IAG/Iberia Purchases Air Europa For €1 billion; Air Europa To Leave SkyTeam

Just released minutes ago: https://www.iairgroup.com/en/newsroom/press-releases/newsroom-listing/2019/iag-air-europa

International Airlines Group (The company that owns British Airways, Iberia, Aer Lingus, Vueling, LEVEL, etc) has announced it will purchase Air Europa for €1 billion.

Initial Thoughts:

  1. That’s huge.
  2. Didn’t see this coming.
  3. More dominance in Madrid… higher fares…

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  • Air Europa, based in Madrid, has a rather extensive fleet with A330s, 787-8s, and 787-9s.

Highlights:

  • Transforms IAG’s Madrid hub into a true rival to Europe’s four largest hubs: Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle.
  • Re-establishes IAG as a leader in the highly attractive Europe to Latin America and Caribbean market.
  • Offers significant synergy potential in terms of cost and revenue.
  • EPS accretive in the first full year and accretive to IAG’s return on invested capital by the fourth year after Completion.
  • Completion is expected to take place in H2 2020 following receipt of relevant approvals.

IAG CEO Willie Walsh:

“Acquiring Air Europa would add a new competitive, cost effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership, therefore generating additional financial value for our shareholders.
IAG has a strong track record of successful acquisitions, most recently with the acquisition of Aer Lingus in 2015 and we are convinced Air Europa presents a strong strategic fit for the group.”

  • Air Europa is one of the leading private airlines in Spain, operating scheduled domestic and international flights to 69 destinations, including European and long-haul routes to Latin America, the United States of America, the Caribbean and North Africa. In 2018, Air Europa generated revenue of €2.1 billion and an operating profit of €100 million. It carried 11.8 million passengers in 2018 and ended the year with a fleet of 66 aircraft.

The Air Europa brand will initially be retained and the company will remain as a standalone profit centre within Iberia run by Iberia CEO Luis Gallego. The managements of IAG and Iberia anticipate opportunities to unlock value through the Acquisition across three key areas:

  • Integrating Air Europa into the existing Iberia hub structure at Madrid;
  • Creating commercial links between Air Europa and other IAG operating companies, in addition to inclusion into IAG’s joint businesses;
  • Integrating Air Europa onto the IAG platform of common services.

By 2025:

  • Adding reciprocal intra-group codeshares across all connecting gateways;
  • Adjusting timings to maximise connectivity through the Madrid hub;
  • Aligning commercial policies and integrating sales forces in home markets;
  • Integrating Air Europa into existing IAG joint businesses; and
  • Integrating Air Europa into the Avios currency for loyalty.
    .

This is a HUGE shift with another airline. Air Europa is apart of SkyTeam and has codeshares with airlines like Air France, KLM, Delta, Alitalia, and other SkyTeam members.

Updated information shows Air Europa will officially leave SkyTeam: https://www.ch-aviation.com/portal/news/82995-iag-confirms-air-europa-to-exit-skyteam

There has been a giant shift in alliances in the past year or so with China Southern leaving SkyTeam for American Airlines and LATAM leaving Oneworld for Delta.

At this point, IAG is completely gaining dominance in Spain with its main airline Iberia and low-cost carrier Vueling in Barcelona.

What are your thoughts on this?

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I agree with all those three points. Very interesting move not benefitting competition in Spain considering both Iberia and Vueling are part of IAG as well. We’ll see what this means for regional routes (e.g. Air Europa Express) and prices/customers.

Thanks for sharing!

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Oh, wow. That’s… a lot of money. Interesting move here. Shame that Air Europa will have to probably leave SkyTeam… :(

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I’m assuming they’ll cut routes that overlap with Iberia/Vueling to decrease overcapacity.

I’m assuming this will be struck down by Spanish courts as a monopoly? Although looking in the past they don’t have a very good history of doing that.

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That’s my fear, but I am not too sure about actual load factors. Also the Embraer Fleet doesn’t fit into the Iberia regional CRJs not in the Iberia A320family, with the same going for the B787 on Laing-haul which isn’t fitting into Iberia’s all-Airbus long haul fleet.

Very interesting to see what will happen to the Air Europa Brand and their aircrafts in the future!

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Apparently this was already approved by the governments which is why IAG announced it. Though, it’s unconfirmed.

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This more evidence of how alliances are becoming irrelevant and private partnerships are the way of the future as seen with Delta and it’s partners in recent months.

Your joking… I was talking with my friend about this and how it would become a Spanish monopoly but here it is! IAG need to calm down

I always wondered how they can survive next to Iberia. And i am not talking about things like service, on time performance, cabin product where Iberia is not really the benchmark of the airline industry. But the bill will paid by the customers. Where there was competition before is now a market dominated by one airline group. The same scenario happened when Air Berlin finally went bankrupt. LH’s CEO promised that ticket prices will not rise. Just a week later a ticket from Hamburg to Frankfurt ( 40 min flight ) cost more then 1000 Euro, that went down but still prices are around 20-50 percent more expensive then before.
Air Europa has a very competitive cabin product on their new 787-8 and 787-9. Lot of legroom in economy class, a nice lie flat business class, very good meals and wines in all classes…made some pictures during one of their 787 deliveries…


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Don’t forget they’re getting a new Business Class product.

https://billete996.aireuropa.com/wp-content/uploads/2019/02/Business-787-9-1170x659.jpg

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Air Europa confirms it will exit the SkyTeam alliance:

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Interesting… looks like they’re going to continue expanding in both fleet and airlines.

I’m flying Air Europa in a couple weeks on one of their A330s, but the fare was only around $45… interested to see how much it will increase. Iberia is pretty cheap from what I’ve seen as well for international flights, so I don’t think it’ll be too much of a difference.

Didn’t see this coming though, but I guess lots of unexpected changes happen like Lufthansa might be buying Alitalia and Delta’s stake in Latam…

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Wow: Didn’t See That Coming

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Not good at all: https://cincodias.elpais.com/cincodias/2019/11/04/companias/1572858133_799892.html

Iberia, Air Europa, Vueling and Air Nostrum account for 72% of passengers on domestic flights.

Even though Iberia’s total domestic market share will increase by 14%, that’s still a massive dominance.

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