Yahoo Finance Brussels forces British Airways owner to ditch €500m takeover
EU officials have forced the owner of British Airways to ditch a planned €500m acquisition of a Spanish airline that would have helped it expand into Latin America.
IAG, the FTSE 100 group that also includes Aer Lingus and Spanish flag carrier Iberia, confirmed on Wednesday that it would abandon the takeover of Air Europa.
The deal has been tied up in red tape since it was first announced more than two years ago.
Shares in IAG, which have fallen by a fifth over the last month, slid a further 3pc in afternoon trading.
The acquisition of Air Europa had a headline price of €1bn before it was cut as the pandemic hit.
The deal was a key plank of IAG chief executive Luis Gallego’s plans to expand into Latin America and challenge the dominant carriers such as Chilean-based airline Latam.
Mr Gallego, who took over from long-time boss Willie Walsh earlier this year, warned analysts in November that so-called remedies - such as the selling of landing slots at certain airports - would not be enough to satisfy competition regulators in Brussels.
"We always said that if we can find a place that is good for all of us, we will do the deal. And if not, we don't do the deal, as we have done on other occasions when we have deals that we consider didn't make sense for us,” he said.
"I am less optimistic than I was before. But we are working hard and Iberia people are also trying to close this agreement, because I think it has an important strategic value for the [IAG], and not only for the group, for the Madrid hub.”
Mr Gallego added: "If Spain and Madrid want to have a hub to compete with the strongest hubs in Europe, a consolidation is needed. And that's the reason I think this operation is critical also to develop the Madrid hub and to fly not only to South America but to have a 360 degrees hub.”
Meanwhile, EU regulators told airlines based in the bloc they must use 64pc of takeoff and landing slot from March until October or face losing some of their allocation.
That is lower than the usual 80pc level but higher than requirements to deploy a quarter of slots last summer and half of the allotment this winter.
The EU transport commissioner, Adina Valean, said: “We can take a step further towards the return to normal airport slot management next summer.”
Airports and carriers such as fast-growing budget airlines such as Wizz Air have called for exemptions to be reduced to allow in those operators willing to operate flights.
However Mr Walsh said the European Commission was right to resist calls to revert to pre-pandemic slot rules when the demand environment remains unpredictable.
Separately, Virgin Atlantic has formed a partnership with easyJet to connect its long-haul network with the carrier’s European flights.
By joining the “Worldwide by EasyJet” program, Virgin aims to attract passengers making journeys such as Geneva to New York and Malaga to Orlando.
The alliance pact will focus on Manchester but also include transfers in Edinburgh and Belfast, where Virgin also has a handful of flights.
Unlike rivals such as British Airways, Atlantic does not have a short-haul network to feed passengers into its services.
