British Airways and Iberia parent IAG has been told that its proposed acquisition of Air Europa could restrict competition, particularly on routes to and from Spanish cities.

The European Commission has outlined its concerns in a formal statement of objections to the companies, as it continues its in-depth investigation into the competitive effects of the proposed takeover.

IAG will have the chance to reply to the statement, consult the Commission’s case file, and request an oral hearing. It can also submit potential remedies, to address the issues raised by the Commission, up to a remedy deadline of 10 June.

Previous remedy commitments, which IAG offered in February, have been deemed insufficient to allay the Commission’s concerns.

The specific areas on which the Commission has focused include certain Spanish domestic routes, particularly where high-speed rail is not an alternative, as well as routes between peninsular Spain, the Balearic Islands, and the Canary Islands.

“For a few of these routes, there will be no direct competition after the transaction,” says the Commission, adding that competition on other sectors “appears limited” and is provided mainly by regional Spanish carriers and budget airlines.

Air Europa 787-c-Air Europa

Source: Air Europa

Air Europa provides competition, as an independent airline, on several routes to and from Spain

Certain short-haul routes to destinations in the Middle East, as well as within Europe, have also been highlighted. The Commission says the primary source of competition on such routes are budget airlines or the incumbent destination carrier.

IAG and its joint-venture partners compete head-to-head with Air Europa on a number of long-haul routes – notably transatlantic connections between Spain, North America and Latin America – and the Commission states that, on some routes, there will be “no direct competition” after the tie-up.

“For other routes, competition from other airlines appears limited and both parties have relatively high market shares,” it adds.

“The Commission is concerned that, absent suitable remedies, the removal of Air Europa as an independent airline may have negative effects on competition in these already concentrated markets.”

Under the in-depth investigation a decision will be taken by 15 July.