Air France-KLM Wants To Invest In Air Europa

Air France-KLM Wants To Invest In Air Europa

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Global aviation in Europe is very much controlled by the “big three” European airline groups — Air France-KLM, IAG, and Lufthansa Group. These airline groups often try to buy up independent airlines, both to further their strategic interests, and to prevent competitors from doing the same.

Recently, we’ve seen Air France-KLM acquire a stake in Scandinavian Airlines, and we’re also seeing Lufthansa Group acquire a stake in ITA Airways. There’s now talk of yet another potential investment in the region, and I’d say it’s pretty logical

Air France-KLM eyes 20% stake in Air Europa

Air France-KLM is pursuing an investment in SkyTeam partner Air Europa. This interest has been confirmed by Air Europa parent company Globalia, but the company notes that “there is an interest, but there is also interest from other airlines and funds,” and that “nothing is sealed.”

Air France-KLM is eyeing a roughly 20% stake in Air Europa, which wouldn’t require approval from the European Union. Air France-KLM’s interest in the Madrid-based SkyTeam carrier is also about increased commercial cooperation between the airlines.

The backstory here is interesting. Keep in mind that in 2019, IAG (the parent company of British Airways, Iberia, etc.) intended to acquire Air Europa. This would’ve been a major shakeup for aviation in Spain, and for the general dynamics in the industry, given that we would’ve seen the same company controlling Spain’s two biggest long haul airlines.

That deal never ended up happening as intended. First there was a major delay due to the pandemic, and then regulators ended up blocking the deal, due to concerns over lack of competition. IAG did manage to acquire a 20% stake in Air Europa, though there’s not closer cooperation between Iberia and Air Europa.

Air Europa is actually doing pretty well financially. In 2023, the company reported a record profit of €165 million, and the company is expecting an even bigger profit this year. IAG had purchased its 20% stake in Air Europa for roughly €100 million, so presumably Air France-KLM would pay more, given the company’s improved financial performance.

Air Europa is an attractive investment target

This closer cooperation makes a lot of sense

If you ask me, there’s huge merit to Air France-KLM investing in Air Europa. Let me of course emphasize that a 20% stake wouldn’t give Air France-KLM a controlling interest in Air Europa, but presumably closer cooperation could be a win-win:

  • Air Europa is already in SkyTeam, so it would be easy enough for the two companies to work more closely together, as a lot of those systems are already in place
  • The biggest potential benefit here is Air France-KLM being able to extend its network to Central and South America, given Air Europa’s extensive network to Latin America
  • I’m not sure if Air France-KLM would try to get Air Europa into the transatlantic joint venture with Delta and Virgin Atlantic, but presumably that could be on the table as well
  • Air France-KLM has already acquired a stake in Scandinavian Airlines, so the airline group would really have some strategic geography advantages if this deal happened

Personally I think this would be positive for consumers (especially if it’s just a 20% stake), and I also think that Air France-KLM is the best fit for Air Europa in terms of airline groups.

It’s worth noting that Lufthansa Group is reportedly looking at investing in TAP Air Portugal, and I think the motivation there is similar — Portugal has great geography across the Atlantic, particularly for South America.

Air France-KLM has a lot to gain with Air Europa

Bottom line

Air France-KLM is looking to acquire a roughly 20% stake in Air Europa. This wouldn’t be a controlling interest in the airline, but the hope is that this would lead to closer cooperation, and strengthen Air France-KLM’s position in Latin America. Between this and the Scandinavian Airlines deal, Air France-KLM could potentially have much better geographic coverage in Europe.

I’m not usually one to root for consolidation, but I hope this does happen, as there’s merit to this…

What do you make of the possibility of Air France-KLM acquiring a stake in Air Europa?

Conversations (29)
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  1. Mark Guest

    Giving how LH treat their partners, I hope both UX & TP ended with AFKL (or at least, UX managed into AFKL group). And that would be good big wake up call of LH/UA/AC, if AFKL successfully got both of them

    1. neogucky Guest

      Doesn’t sound realistic to me. TP and UX have too much overlap for it to make sense to buy both.

