Brussels warns the Iberia-Air Europa merger could raise ticket prices and harm service quality

This is the opinion that European Competition published in its list of objections to the integration of the Hidalgo family airline into the Spanish-British holding company. This is a preliminary decision and by no means final, but it shows the rigidity with which negotiations are being conducted.

After carrying out an “exhaustive” review, the European competition says it found risks to passengers on both domestic flights and flights with Europe and Latin America. Brussels says the operation could reduce competition on a number of national routes, especially those on which high-speed trains offer no alternative, as well as those linking the peninsula with the Canary and Balearic Islands, routes on which both IAG and Air Europa compete directly. “Some of these routes will not have direct competition once operational. In other countries, competition appears to be limited and comes mainly from Spanish regional airlines and low-cost airlines such as Ryanair,” the Commission said in a statement on Friday.

The commission also says there is harm to passengers on short-haul routes connecting Spain with other countries in Europe and the Middle East, on which IAG and Air Europa compete directly or will do so in the foreseeable future. “Competition on these routes appears limited and comes mainly from low-cost airlines such as Ryanair, which in many cases operate from more distant airports, or from traditional destination country airlines,” they detail in the same letter.

Finally, Brussels is also concerned about the impact on ticket prices that the operation’s success on intercity routes could have. Competition suggests that some of these routes will not have direct competition after integration. “In other countries, competition from other airlines appears to be limited and both sides have relatively high market shares,” the text says.

The Commission notes that millions of passengers travel on these routes every year, with total annual costs of more than €3 billion. And that the institution’s goal is to ensure that the transaction does not entail negative consequences for clients, both consumers and companies, in the form of increased prices or deterioration in the quality of services. “The Commission is concerned that, in the absence of appropriate solutions, the liquidation of Air Europa as an independent airline could have a negative impact on competition in these already concentrated markets,” the document says.

Analysis of “protective means”

For Iberia, this was an expected decision and the situation is calm because the Commission has not yet begun to analyze the “remedies” (the waivers that the regulator requires from you to guarantee conditions of free competition in the market). Now comes the decisive phase, which will last until June 10, when Brussels will evaluate the decisions. As Iberia’s new executive president Marco Sansavini has already announced, the proposed package will include the transfer to other competitors of 40% of the flights that Air Europa operated in 2023, with a commitment that no route will be operated exclusively by Iberia and Air. Europe. The race to control these routes involves companies such as Ryanair, Binter and Volotea.

“We continue to work with the Commission to bring together positions and agree on a final solution that will allow this fundamental operation to develop Spain’s connectivity and economy to take place with all guarantees for consumers. Only healthy competition between the hubs of southern and northern Europe and the consolidation of aviation on our continent will allow Europe to compete on equal terms with North America, Asia and the Gulf countries,” sources at Iberia emphasize to the publication.

Hub Barajas

The former flagship company’s parent company reiterates the need for an airport in southern Europe that can compete with those in Paris, Frankfurt and Amsterdam, “as each is home to the headquarters or hub of one dominant airline.” And he argues that the expansion of Adolfo Suarez-Madrid Barajas airport, which will see a €2.4 billion investment, will have a better chance of success if it has a flagship airline capable of carrying large numbers of passengers.