The 1 billion-euro price tag isn't the only thing that's big about International Airlines Group's pending acquisition of Spanish carrier Air Europa. The deal would give IAG a dominant position in Spain by adding Air Europa to Iberia, Vueling and Level, IAG's other carriers in the country. Should the transaction close as expected in the second half of 2020, it will bring under IAG's umbrella Europa's 11.8 million passengers and more than $2.3 billion in annual revenue.
Numbers aside, the magnitude of the deal is perhaps best illustrated by how quickly the outcry from competitors arrived. After the sale agreement was announced in November. Michael O'Leary, CEO of current Spanish market leader Ryanair, immediately began lobbying regulators to force divestments as a prerequisite for approving the deal, which he called a "merger to monopoly in Madrid."
IAG CEO Willie Walsh certainly isn't afraid of a fight. He was named to BTN's 25 Most Influential List in 2017 for his role in leading IAG to take on the traditional air distribution model by imposing a surcharge on bookings made through a GDS.
Beyond solidifying IAG's grip on the Spanish market, the deal's most transformative potential change would affect Madrid's Barajas Airport. IAG plans to consolidate Air Europa—which flies to nearly 70 locations in Europe, Latin America, the U.S. and North Africa—into Iberia's hub structure at Barajas, turning Madrid into a full-fledged European hub alongside Amsterdam, Frankfurt, London Heathrow and Paris. The company also has its sights on establishing Madrid as a newly competitive route between Europe and Latin America, as well as serving as a conduit between Asia and Latin America.
"Acquiring Air Europa would add a new competitive, cost-effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership," said Walsh.