M&A Soars in Spain As IAG Buys Out Vueling

M&A Soars In Spain As IAG Buys Out Vueling

M&A Soars In Spain As IAG Buys Out Vueling

Many Spanish companies favour strategic alliances as a way of increasing financial resources, growing market share and spreading their risks. These kind of business agreements are common in technology, manufacturing and real estate development, and whenever a company wants to expand its sales or operations overseas.

While many alliances are forged in the same country and industry, others cross sectors and borders.

joint venture takes the concept of a strategic alliance further as the companies involved invest in a new entity and share ownership. A strategic alliance is a legal agreement between two or more companies to share access to their technology, trademarks or other assets. It does not create a new company.

But a strategic alliance can often be the precursor to a joint venture or even a full merger as happened with the Spanish and British flagship carriers Iberia and British Airways.

FROM ALLIANCE TO MERGER

In January 2011, Iberia and British Airways took to the skies as a merged entity, International Airlines Group (IAG), creating a new force in the European airline industry.

The Iberia-British Airways merger was a response to the consolidation in the industry which had left BA and Iberia lagging behind the other major European legacy carriers like Lufthansa, as well as cash-rich Middle Eastern airlines such as Qatar Airways. But Iberia and BA are no strange bedfellows, having started co-operation and code-sharing on routes in 2003. BA acquired a 13 per cent stake in the Spanish airline in 1998.

BA and Iberia are also members of the OneWorld airline alliance and enjoy a wider strategic partnership with American Airlines, which allows the three airlines to share revenues on transatlantic flights.

IAG is now the third airline in Europe by revenue behind Lufthansa and Air France-KLM.

Its management has left the door open for other airlines to join the group, which recently took full control of listed Spanish low cost carrier Vueling, a 46-percent owned subsidiary of Iberia.

LOW COST, HIGH QUALITY BUYOUT

It is not difficult to see why IAG wanted to buy out Vueling, which was delisted from the Spanish Stock Exchange earlier this month.

Vueling will allow Iberia to re-position itself as the leading airline in Spain, ahead of Ryanair, in terms of passenger numbers. It brings to the IAG mix a low cost platform, a profitable organisation, a leading market position at Barcelona Airport and a good track record of co-operation with network carriers.

With Vueling under its wing, IAG has become the second largest operator at Paris’ Orly Airport after Air France-KLM. But the question now is what other airlines are on IAG’s target list?

For further information on M&A in Spain, contact corporate law firm Argali Abogados.

Leave a Reply