British Airways and Iberia parent International Airlines Group (IAG) has terminated its deal to acquire Spanish carrier Air Europa from owner Globalia after concluding “the current regulatory environment” in the EU is too hostile.
IAG confirmed its decision to terminate the agreement following the closure of financial markets in Europe yesterday (Thursday) to coincide with release of the group’s half-year results.
The group had announced a deal to acquire Air Europa in February 2023, with IAG purchasing the majority 80% stake owned by Globalia for €400 million.
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IAG already owned a 20% stake in Air Europa, acquired in August 2022, and continues to hold these shares.
In a statement, IAG reported: “The Board of Directors has concluded that in the current regulatory environment it would not be in the best interests of shareholders to continue with the transaction.”
The group noted its assessment that the takeover was “no longer probable”. It will pay Globalia €50 million as a break fee as a result of the termination.
IAG chief executive Luis Gallego said: “We believe this decision is in the best interests of our shareholders. IAG remains committed to its strategy, including competing effectively from its Madrid hub.
“This is a strategy which is delivering strong results [and] we will continue to develop our presence in Madrid so that the hub can develop as a rival to Europe’s largest hub airports.”
IAG first signed a deal to acquire Air Europa for €1 billion in 2019 ahead of the Covid-19 pandemic. This was abandoned in 2021 during the pandemic after EU regulators indicated IAG’s proposed ‘remedies’ were insufficient to address competition concerns.
However, the group made a €100 million loan to Air Europa which was converted into a 20% equity stake 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 likely to be a challenge as IAG already owns Iberia and Barcelona-based Vueling.
Gallego noted at the time: “This agreement will enable 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 noting “preliminary concerns” that the transaction could reduce competition on domestic, short-haul and long-haul routes in and out of Spain.