IAG sees Lufthansa’s entry into ITA Airways as a positive sign for its own Air Europa plans. However, the Spanish-British aviation group is already thinking ahead.
Although rivals, Lufthansa CEO Carsten Spohr publicly supported IAG’s efforts to buy Air Europa in February.
Now that Lufthansa has received EU approval to join ITA Airways, IAG boss Luis Gallego told the Financial Times: “I see this as positive news because it means that the European Commission sees the value of consolidation in order to have a stronger aviation industry in Europe.”
Of course, Spohr and Gallego are supporting each other because they both see good omens for their own plans in the form of approval from antitrust watchdogs.
Gallego made it clear that IAG sees the approval of Lufthansa’s ITA entry as a good sign for its own Air Europa acquisition, which is still awaiting Brussels’ approval. Gallego also mentioned a possible offer for the Portuguese airline Tap, as IAG “always has other options on its radar” in case the Air Europa deal is rejected.
Gallego further hinted that IAG might expand outside Europe for the first time, perhaps by purchasing a South American airline to better serve demand for flights between Europe and South America.
While Gallego provided no details or names, the South American market has been in flux for years. For example, Colombian Avianca and Brazilian Gol, forming the new Grupo Abra, are now working together with Aerolíneas Argentinas. Moreover, since March 2024, there has been speculation regarding a merging of Azul and Brazilian competitor Gol.
With Iberia, IAG already has a market leader between South America and Europe, thanks primarily to connections to Spanish-speaking countries. Tap holds a stronger position in Brazil. Through its entry into ITA, the Lufthansa Group seeks to gain ground in South America, where its presence has been weak until now.
Meanwhile, Grupo Abra has joined forces with the Spanish airline Volotea, offering itself as an intermediary in the Air Europa acquisition by IAG. They aim to jointly take over slots (take-off and landing times) that IAG and Air Europa will have to relinquish for antitrust reasons.
IAG Sees Lufthansa’s ITA Entry as a Good Sign for Air Europa, But Has Other Plans
The battle for European airline dominance is heating up, with both IAG and Lufthansa vying for control of key routes and assets. Recently, the antitrust regulators gave Lufthansa the green light to join ITA Airways.
This development has been welcomed by IAG, the parent company of British Airways and Iberia, as a good sign for its own bid to acquire Air Europa. IAG CEO Luis Gallego expressed his optimism regarding the decision in an interview with the Financial Times. He stated, “I see this as positive news because it means that the European Commission sees the value of consolidation in order to have a stronger aviation industry in Europe.”
Rivals Crossing Their Fingers for Each Other
While IAG and Lufthansa are rivals in the airline industry, their goals in this particular instance align. Both companies see the approval of their respective acquisitions as a positive step toward consolidating their positions in the European market. This shared interest leads to an unusual dynamic where they are essentially “crossing their fingers” for each other’s success.
IAG’s Expansion Plans Beyond Air Europa
Gallego highlighted that the approval for Lufthansa’s ITA acquisition strengthens his confidence in the eventual approval of IAG’s Air Europa takeover. However, he also noted that IAG is keeping other options on the table. Should the Air Europa deal fall through, the group is actively exploring other opportunities. One such possibility is a potential acquisition of the Portuguese airline TAP.
IAG Eyes South American Expansion
IAG is not limiting its ambitions to solely European markets. Gallego suggested that the group might expand its operations outside of Europe for the first time. A potential target might be a South American airline, allowing IAG to strengthen its presence on the lucrative route between Europe and South America.
A Market in Flux
The South American airline industry has experienced significant changes in recent years. Several notable mergers and collaborations are reshaping the landscape:
- Colombian Avianca and Brazilian Gol have formed a new entity called Grupo Abra.
- Grupo Abra is collaborating with Aerolíneas Argentinas.
- Rumors of a merger between Azul and its Brazilian competitor Gol have been circulating since March 2024.
Existing Players and New Aspirations
Several airlines are vying for dominance in South America, and the arrival of IAG or potentially Lufthansa in this market might shake things up significantly.
- IAG’s Iberia airline currently holds a leading position on routes between South America and Europe, particularly to Spanish-speaking countries.
- TAP has a stronger presence in Brazil.
- Lufthansa aims to increase its South American footprint through its entry into ITA, where it currently has a limited presence.
The Battle for Slots
Grupo Abra has made an interesting move, partnering with Spanish airline Volotea to potentially acquire slots that IAG and Air Europa would be forced to relinquish due to antitrust regulations. This collaboration highlights the competitive landscape and the strategic importance of these coveted take-off and landing time slots.
The airline industry is constantly evolving, with mergers, acquisitions, and alliances shaping the competitive landscape. The regulatory environment plays a crucial role in approving or restricting these moves, often driven by concerns over market dominance and consumer welfare. The future holds exciting, albeit possibly turbulent times for both IAG and Lufthansa as they navigate the complex world of airline consolidation and expansion.