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’sSpanish arms have become more 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.
Initial criticisms of IAG for trying to take over during the pandemic were directed at them. They spent many months trying lower the price.
CMA notified IAG and Air Europa on 19th November of the results of their investigation and set a 19 January 2022 deadline for its first decision.
IAG shares rose 1 percent in the early trading period to 150p
All airlines carriers, IAG included, were affected by the pandemic. IAG was able to tap its shareholders early next year for additional cash.
However, the US’s reopening to all foreigners fully vaccinated gave IAG an important boost. IAG stated it is now expecting to be profitable 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. Meanwhile, rivals Air France-KLM (PS387million) and Lufthansa have both returned to operating profit.
IAG shares have increased 0.6% year-to-date but are still 65.5 percent below their pre-pandemic level.