The European Commission has extended the deadline for its investigation into the acquisition of Air Europa by IAG. Previously, the deadline to decide was November 5th, but this has been extended to December 3rd. IAG requested the extension.
Last month the European Commission announced it was opening a full, in-depth investigation into IAG’s Air Europe merger. The commission has the right to block the deal and prevent it from going ahead if it believes it will reduce competition in Spain. If it results in a monopoly that could dictate market prices and overpower other airlines, the deal will be scrapped.
Under the original investigation, both Air Europa and IAG could submit data to prove the deal is legit. Then, the commission would have 90 days until November 5th to make a decision. However, this deadline has been extended until December 3rd. According to a short statement from IAG regarding the extension,
“We have asked for the extension in order to provide more evidence and support the process. It’s procedural.”
This is not the first time the Commission extended a merger deadline since the pandemic began. The pandemic has overwhelmed many airlines, so the regulator has extended several deadlines to allow airlines and companies more time to gather appropriate data to support their case.
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What are they investigating?
Spanish company IAG already has two Spanish airlines to its name; Iberia and Vueling. If Iberia acquires Air Europa, IAG would become very powerful in Spain and reduce competition on domestic and international routes.
Specifically, in the original filing, the commission stated it had concerns regarding “70 origin and destination 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.”
IAG argues that the move would simply bolster its existing Marid hub. But if it wants to get approval from the commission, it may have to give up specific routes. For example, offering concessions to the EU could ensure other airlines can provide genuine competition. The problem is, if the EU demands too many compromises, Iberia could refuse, and the deal would be over.
The winners and losers of the deal
Clearly, if the commission lets the deal go ahead IAG, Vueling and Iberia will have strengthened their positions in Spain. However, there is another airline that could benefit from the agreement; Volotea.
The Spanish airline is well-placed to provide healthy competition, and as such, it could well receive more slots and routes as concessions. IAG has already offered slots to the airline in a bid to boost the airline and prove to the EU that there is plenty of competition. If the EU wants more from IAG, Volotea could stand to gain.
IAG is clearly preparing a solid case to submit if it needs more time. No doubt, the changes caused by the pandemic have influenced routes and competitiveness. IAG could benefit from changes in the Spanish market, or it could work against it.
What do you think of the acquisition? Will the Commission let it go ahead? Let us know your thoughts in the comments.