UK Regulator Begins Investigating IAG’s Air Europa Purchase

In 2019, the International Airlines Group (IAG) announced its plans to acquire Spanish carrier Air Europa. The deal with the Mallorca-headquartered SkyTeam member has since come under extensive scrutiny from groups like the European Commission. Now, a UK competition regulator is also taking a closer look at the merger’s potential impact on certain markets.

UK Regulator Begins Investigating IAG’s Air Europa Purchase
It has been two years since IAG announced its plans to purchase Air Europa. Photo: Getty Images

A two-month process

Last week, the UK’s Competition and Markets Authority commenced an inquiry into IAG’s proposed purchase of Air Europa. It informed the relevant parties of the investigation on November 19th, and invited comment from them within 10 days, by November 29th.

According to FlightGlobal, the CMA has initially given itself two months to conduct the inquiry and come to a provisional decision. This means that it has until January 19th, 2022 to make its mind up on a key question regarding the IAG takeover. Specifically, it wants to ascertain whether or not the merger will reduce competition in air markets concerning the UK.

Potential for a formal investigation

According to Barry & District News, the outcome of the inquiry on January 19th will determine whether or not the CMA will launch a formal investigation into the matter. This could extend the story of IAG’s takeover further, having already lasted more than two years.

Air Europa getty
The CMA has two months to determine if IAG’s takeover will reduce competition. Photo: Getty Images

During this time, the price of the deal has fallen by 50%. IAG’s initial announcement of its acquisition of Air Europa carried a €1 billion ($1.13 billion) price tag. However, the COVID-19 pandemic has been a hammer blow to the aviation industry. As a result, the price of the deal has now sunk to €500 million ($564 million). This figure was set in January 2021.

It will be interesting to see what impact the CMA’s inquiry has on the process. Simple Flying has reached out to Air Europa for a comment on the matter. Meanwhile, Reuters notes that IAG has already issued the following statement regarding the preliminary investigation:

We will collaborate with the CMA. The London-Madrid route is highly competitive and is already part of the European Commission [investigation] process.”

Air Europa Boeing 737 Getty
The European Commission is also presently scrutinizing the deal. Photo: Getty

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Already under scrutiny from the EU

As alluded to in IAG’s statement, the CMA isn’t the only regulator currently taking a closer look at the group’s takeover of Air Europa. Indeed, Simple Flying reported in June this year that the European Commission, the EU’s regulatory body, is also examining the process. The group held concerns regarding the takeover’s competition impact on the Spanish market.

The EU’s deadline for its inquiry was November 5th. However, after IAG requested an extension less than a month after the investigation began, this was pushed back to December 3rd. FlightGlobal notes that the deadline is now set for January 4th next year. With both deadlines now in that month, January will certainly be a key time for all involved.

What do you make of IAG’s planned purchase of Air Europa? Have you ever flown with the Spanish SkyTeam member? Let us know your thoughts and experiences in the comments.