Madrid: Airline giant IAG, owner of Spanish airline Iberia and British Airways, said Thursday it had dropped its bid to buy Spain's Air Europa due to the "current regulatory environment".
The move comes after the European Commission in January opened an "in-depth investigation" into the proposed deal on concerns it would reduce competition on several routes.
IAG, which also owns Spain's low-cost carrier Vueling and Ireland's Aer Lingus, had in February 2023 said it was to acquire Air Europa for 500 million euros from Globalia, its Spanish owner, pending regulatory approval.
"The board of directors has concluded that in the current regulatory environment it would not be in the best interests of shareholders to continue with the transaction," IAG said in a statement.
The company said it would hold onto the 20 per cent of Air Europa which is acquired in August 2022 and pay Globalia the required 50 million euros to cancel the deal.
"We believe this decision is in the best interests of our shareholders. IAG remains committed to its strategy, including competing effectively from its Madrid hub," IAG chief executive Luis Gallego said in the statement.
"We will continue to develop our presence in Madrid so that the hub can develop as a rival to Europe's largest hub airports.''
IAG had argued the deal would strengthen its Latin American routes and make Madrid airport a major European hub.
But Brussels said it was particularly concerned about competition on domestic routes between the Spanish mainland and the Balearic and Canary Islands as well as links between Madrid and several European cities.
It was also looking into long-haul routes from Madrid to Latin America, and to the United States.
IAG had tried to allay the commission's concerns by vowing to cede 40 per cent of Air Europe's routes if Brussels approved its takeover.
IAG has its registered office in Spain, but its headquarters is located next to London's Heathrow airport and its shares are quoted on the London Stock Exchange.
Iberia and British Airlines are part of the One World airline alliance.
