British Airways' owner puts brakes on Air Europa takeover bid

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International Airlines Group (IAG), owner of Aer Lingus, British Airways and Iberia has again withdrawn from its takeover bid of €400m for Spanish airline Air Europa. It is the second time it has done so.

IAG already owns 20% of Air Europa, with the remaining 80% belonging to Globalia, a Spanish tour operator. 

Luis Gallego, chief executive officer (CEO) of IAG said: “We believe this decision is in the best interests of our shareholders. IAG remains committed to its strategy, including competing effectively from its Madrid hub. 

“This is a strategy which is delivering strong results. We will continue to develop our presence in Madrid, so that the hub can develop as a rival to Europe’s largest hub airports.”

This move to let go of the bid comes following regulators threatening to obstruct the acquisition, with the group’s previous takeover attempt back in 2021 also stopped by the European Commission. 

This is primarily because of concerns that this takeover could prove to be anti-competitive, and harmful to travellers, as it would mean that Madrid’s key international airport would be controlled mostly by IAG group airlines, namely Iberia and Air Europa. 

Currently Air Europa and Iberia are two of the main Spanish airlines, also responsible for the key routes to the rest of Europe, as well as North and Latin America. 

IAG will now be compelled to pay a €50m break fee to Globalia, as compensation for not pursuing the takeover anymore. This fee was also previously levied on the takeover abandonment in 2021. 

No further concessions on offer

Although IAG has attempted to provide a concessions package including landing and take-off slots to competitors, this has not succeeded in calming regulator concerns. However, IAG has revealed that it is not willing to offer more concessions in order to make the takeover happen. 

Margrethe Vestager, the European Commission’s (EC) executive vice-president in charge of competition policy said on the EC website: “We looked closely at the impact of the transaction on competition, especially on those routes in which alternative flights are limited. 

“Our in-depth analysis indicated that the merger would have negatively affected competition on a large number of domestic short-haul and long-routes within, to and from Spain on which the two airlines compete closely. 

“We were concerned that the transaction may have led to adverse effects for passengers – business customers and consumers alike – in terms of increased prices or decreased quality of services. IAG offered remedies, but taking into account the results of the market test, the remedies submitted did not fully address our competition concerns.” 

IAG sees robust first half profits, brings dividends back

IAG recently announced first half and second quarter 2024 results, seeing an operating profit of €1,309m for the first half of the year. This was €49m more than the corresponding quarter last year. 

The group also announced that it was reinstating dividends, for the first time in five years, with an interim dividend of €0.03 per share. 

Company returns to dividend payments

Regarding the half year results, Gallego said: “We see continuing strong demand for travel in the attractive core markets in which we operate: North Atlantic, Latin America and intra-Europe. We delivered a good performance in the first half of 2024, with operating profit €49m, ahead of the same period last year. 

“We are pleased to announce a return to paying a dividend, which reflects our confidence in the business, our performance and our transformation. We are delivering on our strategy and our commitment to sustainable shareholder returns. We would like to thank our people working across the group for their contribution to these positive results.”

For the full year 2024, the group continues to expect robust travel demand from its key markets of Latin America, intra-Europe and North Atlantic. It also reiterated its full-year capacity growth guidance at 7%. IAG expects non-fuel unit costs to rise slightly. However, it still expects a strong balance sheet and a healthy free cash flow for 2024.