Competition watchdog puts brakes on British Airways’ owner’s £450m acquisition of Spanish budget carrier Air Europa
- CMA weighs whether deal will ‘result in a substantial lessening of competition’
- Deal was announced in November with its value halved from £900m a year later
- Spanish arm has become increasingly influential in the airline conglomerate
Britain’s competition watchdog has put a temporary halt to British Airways’ owner IAG’s acquisition of Spanish budget airline group Air Europa.
The Competition and Markets Authority confirmed today that it is investigating whether the tie-up will ‘result in a substantial lessening of competition’ within the UK.
The purchase of Air Europa was announced in November 2019, with the aim of giving IAG’s existing airlines in Spain – Iberia and Vueling – dominance at the country’s largest airport, Madrid Barajas, and on routes to South America.
Not yet cleared for takeoff: BA owner’s acquisition of Air Europa put on hold by CMA
IAG’s Spanish arm has become increasingly influential in the airline conglomerate,
In December last year it was revealed that IAG would buy Air Europa for £450million, – deferring the payment until 2026 which was half the £900million initially agreed for the carrier.
IAG initially came under fire for pursuing the takeover during the pandemic and spent months trying to reduce the price.
The CMA gave notice to IAG and Air Europa of its investigation on 19 November and has set a deadline of 19 January 2022 for its initial decision.
IAG shares were up 1 per cent in early trading to 150p.
The pandemic and related travel restrictions resulted in a difficult period for all airline carriers including IAG, which could tap shareholders for more cash early next year.
But the reopening of the US to fully vaccinated foreign visitors last month gave a major boost to IAG, which has said it now expects to return to profit by next summer.
Earlier this month, IAG secured a £1 billion five-year credit line for BA, backed by UK Export Finance.
It made a €452million (£387million) loss for the three months to September and it forecasts a €3billion (£2.57billion) loss for the full year. Rivals Air France-KLM and Lufthansa, meanwhile, have returned to operating profit.
IAG shares are up 0.6 per cent year-to-date, but remain 65.5 per cent off their pre-pandemic levels.