Seeing this news piece, which seems at worst fake news and at best pure journalistic speculation, brought to mind the processes being put into action and those that will come into the headlines in the near future.
*****”IAG mum on TAP privatisation being its “Plan B”,” (17-2-23, ch-aviation)
https://www.ch-aviation.com/portal/news/124652-iag-mum-on-tap-privatisation-being-its-plan-b
This appeared after this other piece hit the headlines just before it…....
*****”Air France-KLM Is Interested In Buying TAP Air Portugal,” (17-2-23, Simple Flying)....
.....which by far is the more interesting piece of news.
https://simpleflying.com/air-france-klm-tap-air-portugal-interest/
To put things into perspective it should be pointed out that Air France has had a long term interest in buying Air Europa with its plethora of routes into South America. IAG wants to checkmate that interest by offering to buy Air Europa and so make Madrid Barajas the main gateway to Latin America, all under the Iberia flag. If IAG is not successful in its bid for Air Europa then Air France will be free to change its bid from TAP back to Air Europa. The likely outcome is for IAG to take over Air Europa, but be prohibited from taking over TAP, which will go to AF/KLM.
Iberia already forms part of the IAG group. Its interest towards Air Europa goes back to 2019 when IAG bid €1000 million for the group but this was immediately considered too much with the oncoming coronavid19 epidemic. Thus it was reduced to €500 million. It would most likely have been accepted in order to keep Air France/KLM out of Barajas airport but was scuppered by the epidemic. As a result the original conditions were renegotiated to permit IAG to buy Air Europa for €500 miiion. IAG took advantage of that to take a slice of 20 per cent of Air Europa instead of the payback of a loan of €100 miilion previously made to Air Europa. So I see no competition problem in IAG taking over the holiday group.
The European Competition Authorities had already laid down to IAG that its bid for Air Europa would be subject to examination with the likely outcome of IAG having to make concessions to get approval of the deal. After that it is highly unlikely that IAG would bid for TAP. The European Authorities would not accept consolidation of all principal long-haul services in the Iberian peninsular passing into the hands of only one company. Therefore, one can safely say that if IAG goes ahead with its move for Air Europa then it will not make any move for TAP.
The matter changes, however, if IAG were prohibited from taking over Air Europa. This would leave it with a still strong desire to strengthen its position in South America. TAP has a good network in South America but to a plethora of routes in Brazil which makes it so attractive. Thus the position would change dramatically. TAP would be open to IAG while AirFrance/KLM would have easy access to Air Europa - which is what it always wanted.
As a Result of that one can easily see that anyone interested in buying TAP would be put under the microscope by the competition authorities.
If Iberia is given the go-ahead to buy Air Europa then the most likely outcome would be for Iberia to be prohibited from buying TAP. On the other hand, if Iberia is prohibited from buying Air Europa then it will be free to bid for TAP.
On the other hand the Lufthansa group is not lying idle. At the moment it is embroiled in an attempt to take over the new national Italian carrier — ITA. Here it is likely to be successful. Its subsidiary, Eurowings, has started to coddle up to Volotea. The presence of LH´s Eurowings subsidiary in ever widening markets in Europe makes it appear to be an ever increasing aggressive operator.Its chosen new partner, Volotea, is a spin-off from Vueling. It is well run and opens latin markets in Europe,(Spain, Italy and France).
*****”Germany’s Eurowings, Spain’s Volotea sign sales partnership,” (17-2-23, ch-aviation)
https://www.ch-aviation.com/portal/news/124568-germanys-eurowings-spains-volotea-sign-sales-partnership
This move throws the gauntlet down to both IAG (with its Vueling subsidiary) and AF/KLM (with their Transavia subsidiaries) What will they do after this is done? They have to expand to be meaningful in the low cost market. What is their future, to merge with JET2, Condor, TUI, French BEE, Corsair or one of the other LCCs or Charter Airlines? Ryanair seems big enough to survive but what will happen to Easyjet and Wizzair? Are they to be prey or predators? Three others are interesting to note (the reborn) Norwegian as a short/medium haul carrier, Air Baltic (an efficient aggressive airline flying from the Baltic States), and the long-haul low cost airline Norse Atlantic.
Of the remaining full service airlines there seem to be three or four that are not already in their likely predetermined destinations. Finnair is in ONEWORLD and seems likely to end up in IAG. Both SAS and LOT are in Star Alliance, but I cannot see them both being taken over by Lufthansa. One,yes, but both, no. Another remaining medium sized airline is the czech, charter, regular service SMARTWINGS, .......................
https://www.smartwings.com/es/sobre-smartwings,
.............. together with CSA Czech Airlines, which initially lies within the Skyteam alliance. On top of that we have Aegean(Greece)in Star Alliance,Tarom (Skyteam),Turkish Airlines (in Star Alliance but able to exist alone as it has an extensive route network from its hub in Instanbul - just like the Middle East Megacarriers.)and Aeroflot(Skyteam) (which I doubt will now ever form part of the European group of airlines). Most of the remaining airlines are too small to be taken into consideration but could well be bought out or allowed to go to the wall.
All this means that everybody is on the block and up for grabs. Anything can happen from now on.
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24 February 2023.
It is a surprise that so soon there have been developments of this news.
This blogger published the blog in the evening of 22 February. About 24 hours later he heard about the purchase of the outstanding 80 per cent of Air Europa (Globalia) not already owned by IAG.This was published in the press of today (24 February) as well as being published on IAGs own website..........“IAG agreement for full acquisition of Air Europa,” (24-2-23, IAG)
The relevant points are the following......
--Euros 100 million in cash on signing.
--Euros 100 miilion in shares in IAG (equivalent to about 1per cent of the company)
--Euros 100 million in cash to be paid on the first anniversary of the signing of the deal in 2024.
--Euros 100 million in cash to be paid on the second anniversary of the signing in 2025.
--Previously IAG paid the Hidalgo family, in 2021, Euros 75 million, compensation for the deal not going ahead.This will be deducted from the final price.
--IAG will take on the Euros 574 million net debt which the Globalia group had at the end of 2021.
There are other minor points which are still important but do not fundamentally change anything. The main point is that the real sales price is near the Euros 1000 million which was initially agreed upon in 2019.
Originally, the European Competition Authorities thought that the deal was too much with regard to Iberia and Air Europa – maybe there was some French lobbying in the background. Now there seem to be no objections, so Air France/KLM have an open road to taking over TAP. However, others will insist that Air France pay back all government aid it has received before the all clear is given.
Already, the can of worms has been opened with speculation that Norwegian and Easyjet are on the block. There are many possibilities, so let us see.
(Up to date information provided by the economic dailies Expansion and Cinco Dias - 24-2-2023)
