International Airlines Group's proposed acquisition of Spanish airline Air Europa would harm competition, according to the European Commission.
In particular, such a merger would reduce competition between Spain and the United States in the Spanish domestic market and in Spain's short-haul international markets, the EC wrote in an April 26 objection statement.
IAG owns Spanish airlines Iberia and Vueling and is also the parent company of British Airways, Aer Lingus and Level.
“The Commission is concerned that customers may face increased prices and/or reduced quality of service following the transaction,” the letter says.
IAG currently owns a 20% stake in Air Europa. A purchase agreement was signed for the remaining 80% in February 2023 for 400 million British pounds.
The company had previously pursued a takeover of Air Europe between 2019 and 2021, but this fell through following a similar competition-related investigation by the EC.
IAG pointed out that counter-notices are a common regulatory step for the European Commission when dealing with complex transactions.
IAG said it was working to gain EC approval by providing a series of remedies to allay competition concerns.
IAG said it “intends to transfer an amount equivalent to 40% of the flights operated by Air Europa to other airlines in 2023.” “Similarly, we are committed to ensuring that no routes are operated exclusively by Iberia and Air Europa. We want to close this transaction as soon as possible, in 2024, so that we can begin to deliver the benefits of the transaction to consumers and the wider Spanish economy. We are doing our best to make Madrid more competitive with other European hubs.”
In the Spanish-American market this summer, Air Europa will overlap with IAG's Iberia on two routes: Madrid-Miami and Madrid-New York JFK. These airlines will join Iberia's joint venture partner American Airlines on the Miami route and American Airlines and Delta on the JFK route.
The EC noted that IAG's takeover would cut off competition on some routes Air Europa operates between Spain and the Americas.
“For other routes, competition from other airlines is limited and both parties have relatively high market shares,” the commission wrote.
IAG said the proposed solution would go beyond selling seats on designated routes. In addition to handing over existing reservations, the company plans to provide aircraft, maintenance technicians and ground staff to airlines that take over the slots.
“We propose to structurally transfer everything necessary to run a competitive and viable business on any sale route,” the IAG fact sheet says.