On December 16, 2021, the European Commission officially ‘took note’ of IAG and Globalia’s announcement to terminate their proposed agreement according to which IAG would acquire sole control over Air Europa.
On May 25, 2020, IAG notified its intention to acquire sole control over Air Europa. IAG, as the holding company of Iberia and Vueling, is the largest provider of scheduled passenger air transport services in Spain. Air Europa is the third largest airline in Spain and the only other network carrier having hub-and-spoke operations at the Madrid airport.
On June 29, 2021, the Commission opened a Phase II investigation, raising concerns in markets for passenger air transport services on Spanish domestic routes and on international routes to and from Spain. The Commission was concerned that the proposed transaction could (i) significantly reduce competition on routes within, to, and from Spain as the parties are the only two airlines operating several routes; and (ii) reduce choice for travellers because airlines that rely on Air Europa’s network could terminate their services to international destinations also served by IAG.
During the Phase II investigation, the Commission considered the proposed remedy package would not adequately address the competition concerns identified. As a result, the parties were left with no other option than to withdraw from the proposed agreement.
Earlier this year, Air Canada also had withdrawn from its plans to purchase Transat, when the Commission considered the remedy package would not fully solve competition concerns. Similar to the Air Canada/Transat deal, the Commission refused to grant the parties’ failing- firm defense, relying on the incoming upturn in the airline sector. Executive Vice-President Vestager’s statement noted that “competitive transport markets offer connectivity with a wide offering of affordable flights. This should be preserved for when demand returns fully and travelling picks up once again.” The Commission’s chief merger control official, Olivier Guersent, was reported earlier in 2021 to have made similar remarks, calling for a tighter stance on merger control enforcement, including upholding high standards for a possible failing-firm defense.
These recent deals show the Commission’s stark approach towards the failing firm defense, even in an industry that is heavily impacted by the pandemic. Indeed, the bloc’s response to the pandemic makes it difficult for merging parties to prove the counterfactual under the failing-firm defense.
Another recurring issue is the Commission’s reluctance to accept certain remedies in the airline sector. As with Air Canada earlier in 2021, the Commission remained skeptical as to whether the merging parties’ slot offerings, together with the usual access rights to feeder traffic, loyalty schemes and other benefits could attract a suitable buyer, let alone establish a new competitor. Airline mergers between close competitors may have become increasingly difficult—although not impossible—to clear.
Editors: Conor Opdebeeck-Wilson and Thorsten Schiffer
 See our April 2021 EU Competition Law Newsletter, available at: https://www.clearygottlieb.com/-/media/files/eu-competition-newsletters/eu-competition- law-newsletter–april-2021-pdf.pdf.
 “No competition enforcement let-up as Europe exits pandemic, Guersent says,” see MLex insight of July 5, 2021.