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IAG looks set to scrap its planned acquisition of Spanish airline Air Europa. The airline group announced on December 15, 2021, that it is in “advanced” talks with Air Europa parent Globalia to end the planned deal, which has had a turbulent history since first being announced in 2019.
“International Airlines Group (IAG) (“IAG”) and Globalia today confirm that discussions are at an advanced stage to terminate the agreement signed on 4 November 2019 and amended on 20 January 2021, under which IAG’s subsidiary, Iberia, had agreed to acquire the entire issued share capital of Air Europa,” the airline group said in a brief stock exchange statement.
IAG had originally agreed to buy Air Europa for €1 billion ($1.13 billion) via Spanish subsidiary Iberia in November 2019 but slashed the price to €500 million ($564 million) after the COVID-19 pandemic hit. IAG also owns British Airways, Vueling, Aer Lingus and Level.
The deal then came under scrutiny by European Union competition authorities, with the European Commission raising concerns on June 29, 2021 that the planned deal for Spain’s third largest airline could reduce competition on domestic and international Spanish routes.
To ease those concerns, Iberia submitted remedies to the Commission on October 27, 2021. IAG chief executive Luis Gallego said on November 5, 2021, that IAG was expecting a decision from the Commission by January 4, 2022, but admitted he was feeling “less optimistic” about the deal than previously.
“We always said that if we can find a place that is good for all of us, we will do the deal. And if not, we don't do the deal, as we have done in other occasions when we have deals that we consider didn’t make sense for us,” Gallego told analysts after the group reported third-quarter results on November 5, 2021.
He added: “So to be honest, today, I am less optimistic than I was before. But we are working hard and Iberia people also they are trying to close this agreement, because I think it has an important strategic value for the Group, and not only for the Group, for Madrid hub.”
A spokesman for IAG declined to comment further on the reason behind the decision when contacted by press on December 15, 2021. The company said in the stock exchange statement that it would provide a further update in the future, “as appropriate”.