By John Flett
British Airways Parent Company Scraps Plans For Buyout
International Airlines Group (IAG) — the parent company of British Airways — is reportedly canceling plans to take over Spanish carrier Air Europa. Reuters reported that the deal to purchase Air Europa would have required IAG to make concessions to satisfy European regulators. The regulator had commenced an inquiry into the deal in June of this year. The consortium had reportedly offered to relinquish 13 short and medium-haul routes and two long-haul routes to Madrid and Barcelona, Spain.
The concession offered by IAG appears not to have been enough to satisfy the regulator’s concerns that such a takeover would result in a less competitive Spanish domestic air market. Other concerns related to international routes into and out of Spain were also thought to have been a red flag for the regulator. Air Europa has operations to European destinations and to Latin America.
IAG planned to buy out Air Europa for a reported €1 billion ($1.1 billion) and was first announced in November 2019 by then chief executive Willie Walsh. At the time of the initial announcement, Mr. Walsh said, “Acquiring Air Europa would add a new competitive, cost-effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership, therefore generating additional financial value for our shareholders.”
The U.K. Government had advised last month that the country’s Competition and Markets Authority (CMA) had opened an inquiry into the proposed acquisition. In a statement seeking comment, the government said, “The CMA is considering whether it is or may be the case that this transaction if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”
In January 2021 IAG’s offer to Air Europa’s owners was cut to €500 million as a result of the effects of the pandemic.
Current IAG chief executive Luis Gallego said at the time, “Being part of a large group is the best guarantee to overcome current market challenges which will also benefit Air Europa once the transaction is completed. I am pleased that we have reached an agreement with Globalia to defer payment until well into the expected recovery in air travel following the end of the pandemic and when we expect to be realizing significant synergies resulting from the transaction.”
Aviation analysts have stated that withdrawing from the deal prior to a denouncement by regulators may place any future bid by IAG in a more favorable light.