HomeAir LineIAG and Air Europa: second time's the charm

IAG and Air Europa: second time’s the charm

A failure of the merger can only be due to misgivings from other countries, and not to the operation as such.

Air Europa Boeing 787-9 Dreamliner, landing at the Gran Canaria airport, in Telde.BORJA SUAREZ (REUTERS)

The new attempt to purchase Air Europa by the aeronautical holding company IAG, previously frustrated in 2019, seems much more solid this time than the first. The possible weaknesses of the project were detected at the time and are now known, and there may be clear solutions for the opposition of the European Union, which could clearly see at that time problems in an operation that threatened market competition.

Let us remember that the year 2019 was also lengthy in these attempts, due among other reasons to low interest rates and the need to position itself in the market to survive the low-cost policies of some agents. Europe’s large airline companies struggled to continue consolidating their position in the market, while many small airlines began to go bankrupt or merge to withstand the challenge, which later with the pandemic became a full-scale disaster.

After the foreseeable entry into phase 2 of the investigation by the community executive, which, in compliance with its mandate, continues to carry out the necessary investigations, a window of 90 business days is opened, that is, until June 7. During this period, it will be possible to decide whether or not to approve the purchase operation, as well as under what conditions.

In this context, IAG also has this period to grant a series of concessions based on the experience acquired in its first time, with the aim of ensuring the success of the proposed operation, but this time with the homework done to alleviate the uncertainties and dysfunctions regarding the most problematic routes. In fact, some first concessions were already delivered before the deadline expired, which will possibly be extended. With this action, it becomes evident that a situation is not being prejudged by the community entity, rather the opposite: that it is examining the possible viability or not of the project.

On the other hand, and landing, never better said, the issue on a more domestic level, there is no doubt that this future intervention will be a before and after for the positioning of Spain and Madrid on the international scene, because will reinforce the Madrid hub, strengthening the country’s connectivity, expanding the airport and giving more meaning even to the construction of a future second civil airport (independent of the Cuatro Vientos military aerodrome), which will positively impact the economy and consumption region of.

The acquisition of Air Europa by the aeronautical holding IAG is key for Adolfo Suárez Madrid-Barajas to establish itself in European leadership, making it a reference hub in the Old Continent due to its special geographical location, especially in destinations such as Latin America, and developing it towards Asia with new routes and airlines that can operate in these areas. Barajas will become a large hub that competes from southern Europe with other large airports such as Paris-Charles de Gaulle or Frankfurt, which may exert certain pressures on the European environment.

The community regulator, as well as many experts, tend to point out that the future merger could be detrimental to competition, and could reduce it in the market for air passenger transport services, both at the national level (in which I sincerely believe that there are more important things to attend to on the table, and there seems to be no concern in this regard) long and short distance, as in the international.

I have no doubt that these aspects are not really difficult to mitigate in the current framework of the European Union, and I believe that the Community Executive should focus more on ensuring that the slots are met, and that the provision of air services by the from other airlines. It seems unstoppable, not even for competitive reasons, for Madrid to become the intercontinental hub that it is destined to be.

Therefore, it is clear that the economic impact will be very positive for the interests of Spain in all aspects, and will give the possibility not only of increasing resources directly, but also indirectly, with the current planning that makes the effective competition.

It will be good news for consumers and users and will generate wealth and employment in the region, accelerating other investment projects, which will also benefit Spanish society as a whole. It does not seem that this time the European entity has compelling reasons to prevent the operation, at least from the point of view of the values ​​that the European Union itself protects. A failure of the merger could only be due more to the misgivings of the rest of the countries, and of their own airlines, especially the low-cost airlines, than to the operation itself.

Victor Fermosel He is a professor at EAE Business School.

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Source: Cincodias

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