Air Europa Deal Pending, IAG CEO Encouraged By Lufthansa-ITA Approval

FARNBOROUGH—International Airlines Group (IAG) CEO Luis Gallego told an audience at Farnborough Airshow that recent action by the European Commission (EC) bodes well for its proposed acquisition of Air Europa.

“After the Lufthansa-ITA [Airways] approval, we expect that means the EC understands that consolidation is good for the industry,” Gallego said July 22 during a panel discussion.

Lufthansa is taking an initial 41% stake in ITA after receiving EC approval for the deal on July 3—approval that is conditional upon Lufthansa’s compliance with certain remedies to assuage competition concerns.

Should IAG get its own approval by Aug. 20—the EC's investigation deadline—Gallego sees potential to wrap up the rest of the deal’s hurdles by the end of 2024. The parent company of Iberia, Level, Vueling, British Airways and Aer Lingus, IAG first announced its intent to acquire Air Europa in November 2019, and renegotiated terms after the onset of the pandemic. In January, the EC’s competition regulator launched a Phase II investigation of the takeover, prompting IAG to propose remedies the following month.

“Because aviation is a business worldwide, we need to compete with the big carriers in the world," Gallego said. “If in Europe, we want to lead the sustainability path, and in Europe we want to have volume to compete in the world, we need more consolidation.”

Looking ahead, other evaluations could still be in the works, as TAP Air Portugal remains an intriguing possibility for the Group. IAG is one of three European legacy groups that has expressed interest in TAP amid stalled efforts by the Portuguese government to privatize the carrier. According to reports from local media, news on the status of that process is expected in September.

“We are always analyzing opportunities,” Gallego said. “Now the main focus is Air Europa, but we said TAP could be interesting for us depending on the conditions,” citing the flag-carrier's access to the Brazilian market, former colonies of Portugal, and new traffic to the U.S. “We know that now the new government, they want to restart the [privatization] process again,” Gallego said. “It’s something that can be interesting for us, but we don’t know the conditions.”