Believes that IAG’s acquisition may lead to “higher prices and lower quality for travelers” by reducing competition and could prevent competition.
- Aerolneas Iberia closes the purchase of Air Europa for 500 million
The European Commission announced on Tuesday the opening of an in-depth investigation into the purchase of Air Europa by the giant IAG. Brussels believes that there is an obvious danger that the operation “could reduce competition in the market for air transport of passengers”, both on internal routes and Espaa as in the international ones that have our country as their starting point or destination. Competition is now given 90 days to make a decision. An investigation does not presuppose any results and could conclude with giving the green light to the purchase or an authorization but forcing some changes or conditions, but it can also end in a veto, preventing it from materializing.
“IAG, which has Iberia and Vueling among others, and Air Europa are the leading airlines in Spain. They are also key providers of connectivity between Spain, the rest of Europe and Latin America. We will carefully evaluate whether the proposed transaction would negatively affect the competition on both domestic and short-haul routes to and from Spain, possibly leading to higher prices and reduced quality for travelers. Although the financial situation of many airlines is still fragile, there are indications that the Demand for air transport services is recovering from the coronavirus crisis. That is why it is important to ensure that the recovery of the sector takes place in a competitive environment that preserves sufficient options for travelers, “the European Commissioner said in a statement. Competition, Margrethe Vestager.
The transaction was announced in May 2020, but the Commission has waited until it has sufficient evidence of something that many in the sector have denounced from day one. The preliminary investigation (the opening of an in-depth investigation is the initial step of opening the formal file) has given the technicians enough elements to move forward. “IAG and Air Europea compete hand-in-hand for passenger services in Spain, especially on various routes from Madrid to the United States or Latin America, but also on shared routes,” says the document published today. “At the moment the Commission is concerned that the proposed operation may significantly reduce competition on 70 routes to or from Spain that both airlines now cover directly. In some of them IAG and Air Europea are in fact the only ones. operators “, they recall in the institutions
Similarly, in Brussels there is concern about what effect the purchase of one of its main rivals may have on other foreign airlines that depend on the Air Europa network and its Madrid base to connect Europe with certain parts of America. “Without Air Europa traffic, some airlines could close their services to international destinations also covered by IAG, which would limit the options of passengers,” says the summary of the file.
IAG has argued at all times that there are more companies providing services and that passengers were not going to be harmed, but Vestager believes that rivals, including low-cost ones, are not in a position to compensate for the possible loss of options. That it is unlikely that they could pose a real and sufficient challenge for the outgoing merger giant “on routes that would have high market shares. Likewise, the competitive pressure from European or Latin American airlines seems insufficient”, says the initial opinion.
Another of the arguments of the companies that want to join and that is not entirely convincing in Brussels is the impact of the Covid. The EU is fully aware of the effect on tourism, the damage to the sector and the losses recorded and the public aid granted. But it does not buy, not entirely at least, the argument made that after the Covid some routes were doomed to disappear in the planning of either of the two firms separately. “The Commission cannot determine whether in the long term the companies would have continued to compete on each and every route in which they did so before the pandemic. However, the preliminary position is that IAG and Air Europa remain the real competitors. or closest potentials in the investigated routes “,
Now a delicate and urgent phase is beginning. The Commission has 90 working days, until November 5, to pronounce itself. IAG is the third largest airline on the continent, after Ryanair and Lufthansa. It has Iberia and Vueling, but also British Airways, Air Lingus in Ireland and Level. The European Commission is obliged to supervise any operation or merger with companies of a certain size and to guarantee that there is no concentration or collusion that goes against Community rules. In its communiqué, Brussels recalls that right now there are three other large operations, not in the air sector, also awaiting a decision, since the immediate approval for their conclusion has not been given.
The most notorious case in recent years was Vestager’s veto on the merger of Alstom and Siemens, in the train sector, a decision that outraged Paris and Berlin and led both governments to launch an in-depth review of competition rules to try to prevent future blockages of these characteristics. Around the same time, in 2019, the merger of Thyssen and Tata Steel’s steel business also came to a halt. And a decade ago it also prevented the union of Aegean Airlines and Olympic Air in Greece or the purchase of Air Lingus by Ryanair up to two times, in 2007 and 2013.
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George is Digismak’s reported cum editor with 13 years of experience in Journalism