Iberia Shelves Air Europa Takeover And Notifies Brussels


Iberia’s withdrawal of the memorandum of understanding in which the airline anticipated the conditions that could be imposed by the European Commission to approve the operation, makes it practically impossible to get the go-ahead from Brussels. As José Hervás explains today in Capital Madrid: “In the last two weeks there has been a 180-degree turn in the negotiations between the airline Iberia, the IAG group and the European Commission regarding their negotiations to take over Air Europa…. Media involved in the negotiations tell CapitalMadrid.com that the merger will not take place. But they warn that it could be a new strategic move by Iberia”.

The Vice-President of the European Commission, Margaritis Schinas, had the opportunity to explain some details of the difficulties that this decision by Iberia entails for the EU executive to give the go-ahead to the proposed purchase of Air Europa by Iberia. He did so a fortnight ago, when he visited Madrid, on the occasion of the presentation of the 17th Otto of Habsburg Award, in recognition of his commitment to the defence of European values.

The event was attended by the founder-chairman of Air Europa, Juan José Hidalgo, as well as other leading representatives of the Spanish tourism and aeronautical sector. They lamented to the Commissioner the damage that this operation could cause to Spain and, more specifically, to the Community of Madrid.

In terms of employment alone, Iberia itself estimated that the merger could have generated around 30000 indirect jobs, as well as a significant increase in international tourist arrivals.

According to sources involved in the negotiations, the government – which has been more active in recent weeks to make the deal a success – is preparing an alternative offer to Brussels to ensure Air Europa’s viability in the short and medium term if the merger with Iberia fails.

Staff in Air Europa’s new organisational structure, following SEPI’s entry into the company, believe the accounts are in order. And that, although flights have been significantly reduced, occupancy levels guarantee the profitability of scheduled flights. So, despite the depth of the current crisis, Air Europa is viable in the short term with the aid. Even if in the long term it needs to team up with another major airline. This is now made almost impossible by the fact that companies which have received state aid, such as Air France or Lufhansa, cannot buy other companies in the sector.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.