    2. Mark Guest

      @neogucky

      I do agree somehow, in terms of alliance balances, buying both TP & UX could overkill one of alliance's network. IAG buying TP would also create overpowering network since IB is really strong in Latin markets

      On the another hand, TP would also better asset for AFKL. I could see the strategy somehow with synergy of UX & TP. Unless LH do something with TP

    3. Mark Guest

      @neogucky

      I do agree somehow, in terms of alliance balances, buying both TP & UX could overkill one of alliance's network. IAG buying TP would also create overpowering network since IB is really strong in Latin markets

      On the another hand, TP would also better asset for AFKL. I could see the strategy somehow with synergy of UX & TP, unless LH do something about TP

  2. Bowie Guest

    If Lufthansa are investing in TAP and Air France-KLM are investing in Air Europa, where does that leave IAG in terms of next acquisition target?

    1. Creditcrunch Diamond

      Rumours swirling around the city that IAG are about to buy EasyJet, there share price is rising on the speculation.

    2. Creditcrunch Diamond

      lol yeah these rumours keep popping up every few years with IAG snd EZY, but you never know it might happen

    3. Samo Guest

      LOT :) Okay, just a wishful thinking, mostly because LOT isn't for sale, but it would be a great addition.

  3. Al Guest

    "Air Europa is already in SkyTeam, so it would be easy enough for the two companies to work more closely together, as a lot of those systems are already in place"

    I get this at a high level but would be curious what this would mean in practice. How practically could the two airlines work more closely together in a way they can't now. Can someone who works in the industry chime in here with specific examples?

    1. yoloswag420 Guest

      Fundamentally, all airlines are competitors, even if they're alliance partners. For example, Air France would prefer you fly them to connect to your final destination in Europe rather than Air Europa.

      The whole idea is that they could divide up routes and align their networks/schedules in a way that's mutually beneficial. Whether that's through these logistical changes, codesharing, or eventually a joint venture.

    2. Al Guest

      But wouldn't you would need a joint venture type arrangement to start dividing up routes, coordinating schedules, etc. ?

  4. Euro Gold

    Air Europa: the ignored, unwanted stepchild by Delta and European carriers within Skyteam. Not in the TATL JV, the award seats don't show up on Delta's website, the hard product is lousy, the service is even lousier, and they don't even have their own lounge at MAD. (Honestly, even though Iberia is mid-pack in terms of quality, I would fly it over Air Europa any day of the week)

    How exactly is it going to...

    Air Europa: the ignored, unwanted stepchild by Delta and European carriers within Skyteam. Not in the TATL JV, the award seats don't show up on Delta's website, the hard product is lousy, the service is even lousier, and they don't even have their own lounge at MAD. (Honestly, even though Iberia is mid-pack in terms of quality, I would fly it over Air Europa any day of the week)

    How exactly is it going to work if AF/KL AND IAG both own an equal share of Air Europa and each "parent" tries to control/influence its business decisions? It might make sense for AF/KL to invest in it networkwise in some aspects but I say skip this turd of an airline.

    1. Throwawayname Guest

      UX offers great value, particularly for short haul. They don't pretend to be a luxury airline but they're reliable and don't have aggressively customer-unfriendly policies such as inflated one-way pricing (LH/AFKL), fares that don't include standard-sized hand luggage (like SK), or status benefits exclusions for certain fare types (LH, SK, BA, all of whom make elites pay to check in luggage). AENA lounges are fine, there's nothing really to complain about and they're certainly better...

      UX offers great value, particularly for short haul. They don't pretend to be a luxury airline but they're reliable and don't have aggressively customer-unfriendly policies such as inflated one-way pricing (LH/AFKL), fares that don't include standard-sized hand luggage (like SK), or status benefits exclusions for certain fare types (LH, SK, BA, all of whom make elites pay to check in luggage). AENA lounges are fine, there's nothing really to complain about and they're certainly better than the rodent-infested KLM one at AMS, the BA (business) lounges at LHR, or the inexistent SN lounge on the non-Schengen side of BRU (you can visit the lounge run by the airport but only with a business class ticket - status won't help). They probably wouldn't be my first choice if I were to be spending huge amounts of money on premium transatlantic fares, but they really are a solid, underrated airline.

