Last Updated: 21 Feb 2024
International Airlines Group (IAG), the parent company of British Airways and Iberia, recently announced that they’ve bought the Spanish carrier, Air Europa. This deal has been cooking since 2019 but faced a fair share of political headwinds. Despite that, the acquisition is now a done deal as per the latest announcement by the company.
So what does this mean for the airlines, passengers, and especially those who collect Avios points? Let’s discuss this in this blog.
Background
If you're not familiar with IAG, it's a big deal in the aviation world. They already own British Airways and Iberia. And Air Europa are a significant player in Spanish and international flights. In short, we're talking about aviation heavyweights here.
Back in 2019, whispers started circulating about IAG's interest in acquiring Air Europa. The acquisition took a while to finalise, thanks in part to political resistance. Many critics and regulators expressed concerns that the deal could impact market competition, potentially leading to higher ticket prices for consumers. But after navigating these challenges, addressing concerns, and making whatever concessions were necessary, IAG successfully secured 100% ownership of Air Europa, effectively making it a key player in the Spanish and broader European aviation markets.
The deal came to a close at €400 million, with a staggered payment plan, ensuring a balanced financial strategy for IAG while also securing its new asset. A chunk of that — €100 million, to be exact — is in IAG shares, giving Air Europa stakeholders a vested interest in IAG's overall performance. This method of payment in shares is a strategic move, often aimed at facilitating a smoother integration of the acquired company into the parent corporation.
Interestingly, the financial relationship between IAG and Air Europa didn't start with this acquisition. IAG had already made a significant financial commitment to Air Europa before the deal was fully inked. In March 2022, IAG provided a €100 million convertible loan to the airline. This not only assisted Air Europa in a challenging economic environment but also granted IAG an initial 20% shareholding in the company, essentially getting its foot in the door and setting the stage for the subsequent full acquisition.
As for the fleet that IAG is inheriting, Air Europa currently operates a selection of 50 aircraft, adding considerable weight to IAG's existing lineup. But that's not all — Air Europa has an additional 15 planes on order to further expand its capabilities. This includes five Boeing 787-9 Dreamliners as well as ten Boeing 737 MAX planes. These new additions are scheduled for delivery in phases between the years 2024 and 2026, signaling Air Europa's commitment to modernising its fleet and, by extension, offering a more efficient and comfortable experience for its passengers.
Strategic Implications
Market Dominance in Spain
One of the biggest takeaways is that IAG now has a virtual stranglehold on domestic flights in Spain. With Vueling, Iberia, and Air Europa under its belt, IAG controls the top three Spanish airlines by passenger numbers. This consolidation could have varied implications for passengers, from fare prices to flight schedules.
Expansion Opportunities
But IAG isn't just looking inward; they're eyeing international skies too. The acquisition paves the way for the group to stretch its wings further into Latin America, the Caribbean, and Asia. And it's all set to take off from Madrid — a strategically placed hub for these destinations.
Branding and Management
Wondering if Air Europa planes will suddenly start looking like Iberia or British Airways? Nope, Air Europa will keep its existing branding. However, Iberia will handle the management. That brings us to the topic that may interest many — the Iberia Avios program.
Impact on Avios Collectors
If you’re looking for Avios reward flights, this is important for you to note. Air Europa will be leaving its current alliance with SkyTeam to adopt — you guessed it — the Iberia Avios program. Essentially, this means you'll be able to book flights with Avios on Air Europa's network. And yes, you can also earn Iberia Avios on these flights. That adds a whole slew of new travel and collection opportunities.
What’s more, since Iberia Avios and British Airways Avios are interchangeable, you have even more options. You can book flights with Avios across a broader network than ever before, from domestic Spanish routes to long-haul flights to Latin America and Asia.
Final Thoughts
The acquisition of Air Europa by IAG is a game-changer in multiple ways. From dominating the Spanish domestic flight market to expanding into new international territories, this deal has set the stage for some exciting developments in the airline industry. And let's not forget the new avenues it opens for Avios collectors, who will now have a richer playground to earn and spend their points.
With so many new and extended routes now within your grasp, there's never been a better time to prepare for your travel plans. To stay ahead of the game and snag the best deals, be sure to sign up for alerts using our Reward Flight Finder, which allows you to keep an eye on available seats for these exciting new destinations, making trip planning a breeze.