Air Europa’s takeover plans have been scuppered after the parent company of British Airways and Iberia, International Airlines Group (IAG), cancelled its deal to acquire the Spanish carrier from owner Globalia, as it concluded that “the current regulatory environment” in the EU is “extremely hostile”.
IAG confirmed its decision to terminate the agreement after the close of financial markets in Europe yesterday, Thursday 1 August, to coincide with the announcement of the group’s half-year results.
The group had announced an agreement to acquire Air Europa in February 2023, with IAG buying 80% of the shares held by Globalia for €400 million.
IAG already held a 20% stake in Air Europa, which it acquired in August 2022, and continues to hold those shares.
In a statement, the IAG said: “The Board has concluded that in the current regulatory environment it would not be in the best interests of shareholders to proceed with the transaction. The group noted its assessment that the acquisition ‘is no longer likely’. It will pay Globalia EUR 50 million as a termination fee”.
In a related statement, IAG CEO Luis Gallego said: “We believe that this decision is in the best interests of our shareholders. IAG remains committed to its strategy, including effective competition from the Madrid hub. It is a strategy that is delivering strong results [and] we will continue to develop our presence in Madrid so that the hub can grow as a rival to Europe’s largest hub airports.”
IAG signed its first ever agreement to acquire Air Europa for €1 billion in 2019. The deal was called off during the pandemic after EU regulators said IAG’s proposed “remedies” were insufficient to address competition concerns.
However, the group provided a €100m loan to Air Europa as part of the agreement to terminate that deal, which was converted into a 20% shareholding in 2022.
When the acquisition was revived in 2023, IAG described it as “strategically important” as it would strengthen its position in the Latin American and Caribbean markets. However, securing regulatory approval was always going to be a challenge as IAG already owns Iberia and Vueling, based in Barcelona.
Mr Gallego had pointed out at the time: “This agreement will allow IAG’s Madrid hub to compete on an equal footing with other European hubs and consolidate its position in the South Atlantic. Madrid is the main gateway between Latin America and Europe and there are opportunities to expand its network.”
The European Commission opened an in-depth investigation after finding “initial concerns” that the transaction could reduce competition on domestic short- and long-haul routes within and outside Spain.
