We thought it had been abandoned but the plan to buy Air Europa by IAG is still relevant. It will just take time. A lot of time.
A COVID-proof redemption
It was in the fall of 2019, in other words an eternity. We learned like everyone else, surprised, of the proposed takeover of Air Europa by IAG , already owner of British Airways, Iberia, Aer Lingus, Level or Vueling.
Since COVID and past the economic context has postponed the operation until everyone thought it was abandoned. But it is not so since the president of IAG recently declared that the operation would be done but would take time , around 18 months.
Remember that IAG has already paid Globallia, the owner of Air Europa, $75 million for breach of contract and immediately granted it a loan of $100 million that can be converted into equity up to 20% of the latter.
Operations that will not be lost funds for IAG, especially since after the crisis the price of Air Europa will be far from the 1 billion originally planned.
A competition problem?
Initially the case had taken a long time, in particular because of the fear of a European veto for reasons of competition . Indeed, by holding Air Europa, Iberia and Vueling, IAG would be in a more than dominant position on the Spanish market. We do not see why things would have changed in the meantime.
The question of Air Europa’s right to operate in Europe will also arise. The file is still open and the European authorities continue to argue that since IAG does not have a majority of European capital, its companies should not be authorized to operate intra-European flights , hence the idea already mentioned of part ways with British Airways . Unless the operation allows. Globallia to take a stake in IAG and reverse the balance between European and non-European capital?
A new balance of alliances in the European sky
At the time of the announcement, we argued that the takeover would de facto cause Air Europa to switch from Skyteam to OneWorld , something quite obvious if the operation is done one day. Of course this would be a weakening of Skyteam on a major country in terms of tourism in Europe.
But the thing would be even more critical today when everything suggests that except for a sleight of hand which would lift the ban on Air France-KLM investing in a company as long as it has not reimbursed its COVID-related state aid, ITA (formerly Alitalia) is in serious danger of leaving Skyteam to join Lufthansa and Star Alliance .
As a result, Skyteam’s position would be greatly weakened in Europe where it would lose most of its Mediterranean presence.
Conclusion
The takeover of Skyteam by IAG will probably take place within 18 months. An operation which risks colliding with the European regulator but which if it were done would redistribute the cards in the southern European sky.
Image: B787 Air Europa by Luciano de la Rosa via Shutterstock
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