In a surprising turning point in the European aviation market, International Airlines Group (IAG) has abandoned its planned full takeover of Air Europa. This decision was made in early August 2024 and marks a significant step in the ongoing consolidation of the sector. The decision by IAG, the parent company of British Airways, was influenced by strict antitrust requirements imposed by the EU Commission, which significantly limited the deal. Now Lufthansa appears to be emerging as a possible new player on the scene, with the aim of acquiring both Air Europa and TAP Air Portugal.
The planned takeover of Air Europa by IAG was a strategic move aimed at strengthening the market position of British airlines in the European and especially South American markets. Air Europa, known for its extensive network in South America and its modern fleet, was seen as key to IAG's growth. But the EU Commission stood in the way of the deal. It demanded that IAG make extensive concessions, including the surrender of valuable slots and routes in Madrid, in order to ensure competition and avoid monopoly-like structures.
IAG therefore decided to abandon the takeover as the terms demanded were not considered to be in the best interests of shareholders. However, the missed opportunity could open new avenues for other market participants who may also have an interest in the Spanish airline.
Lufthansa: A new interested party for Air Europa
In this context, Lufthansa has come to the fore. According to a report by "WirtschaftsWoche", the German airline has sent a delegation to Llucmajor in Mallorca to discuss possible options with Air Europa. While the details of the meeting have not been officially confirmed, insiders report that it was about "possible cooperation" and a detailed review of Air Europa's business processes.
Air Europa, which has 51 aircraft including 24 Boeing 787s, has an attractive network, particularly to South America. This region is of growing importance for global aviation as it offers both tourist and business connections. Lufthansa may be pursuing a strategic acquisition to increase its exposure to this important market and increase market share on the continent.
Air Europa: A valuable jewel in the aviation market
Air Europa is a major player in the European aviation market and has a solid network system that covers South America in particular. The company is 80 percent owned by the Spanish tourism group Globalia, while IAG already holds 20 percent of the shares. IAG had already offered 400 million euros for the Globalia share, which shows the high valuation and strategic value of Air Europa.
The airline has a healthy cost structure and a high proportion of self-payers, making it financially stable. These factors could prompt Lufthansa to seriously consider how it could integrate the company into its group.
Parallel interest in TAP Air Portugal
In addition to its interest in Air Europa, Lufthansa is apparently also exploring the possibility of acquiring a stake in TAP Air Portugal. Lufthansa is reportedly considering a stake of up to 19,9 percent in the Portuguese airline. This threshold is below the limit at which approval from the EU Commission would be required. Such a stake would enable Lufthansa to further expand its presence in Europe and South America without having to overcome the regulatory hurdles of a complete purchase.
TAP Air Portugal, also a major player in the South American market, offers Lufthansa another opportunity to diversify and strengthen its market strategy. The acquisition of TAP or parts of it could further strengthen the Lufthansa Group and improve its position in international competition.
The changing market of European airlines
The withdrawal of IAG and the new movements in the market show how dynamic and competitive the European aviation industry is. The developments around Air Europa and TAP Air Portugal illustrate the complex strategic considerations behind large acquisitions and investments. Lufthansa is potentially positioning itself as a major player in this area and the next steps will be crucial for how the market will develop.
Only time will tell whether Lufthansa can achieve its objectives regarding Air Europa and TAP Air Portugal and how these moves will affect competition and the structure of the European aviation market.
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