The European Commission has confirmed that it has opened an in-depth investigation to assess the proposed acquisition of Air Europa by IAG, under the EU Merger Regulation. The Commission states that it is concerned that the proposed transaction “may reduce competition in the markets for passenger air transport services on Spanish domestic routes and on international routes to and from Spain”.
Executive Vice-President Margrethe Vestager, responsible for competition policy, said: “IAG, which flies with Iberia and Vueling among others, and Air Europa are leading airlines in Spain. They are also key providers of connectivity between Spain, the rest of Europe and Latin America. We will carefully assess whether the proposed transaction would negatively affect competition on domestic, short-haul and long-haul routes to and from Spain, possibly leading to higher prices and reduced quality for travellers. Although the financial situation of many airlines is still fragile, there are signs that demand for air transport services is recovering from the coronavirus crisis. It is important to ensure that the recovery of the sector takes place in a competitive environment preserving sufficient choice for travellers.”
IAG and Air Europa are respectively the first and third largest providers of scheduled passenger air transport services in Spain. They both operate a network of Spanish domestic routes, as well as short-haul routes between Spain and other countries in the European Economic Area (EEA) or outside the EU, and long-haul routes between Spain and the Americas.
The Commission's preliminary market investigation revealed that IAG and Air Europa compete head-to-head for passenger air transport services in Spain, in particular on several routes from Madrid to the US and Latin America, and on several domestic and short-haul routes, including feeder traffic routes bringing passengers to Madrid to continue their journey on long-haul flights to the US and Latin America.
The Commission states that it is concerned that the proposed transaction could significantly reduce competition on 70 origin and destination (O&D) city pairs within and to/from Spain, on which both airlines offer direct services. On some routes, IAG and Air Europa have been the only two airlines operating.
The Commission is also concerned about the effect of the proposed transaction on routes on which other airlines rely on Air Europa's domestic and short-haul network for their own operations at the Madrid airport and a number of other EU airports.
The Commission adds that it has found that competition from other airlines, including from European low-cost carriers “would likely not provide a sufficient constraint on the merged entity on the routes where it would hold high market shares. Similarly, the competitive pressure of European network airlines or Latin American airlines appears insufficient”.
The pandemic has muddied the waters for the Commission a little – a fact it notes yet states that its investigation will be based on the positions of the two airlines before Covid-19 disruption. The Commission has now 90 working days, until 5 November 2021, to take a decision.