    2. Euro Gold

      My experience with them:

      Book flight. Get told one needs to upload COVID info on website (this was not true) but website keeps failing to verify said info. Checkin counter opens only 2 hours before flight despite busy security lines, and no way to get priority security by buying an upgrade to business class. Get into security line, almost miss flight and group of a dozen ppl on the same flight charge ahead and demand...

      My experience with them:

      Book flight. Get told one needs to upload COVID info on website (this was not true) but website keeps failing to verify said info. Checkin counter opens only 2 hours before flight despite busy security lines, and no way to get priority security by buying an upgrade to business class. Get into security line, almost miss flight and group of a dozen ppl on the same flight charge ahead and demand they be screened next so they avoid missing the flight and subsequently their connecting long-haul flight (this was 15 min before scheduled departure). Tight seat compared with other European carriers. FAs were gruff and terse with ppl, shoving past ppl in the aisle, and deliberately did not offer food/beverage to my aisle for purchase or even complimentary. Oh and the luggage was slow to arrive.

      Give them another chance? Absolutely not.

    3. Throwawayname Guest

      Let's turn this logic on its head. I haven't personally been a victim of the infamous BA IT meltdowns, but being aware of them makes me less likely to book with that airline. When was the last time Air Europa had to simultaneously cancel a bunch of flights due to IT issues?

      Drawing a conclusion about a large, complex organisation from a single, personal interaction with it doesn't seem to be a very intelligent...

      Let's turn this logic on its head. I haven't personally been a victim of the infamous BA IT meltdowns, but being aware of them makes me less likely to book with that airline. When was the last time Air Europa had to simultaneously cancel a bunch of flights due to IT issues?

      Drawing a conclusion about a large, complex organisation from a single, personal interaction with it doesn't seem to be a very intelligent way to manage risk and/or go about life, but, as they might say on Reddit, 'you do you'.

    4. Ben Holz Guest

      Not a UX hater, I personally think they are an ok airline all around, but UX did have a pretty major leak of credit card information in 2022/2023. Of course that didn't lead to the cancelations and meltdowns BA experienced, but it's much bigger than most airlines have experienced

  5. Tim Dunn Diamond

    glad you have nothing else to do on Thanksgiving Day, like those of us participating in your forum :-), to address yet another restructuring of the European aviation scene.

    Spain is a far larger market than Portugal and has far more longhaul connecting potential than Italy so this could be as significant for SkyTeam in southern Europe as SK as in Northern Europe.

    UX is large to Latin America but AF/KL are not aligned with...

    glad you have nothing else to do on Thanksgiving Day, like those of us participating in your forum :-), to address yet another restructuring of the European aviation scene.

    Spain is a far larger market than Portugal and has far more longhaul connecting potential than Italy so this could be as significant for SkyTeam in southern Europe as SK as in Northern Europe.

    UX is large to Latin America but AF/KL are not aligned with LA as DL is; many of these non-JV partnerships take time to unwind. it could help AF/KL that it works w/ Gol which has no presence in Europe.

    The real loser in this is IAG which could see AF/KL and LH Group become even larger in continental Europe.

    as for KE/OZ discussed below, this has far bigger impact for DL and KE TPAC routes which could lay the frame for further 2025 TPAC routes.

  6. Ben Holz Guest

    Not going to lie, I really expected and thought that UX would have been *it* for the LH Group (maybe from a selfish point of view, since I'm MUC based and basically all of my longhaul business travel takes me to LatAm).

    Getting from Germany to any Latin American airport other than EZE/GIG/GRU/MEX is just a PIA if you are an LH FF- you either a) have to do 2 stops while connecting in one...

    Not going to lie, I really expected and thought that UX would have been *it* for the LH Group (maybe from a selfish point of view, since I'm MUC based and basically all of my longhaul business travel takes me to LatAm).

    Getting from Germany to any Latin American airport other than EZE/GIG/GRU/MEX is just a PIA if you are an LH FF- you either a) have to do 2 stops while connecting in one of the above, b) you have to take a detour through Canada or the US (with the latter being particularly inconvenient given the lack of sterile transit) or c) you give up on crediting to LH and connect with AF/KL/IB/UX (which is what I've done, crediting to IB since longhaul is where the big milage/status earning opportunities are). And yes, there are plenty of already established and growing economies (like Panama, Chile and Peru) where the above most certainly applies.

