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International Airlines Group (IAG), owner of British Airways and Iberia, surprised markets and airline passengers this morning by announcing Iberia has bought Spanish carrier Air Europa for €1bn.

The move appears to be about increasing Iberia’s market share in Spain and on the profitable routes to South America, with the hope of making Madrid the main European hub, to challenge the four largest European airports (Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle) – we think they need to fix chaotic Madrid Airport first!

IAG CEO Willie Walsh said:

“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, therefore generating additional financial value for our shareholders.
IAG has a strong track record of successful acquisitions, most recently with the acquisition of Aer Lingus in 2015 and we are convinced Air Europa presents a strong strategic fit for the group.”

Air Europa was established in 1986 and has its main base at Madrid-Barajas Airport. It has 45 aircrafts, including 13 787s, and flies to 44 destinations across Europe, South America and Africa. It joined the SkyTeam alliance in 2007 and currently has a Skytrax 3-star rating. It’s the third largest airline in Spain after Iberia and Vueling.

The move to buy Air Europa comes only weeks after the news of LATAM’s departure from Oneworld, after Delta took a stake in the airline. It looks as though both IAG and Delta see South America as the next big air passenger market to conquer.

LATAM Boeing 787-9 Dreamliner photographed on May 13, 2016 from Wolfe Air Aviation Learjet 25B.

While no information has yet been supplied about the status of its frequently flyer programme SUMA, a gradual migration to the Iberia Plus programme could be a possibility. For customers of other major IAG airlines (BA, Iberia, Aer Lingus), the Air Europa acquisition could mean more codeshare flights and an extended Oneworld network.

The news of Iberia buying Air Europa comes after IAG boss Willie Walsh was himself in the news last week, as it was announced that he’d be retiring in the next 24 months. IAG haven’t yet announced who his successor will be, but could British Airways’ Alex Cruz be next in line? Only time will tell!

Update 6 November 2019

Since the initial announcement, IAG have confirmed that Air Europa will leave SkyTeam and that the frequent flyer currency will be changed to Avios. No dates for these changes were announced, although they’re unlikely to happen until after the Air Europa purchase is completed in late 2020.

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