Proposed acquisition of Air Europa by IAG: Commission opens in-depth investigation

Europe
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On 29 June 2021, the European Commission opened Phase II merger control proceedings on IAG's proposed acquisition of Air Europa because of its potential impact on the Spanish air services market.

In May 2021, IAG notified the European Commission of its plan to acquire the airline Air Europa under the merger control procedure.

After a preliminary examination of the project, the European Commission decided on 29 June to open an in-depth investigation because of serious doubts as to the compatibility of the proposed merger with the internal market. The Commission is concerned that the proposed transaction could reduce competition in the Spanish passenger air transport market

Both airlines are among the top three providers of scheduled passenger air transport services in Spain, and each operates both domestic and international routes to and from Spain. They are also both active in the air cargo market.      

The preliminary market investigation revealed that the two airlines compete on a large number of direct routes, some of which they alone operate. As a result, competition could be significantly reduced on 70 origin/destination city pairs, both within Spain and to/from Spain. 

As Air Europa also plays a feeder role for other airlines (through its network of domestic and short-haul routes), for example at Madrid airport, the Commission is concerned that the proposed merger would have the effect of restricting the services offered by these other airlines, which might be forced to cease international operations on the routes also served by IAG, to the detriment of consumers. 

The Commission also found that other airlines, including low cost airlines, European network airlines and Latin American airlines would not provide  sufficient constraint on the merged entity, in particular on routes where it would have high market shares.

It should be noted that such an analysis is all the more complicated to carry out in this period of health crisis which is seriously affecting the air transport sector and whose recovery is still uncertain. The Commission stressed that it was having difficulty assessing the impact of this crisis on the competitive environment in the medium and long term, both on Air Europa's activities and those of IAG and their competitors. At this stage, no commitments have been proposed during the preliminary investigation.  

The Commission, which has until 5 November 2021 to take a decision, will now carry out an in-depth examination of the effects of the proposed transaction to determine whether it is likely to significantly reduce effective competition. 

In this respect, interested third parties have 15 days from 6 July 2021 to submit any observations on the proposed concentration to the Commission. The relevant information for this purpose is available here.