British Airways and Iberia launch takeover proceedings on the remaining 54% stake of the Catalan Vueling

IAG, the airlines group formed after the merger of British Airways and Iberia, has announced its plans to acquire 100% of Vueling’s capital. Iberia already has 45.85% of the Catalan airline. Now, IAG intends to buy the remaining 54.15%, equivalent to 16.2 million shares. IAG is offering €7 per share, 28% more than Vueling’s last trading price on the stock exchange market. Vueling is one of the few airlines in Europe making a profit. Catalan politicians are “worried” about the purchase, as Vueling is based in Barcelona El Prat Airport and is committed to its expansion. However, Iberia abandoned its plans to develop El Prat and has prioritised Madrid Barajas. A Catalan MEP has asked the European Commission about the possibility of there being a free competition obstacle.


November 8, 2012 10:31 PM

Barcelona (ACN).- On Thursday, IAG, the aeronautical giant formed after the merger of British Airways and Iberia, confirmed a takeover to fully own Vueling, the Catalan airline based in Barcelona El Prat. International Airlines Group (IAG) already controls 45.85% of the Catalan company’s capital, these shares belonging to  Iberia  Now, IAG intends to buy the remaining 54.15% of Vueling, equivalent to 16.19 million shares. With the aim of owning 100% of Vueling’s capital, IAG is offering €7 per share, which represents 28% more than Vueling’s last trading price on the stock exchange. The purchase operation would be paid in cash and not by exchanging stocks. Yesterday evening, once news about IAG’s potential takeover on Vueling broke, the Spanish Stock Market Regulation Authority (CNMV) temporarily suspended trading of Catalan company, which was set at €5.47 per share. Vueling’s capital represents 29.9 million shares, with a €1 nominal value. IAG has not disclosed the details of the operation, but it seems likely to  run the Catalan airline as a separate brand, using its own specific business model, which has proven to be quite successful. Born as a low cost airline, Vueling has developed its own model, combining relatively cheap prices with services going beyond a basic low cost company. In fact, Vueling has been one of the very few European airlines posting profits during recent years. It has Barcelona El Prat Airport as its main base. In October it announced it would link the Catalan capital to 100 different destinations from summer 2013. It also announced it would transform Barcelona’s Airport to eventually become Europe’s main hub for short and medium distance flights by 2014.

In fact, the Catalan Transport Minister, Lluís Recoder (from the Centre-Right Catalan Nationalist Coalition, CiU), stated on Thursday he was “worried” about IAG’s purchase plans as Vueling has prioritised El Prat Airport and  is committed to its expansion. However, Iberia “has gradually abandoned Barcelona to concentrate on Madrid Barajas”. This Thursday, a Catalan Member of the European Parliament, Ramon Tremosa, also from CiU, filed a formal question to the European Commission regarding Vueling’s full control by IAG and its potential impact on the free competition of Spain’s airport market. However, IAG considers it does not need to inform an anti-trust authority and only reports on the operation to the CNMV and the Spanish aeronautical authorities, both controlled by the Spanish Government. IAG expects to conclude the deal next spring.

A Catalan MEP asks the European Commission about the purchase of Vueling and its impact on free competition

Ramon Tremosa believes that the IAG takeover might represent a risk for free competition within the Spanish airport and flying market, as the Spanish State owns 12.87% of IAG, after the nationalisation of Bankia. In addition, the Spanish Government also owns all Spanish airports and runs the aeronautical authorities. Tremosa argues that Iberia and Vueling are Spain’s main airlines, and both would be controlled by the Spanish Government, creating a “new aeronautical group with a monopolistic will”. The Catalan MEP stated that if IAG’s “takeover was successful, it would create a group that would be first [in Spain] by volume of passengers and the first operator in both Barcelona and Madrid airports, impeding any possibility of future free competition between the airports”. In fact, Tremosa fears that, considering Iberia and the Spanish Government’s track history regarding Barcelona El Prat Airport, the new group could “favour Barajas’ and Iberia’s interests” over the Catalan airport’s. Therefore, Tremosa asks the European Commission to study the operation and eventually requests the Spanish Government to either privatise its airport network or to sell its shares within IAG, as otherwise “free competition is not guaranteed”. The European Commission has three weeks to answer.

Vueling would keep its business model

According to IAG’s note to the CNMV confirming the takeover, Vueling would keep its own business model and brand, despite being owned by British Airways and Iberia, if the operation is successful. IAG’s objective is to have “a leading position in Barcelona” and to be “growing in the rest of Europe”, while allowing IAG to have a low cost platform. In addition, IAG could also generate “potential synergies” with Vueling regarding financial aspects, although they do not expect them to be “significant”.