I agree with your statement. I guess from a non-Spanish point of view VY brand has little recognition. However, in Barcelona it works just fine, and one can argue that even in the Spanish domestic market (non-BCN operations) VY plays a significant role. Those are the reasons why I don't really see Vueling disappearing in favor of Air Europa.
I consider Air Europa's brand recognition in South America as a valuable active which could be wisely used by IAG. It could be the way of entering new rutes or serving less profitable markets, as well as secondary cities, a niche which UX was already focusing on. Given the duplicity of operations, for short-haul it would be more efficient to consolidate all into the Iberia and Iberia Express brands as feeders for long-haul operations. This would strenghten the current second-class position of IB in Europe.
As for the great future plans for expansion in Africa, Middle East and Asia, I remain skeptical. The only reason behind IB acquiring UX was the elimination of competition in the South America market. The fact that IB has repeatedly failed in the African and Asian markets (JNB being the only non-North African route and was suspended pre-COVID 19) has nothing to do with UX's competition in Madrid Barajas hub. It's more about a very bland service, a poor brand awareness outside Europe and America and the constant dependency on LHR's hub.
You only need brand recognition in the markets you operate. In the markets where Vueling is strong, there's brand recognition.
Yes, Air Europa has achieved brand recognition in South America. But Iberia too. And Iberia, as a brand, is way more valuable (IB is the most valuable airline brand in Spain).
The key is to know how Iberia (and indeed IAG) will accommodate Air Europa within the group. They suggest they expect Air Europa to achieve ROIC levels IAG has achieved historically (around 15%). Is that possible IF they focus on the second tier markets? Air Europa's 2019 results suggested a 5% operating margin/profit, which is clearly not enough to achieve a 15% ROIC. Does that mean they will keep Air Europa as a carrier/brand? Or do they write it as a "blink blink" to regulators - "see, we don't plan to get rid off the airline"?
In essence, there remain many unknowns. Only time will tell.
Forget about IB expansion in Africa and Asia. They tried with Africa twice in the past decade. Now they fully retreated from the market. Also, TAP is very strong in that segment (essentially, IB missed the train on how to make those operation a success). In terms of Asia... I have high doubts. The true link between Asia and Southamerica is AF+KLM. IAG is not strong in Asia (yes they operate a handful of destinations, but compared to LH/AF/KLM, it's pretty insignificant). Also, MAD's geographical position is great for South America, but horrific for Asia - in contrast to Helsinki.
Fully agree on your last statement. The idea behind UXs acquisition was to remove their main competitor.