July 11, 2020

Competition will veto routes to give green light to the sale of Air Europa




Once the business negotiation is closed, the sale of Air Europa to Iberia reaches the decisive phase: the approval of the competition authorities. Brussels and the National Commission of Markets and Competition (CNMC) that they will work side by side to analyze the operation and, although the investigation is still in a very initial phase, both organizations have already detected that the transaction could generate a monopoly on some routes.

According to sources in the air sector, those indicated are the route between Madrid and Bilbao and some of those that link the capital with the Islands (both Balearic and Canary Islands). The purchase of Air Europa by Iberia would eliminate competition on some frequencies, which are only operated by IAG or by the airline so far in the hands of the group Globalia. Therefore, these organizations will foreseeably require Iberia to get rid of slots to approve the purchase of Air Europa.

The purchase would also limit competition in other connections, such as the air bridge between Madrid and Barcelona and flights to Seville. However, business sources point out that in these connections there would be a caveat: the AVE. The high speed has a good number of frequencies on these routes (in Madrid-Barcelona accounts for more than 60% of the trips in front of the plane), so in the sector they understand that the competition will remain despite the integration of Air Europe in Iberia. Even more so with the liberalization of rail transport, scheduled for December 14 of next year.

On Monday, Iberia defended itself against accusations of a possible monopoly explaining that the group resulting from the acquisition of Air Europa would have a lower weight than other similar airlines in its hubs. «In fact, IAG's joint share with Air Europa is 39%, a percentage lower than that of competitors in Paris Charles de Gaulle, Frankfurt or Amsterdam», The firm explained. The sector expects that when the transaction is completed each airline will be done with a differentiated market niche.

But the groups involved have not clarified whether this option is on the table. And the acquisition is still in a very initial phase. Neither the European Commission nor the CNMC They have still received the purchase notification, an indispensable step to radiograph the transaction. Once notified, Brussels will have a first period of 25 days to analyze the operation and decide whether to approve or open a second stage of the investigation to conduct a more in-depth evaluation. If the Commission decides to open this second phase, You will have an additional period of 90 days to make a decision.

Brussels and the CNMC will share the weight of the analysis at first. It is true that both airlines invoice a significant percentage of their business outside of Spain, but it is also true that most competition problems would occur in the national market. Therefore, the predictability is that the European Commission and the CNMC act jointly in this analysis, which will require investigating the position of the new Iberia on each route that begins to operate when the operation is closed, in the second half of the year that comes.

Complaints of hoteliers

Despite this, the operation has already begun to stir in the tourism sector. Yesterday, the Hotel and Hotel Association of Tenerife, La Palma, La Gomera and El Hierro (Ashotel) assured that it will follow the process “closely” and that it is studying to go to the European Competition institutions to analyze whether this acquisition is adjusted or Not right.

The hotel sector – like certain consumer associations – fears that the operation will ultimately result in an increase in the prices of flight tickets to the Canary Islands and the Balearic Islands. A factor that could further unbalance tourism in these regions, affected in recent months by the closure of Ryanair and Norwegian bases and the bankruptcy of the tour operator British Thomas Cook.

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