International Airlines Group (IAG) has confirmed that its subsidiary Iberia has pulled out of its bid to acquire Air Europa.
IAG, also parent of British Airways, initially swooped for Spanish carrier Air Europa in a €1 billion agreement in November 2019 to help it establish a position as a leader in routes from Europe to Latin America and the Caribbean.
It was hoped the acquisition would help make Madrid a rival to transatlantic hubs Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle.
In January 2021, the price of the acquisition was reduced to €500 million because of Covid.
However, the European Commission opened an investigation in June amid concerns that the deal would reduce competition on Spanish domestic routes and on international routes to and from Spain.
And last month the UK’s competition watchdog, the Competition and Markets Authority (CMA), launched a probe into whether the deal would harm competition in the UK.
This morning, IAG confirmed: “International Airlines Group and [Air Europa parent] Globalia today confirm that discussions are at an advanced stage to terminate the agreement signed on November 4 2019 and amended on January 20, 2021, under which IAG’s subsidiary, Iberia, had agreed to acquire the entire issued share capital of Air Europa.
“A further update will be made in the future, as appropriate.”
Luis Gallego, IAG chief executive, said: “It is very disappointing that we have had to terminate the current agreement to acquire Air Europa but the decision makes sense due to the market conditions, the deep crisis resulting from Covid-19 and taking into account our desire to maintain a disciplined approach to capital allocation.
“However, we have committed to analyse alternative arrangements with Globalia that could deliver significant benefits. In the same way, we will continue to work with the Spanish Government to guarantee the connectivity of Spain and the development of the Madrid hub.
“As it has for the last 94 years, Iberia will continue to carry out its mission to connect Spain with the world, working hard to strengthen and develop the Madrid hub so that it can compete as an equal with the other European hubs.”