Airlines do not buy other airlines in an attempt to eliminate competition.
Of course not. Consolidation of american airlines had nothing to do with this. It was done for altruistic reasons. Particularly AIR TRAN´s and VIRGIN AMERICA´s purchase.
Successful airlines learn to compete.
And they are even more succesful with less competition.
IAG summarised their reasons for acquiring Air Europa. You can find a presentation here:
Do you take face value everything they tell you?
The priority for IAG is strengthening its position in the Europe-Latin America market, aiming to create an airline group that is better able to compete in that market. In a number of countries, one strong airline has been seen to be better able to compete in the global market than two airlines that compete with each other.
This is exactly the opposite of what you are saying.
History shows that where an airline buys a competitor, competition is not eliminated; new competition will soon come along.
It will take years, if not decades, for another airline to reach the point where Air Europa is now. Some airlines will step in in some routes but it is unlikely that an airline will develop a strong hub in Madrid. IAG is buying peace of mind for years.
The market in Europe and the market in the US are different environments. In particular, in Europe for a number of reasons national boundaries limit consolidation. This structural difference makes it difficult to directly compare the markets in Europe and the US.
In this thread a debate around competition in the US domestic market would take us off topic.
“Eliminated” implies no competition, and you say “less” competition.
What do you mean by “more successful”?
What examples are you thinking of? Which airlines in Europe have acquired another airline, enjoyed the benefit of no or less competition, and then been “more successful” over a sustained period?
What evidence do you have for your claim?
IAG shares are traded on the London Stock Exchange and the ‘Spanish Stock Exchanges’ (the stock exchanges of Madrid, Barcelona, Bilbao and Valencia). Therefore, IAG is obliged to follow strict protocols around what it says about financial performance and its investment plans.
The IAG share price and its ability to raise money will be affected by what it says.
IAG presented its proposed acquisition of Air Europa as a strategic investment with the aim of strengthening the group’s position in the Europe-Latin America market.
Airline and investment analysts will be looking very closely at IAG’s proposed acquisition. If analysts are not comfortable with what IAG says, they will not hesitate to say so.
Knowing that IAG is obliged to follow strict protocols around what it says about its investment plans, I do accept what IAG says at face value.
I do believe that IAG’s objective is to strengthen its position in the Europe-Latin America market.
I do not for one moment believe that IAG thinks that by acquiring Air Europa they will eliminate or significantly reduce competition.
The IAG (Iberia) acquisition of Air Europa is similar to the BA / BCal merger and the Air France purchase of UTA. In both these cases the objective was to create an airline with a global network that was better placed to compete with other large carriers.
BA merged with BCal to extend the network. That merger did not eliminate or reduce competition. On a number of the former BCal longhaul routes BA faced competition from Virgin and others. On the former BCal shorthaul routes BA quickly faced competition from Air Europe, then Dan Air, then easyJet and a number of others.
I have not suggested that we will see another airline reach the point where Air Europa is now. That will not happen. As others have said, the Spanish longhaul market is not large enough to support two carriers that compete with other airlines as well as competing with each other.
Rather, on shorthaul routes a number of different airlines will quickly replace Air Europa. This may be Volotea, easyJet, Ryanair or others basing aircraft in Spain and operating a number of former Air Europa routes, or may be airlines like Transavia, Eurowings, Aegean or others operating one or two routes from their bases.
On longhaul routes to and from Spain the combination of Iberia and Air Europa will continue to face competition from Delta, United, Latam, Avianca, Evelop and others (see post 354).
For passengers making journeys originating outside Spain, Iberia and Air Europa will continue to face competition from Skyteam, Latam (until they join Skyteam), the Star alliance and other airlines based in the Americans and Europe.
The acquisition is good for Air Europa customers, good for Air Europa employees, good for Globalia, good for Iberia and good for IAG.