IAG ‘facing possible objections’ to Air Europa takeover bid

British Airways owner IAG is reportedly facing fresh resistance  from EU antitrust regulators over its €400 million bid for Air Europa if it does not offer remedies.

The European Commission opened an in-depth investigation into IAG’s ambition to gain sole control of the Spanish carrier a month ago.

Brussels voiced “preliminary concerns” that the transaction may reduce competition for services on several domestic, short-haul and long-haul routes in and out of Spain.

IAG, which also owns Iberia and Spanish budget carrier Vueling, and Air Europa operate an extensive network of domestic routes in Spain, short-haul routes within the Europe as well as long-haul routes, in particular to and from Latin America. 

IAG could see a statement of objections setting out the Commission’s concerns about the deal in the coming weeks if no remedies are offered before then, a source told Reuters.

Separately, the Financial Times reported that the Commission was poised to detail objections as early as next month in a move seen as amounting to a warning that the transaction faces a veto unless credible concessions are made. 

Regulators fear the deal will reduce competition on Spanish domestic and international routes, and have been studying whether the merger would make it difficult for rivals to offer their services or have other indirect effects such as raising prices.

The Commission, which is set to decide on the deal by June 7, did not respond to a request for comment.

The companies terminated a previous deal after EU regulators indicated their remedies were insufficient to address competition concerns.

IAG and Air Europa entered into an understanding with two Spanish airlines as “potential remedy takers” but they decided not to submit remedies during a separate probe in 2021.

The Commission announced the opening of a new in-depth investigation under EU merger regulations on January 28 into the effects of the proposed transaction to determine whether it is likely to significantly reduce effective competition.

IAG wants to buy the 80% of Air Europa it did not already own from Spain’s Globalia.

IAG declined to comment to the FT but pointed to a statement last month by chief executive Luis Gallego, who said the company was readying remedies to appease the commission’s concerns. 

“We remain committed to closing this transaction as quickly as possible in 2024 to start delivering the deal’s benefits for consumers and the wider Spanish economy, and increase Madrid’s competitiveness with other European hubs,” he said.

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