With the acquisition of the airline Air Europa, the International Airlines Group wanted to grow strongly in Spain, but the deal was not a lucky star right from the start. First the transaction volume fell considerably due to the corona pandemic and then the EU Commission showed serious concerns about the approval.

The International Airlines Group has now officially confirmed that it is in negotiations with Globalia to terminate the purchase agreement concluded on November 4, 2019. In other words: IAG no longer wants to buy Air Europa. The owner of the Spanish airline, Globalia, has also confirmed that it is negotiating the IAG's withdrawal from the contract.

Over the past few weeks there have been repeated rumors that the takeover of Air Europa by Iberia's parent company IAG could fail. That there was more to this than was officially admitted at the time also show a few words in the short, joint declaration: The talks should be in an "advanced status". Further information will be announced after the negotiations are over.

The International Airlines Group originally bought its competitor Air Europa for around one billion euros. Due to the corona pandemic, the purchase price was renegotiated and reduced to around 500 million euros. Right from the start there were serious concerns that the EU competition watchdogs could thwart the bill, because Iberia, Air Europa and Vueling would together have an almost monopoly-like position on the Spanish market, especially on long-haul routes.

The EU Commission had reported concerns

It happened as it had to: In June 2021, the EU Commission informed its contractual partners Globalia and IAG that they had serious concerns about competition law and that they would initiate an in-depth review. Voluntary slot donations to competitors such as Volotea were not enough for the authority. The concessions that the International Airlines Group would have to make in order to get the green light for the deal are so extensive that the takeover of Air Europa would not result in any advantage for the group of companies.

While the International Airlines Group can easily cope with the bursting of the deal, because in the event of failure, a maximum of 40 million euros contractual penalty would have to be paid to Globalia, it should be more complicated for Air Europe. The negotiations between the two contracting parties should primarily focus on the amount of compensation, because it is in the nature of things that the IAG wants to pay as little as possible and Globalia wants to get as much as possible.

Air Europa is not considered acutely endangered, but in detail there are numerous questions that raise many question marks about the future of the Spanish carrier. The state aid granted by the government directly and through the Sepi Fund was also explicitly linked to the takeover by the IAG and the subsequent merger with Iberia. It is completely open whether the Spanish government will demand the money back due to the bursting of the deal or whether it will continue to support Globalia or Air Europa and thus keep it in the air standalone.

In theory, Lufthansa could get a bargain

It is considered likely that the Spanish carrier will initially continue to fly alone, but owner Globalia will very soon start looking for a new buyer or at least a partner. Who is eligible for this? Difficult to assess, because even if there were many signs that the takeover by IAG would never take place, many in the industry assumed that the International Airlines Group or the Spanish government would somehow get the deal through in Brussels. In theory, Lufthansa could strike now, because by rescheduling state aid to normal capital market bonds, the ban on acquisitions imposed by the EU Commission has been gotten rid of. Whether the crane is even interested in Air Europa is another matter. In times like these, serious and financially strong buyers are in short supply and therefore it is difficult for Globalia to find a partner or buyer with the necessary change. In theory, Lufthansa could get a bargain, for example, because it will definitely be cheaper than the 500 million euros that the IAG would have paid. Who wants to pay more than a dropped buyer had offered?