Seems that the airline might stay independent as IAG is looking to save money with the current ongoing crisis. At the same time Air Europa might just accept the previous terms from the deal made with IB.
This thread is like déjà vu all over again.
Earlier this year there was a long thread covering the proposed IAG purchase of Air Europa.
See: IAG to buy Air Europa for €1 billion
On 7th May Wille Walsh said the process for IAG to acquire Air Europa was ongoing, and noted that the agreement between the pair did contain a price adjustment mechanism. “We still have to go through the full competition regulatory approval process. And that is ongoing. So at this point, the process continues.”
If IAG decided to walk away from the deal, there would be a public announcement.
Last year IAG released a presentation on their proposed acquisition of Air Europa. The presentation makes it clear that the priority for IAG is strengthening its position in the Europe-Latin America market. IAG state that the IAG share of the Europe-Latin America market will increase from 19% to 26% if the deal is approved. IAG gives the AF/KL plus LATAM (future Skyteam) share as 27%.
EU Regulators are considering the acquisition. If the Regulators find that the proposed acquisition will limit competition, it does not mean that the deal must be blocked. Rather, the Regulators may call for conditions that allow competition to continue in the relevant markets.
IAG will have to decide whether the proposed acquisition is still attractive after any concessions they are required to make.
IAG manages expenditure very carefully. IAG has confirmed that it will pay a €40-million break fee to Globalia if the transaction does not proceed. This suggests that IAG is confident of approval with acceptable conditions.
The EU is pro-consumer. EU competition law seeks to maintain competition and to protect consumers from anti-competitive behavior.
To enable competition, EU Regulators have in previous cases made their approval of an airline acquisition, merger or joint venture conditional on the removal of barriers to entry.
In the EU rules on acquisition it says: “…the entry of new competitors may be regarded as a competitive constraint which is sufficient to prevent or thwart the potential anti-competitive effects of the concentration.”
For example, EU approval of the BA acquisition of bmi was conditional on, amongst others things, BA releasing suitable slots at Heathrow to enable other airlines to offer UK domestic services.
See: https://ec.europa.eu/commission/pressco ... /IP_12_338
The acquisition of Air Europa will not give the IAG group dominance throughout the EU. However, the deal would give the IAG group a strong position in Spain, and particularly in Madrid.
It seems likely that the regulators will require IAG / Iberia to release slots to potential competitors to enable them to enter the market. Anticipating this, IAG has offered slots at Madrid for Volotea.
If the proposed acquisition of Air Europa is approved and goes ahead then EU competition law applies.
Anti-competitive behaviour is prohibited by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).
Two main types of anti-competitive activity are prohibited, one of which is ‘Abuse of a dominant market position’ (under the Article 102 prohibitions). This prohibits businesses with significant market power unfairly exploiting their strong market positions.
To be in a position of dominance, a business must have the ability to act independently of its customers, competitors and consumers. Establishing if a company is dominant requires an assessment of a number of elements but, as a general rule, if a business has a 50% market share there is a presumption that it is dominant. However, dominance has been found to exist where market share is as low as 40%.
There are few if any barriers to other airlines that might want to enter the shorthaul markets currently served by Air Europa, particularly if slots are made available.
Established airlines would have to decide whether they are likely to make a profit. If an airline believes it has a compelling value for money offer then it can be confident of being able to compete with a dominant competitor.
Ryanair, easyJet and Wizz have shown that they are willing to try new markets and that they are perfectly capable of competing profitably with other carriers. Where they have not been happy with the results, they have simply moved resources (aircraft, crews etc.) from one market to another. This flexibility means that for those carriers there is little risk in entering, or re-entering, Air Europa markets.
Ever since childhood, when I lived within sight of London Airport, I have seldom seen a plane go by and not wished I was on it.”
With apologies to Paul Theroux - ‘The Great Railway Bazaar’