission officials told IAG and Air Europa at a meeting on Monday, according to people with direct knowledge of the matter.
The meeting took place just weeks before an August 20 deadline for the EU executive to decide on whether to block the deal. The chances of the takeover being blocked are now “very high”, the people added. It is rare for Brussels to block deals on competition concerns, with most transactions either getting cleared unconditionally or with remedies. Between 2014 and 2023 the European Commission blocked just nine mergers, according to White & Case, the law firm.
Still, with the Air Europa decision not yet finalised, the companies could still offer more last-minute remedies, fight any ruling to block the deal in court, or even walk away from the deal, the people added.
It is the second time that IAG, which owns five airlines including British Airways and Spanish flag carrier Iberia, has tried to buy Air Europa, after abandoning an earlier effort at the height of the pandemic. IAG agreed in February last year to buy the 80 per cent of Air Europa it does not already own for about €400mn.
A deal would give IAG new access to the growing south Atlantic market, and also help build Madrid airport into a major European hub.
But throughout the probe EU officials warned that the deal risked undermining competition and could lead to fewer choices for consumers and higher prices. The Financial Times first reported on the problems facing the deal in February.
Since then IAG officials have consistently said they still hoped the deal would pass, and offered remedies including offering about half of Air Europa’s landing slots to other airlines.
They have taken heart from the EU’s decision earlier this month to clear Lufthansa’s acquisition of 41 per cent of troubled Italian airline Ita, formerly Alitalia, subject to the disposal of some slots and routes to preserve competition.
Airline bosses believe the European industry needs to consolidate further in order to compete on the global market, as it faces cash-rich Gulf airlines to its east and highly profitable US carriers to its west; a region that saw its own burst of consolidation following the financial crisis.
IAG and the European Commission declined to comment.
Additional reporting by Paola Tamma in Brussels
