European airline group IAG on Thursday (1 August) announced it will terminate a deal to acquire Spanish carrier Air Europa.

The decision comes after the European Commission in April raised competition concerns over the €400 million deal and marks the group’s second failed attempt to acquire Air Europa.

IAG, which already owns British Airways, Iberia, Vueling and Aer Lingus – and has an existing 20 per cent stake in Air Europa –first agreed to acquire the Spanish airline in 2019 when the price was €1 billion before the bid was scrapped two years later following the Covid-19 pandemic.

The group then revived its efforts to buy the remaining 80 per cent of Air Europa in February 2023 at the much lower price tag of €400 million.

In a statement on Thursday, IAG said its 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”.

European competition regulators in July approved Lufthansa’s proposed takeover of Italian carrier ITA Airways, but only after lengthy negotiations and heavy concessions were made by both the airline group and the Italian government.

IAG will pay Air Europa owner Globalia a €50 million “break fee” as a result of backing out of the deal and will continue to hold a 20 per cent minority equity stake in the airline.

IAG CEO Luis Gallego said: “IAG remains committed to its strategy, including competing effectively from its Madrid hub. This is a strategy which is delivering strong results. We will continue to develop our presence in Madrid so that the hub can develop as a rival to Europe’s largest hub airports.”