    To add on LHG's potential TP acquisition, LH already has connection partnerships with LA and GOL in Brazil, so getting to secondary destinations in Brazil is not a major issue at all. Making LIS-HispAm work is considerably more challenging than MAD-Brazil and for that matter UX already flies to GRU and SSA (having served FOR, REC and GIG until not too long ago), while TP only flies to CUN and CCS (the former seasonal and the latter also kind of seasonal, but inconsistently so-- and that's despite the large number of Venezuelan-Portuguese population in both countries, though admittedly anything involving CCS/Venezuela goes beyond aviation challenges).

    Point being, at this very moment IB arguably has the strongest EU-LatAm network followed by AFKL, who will be going head to head with IB if the UX acquisition goes through. In the meantime, LHG will fall even further behind than its competitors, even if the TP deal ends up materializing because even if Brazil is the single largest Latin American market, you cannot compare it to a market combining another 10+ strong economies.

  7. Robin Guest

    Hard disagree with your take on this one, Ben.

    As someone who lives in Spain, I wouldn't want AFKL anywhere near a Spanish airline for two reasons:

    1) The French are notorious for striking seemingly every other day. This doesn't exist to the same extent in Spain.

    2) SkyTeam is nearly useless and generally speaking runs its mileage programs into the ground a la Delta (though, admittedly AFKL does occasionally still offer good value) and...

    Hard disagree with your take on this one, Ben.

    As someone who lives in Spain, I wouldn't want AFKL anywhere near a Spanish airline for two reasons:

    1) The French are notorious for striking seemingly every other day. This doesn't exist to the same extent in Spain.

    2) SkyTeam is nearly useless and generally speaking runs its mileage programs into the ground a la Delta (though, admittedly AFKL does occasionally still offer good value) and I fear there would inevitably be a "SkyPesofication" of any airline that is part-owned by a SkyTeam airline.

    Especially if the airline is doing well, why on Earth would it subject itself to the above-cited risks? Stick with IAG, they have a proven business model that works for everyone, as Avios continue to present the highest value for anyone flying into and out of Europe.

    My $.02.

    1. Ben Holz Guest

      The IAG deal has for all practical purposes fell through on its entirety, as a matter of fact I think IAG/IB (don't remember which one it was in particular) has already started paying UX the contractual compensation for not going through with it (50M EUR in total)... which is also something to take into account with these "record" profits.

    2. Icarus Guest

      Air France hasn’t had a strike for almost 7 years since Ben Smith and Anne Rigail took the helm, unlike several other carriers.

    3. Tim Dunn Diamond

      correct. LH has been the strike queen of Europe for a number of years.

    4. Robin Guest

      Yeah I agree there - LH has been horrendous...in every way, to be honest!

  8. Samo Guest

    This would be an excellent addition to the AFKL portfolio and network (although they should probably start looking for a new name so they don't end up being AFKLSKUX :)). The only thing they'd be missing is something on the eastern side of the EU. Using AFKL requires a lot of backtracking from many European locations.

  9. MaxPower Diamond

    I’m surprised you don’t bring up the logical eventuality of latam becoming the AF/KL partner in South America given… well, delta?
    Seems like a given and AF/KL would have Aer Europa fill the niche in Madrid similar to what delta states/stated they’d do in Miami…

  10. Andy Diamond

    Given the membership in Skyteam this would obviously make sense. Let's hope it will also positively affect mutual benefits in FFP. Currently, for instance, the cheapest fare class in the Business cabin (which is O) does not earn anything on the other airline ... and Air Europa has good O availablity, so you have to be careful!

    On the other hand, this makes it less likely that AFKL will get approval for TAP, which would...

    Given the membership in Skyteam this would obviously make sense. Let's hope it will also positively affect mutual benefits in FFP. Currently, for instance, the cheapest fare class in the Business cabin (which is O) does not earn anything on the other airline ... and Air Europa has good O availablity, so you have to be careful!

    On the other hand, this makes it less likely that AFKL will get approval for TAP, which would be a much better option than LH, both in terms of competition and service. TAP is not only much better than LH, but also much cheaper ...

  11. Creditcrunch Diamond

    @Ben more SkyTeam news on the KE merger with OZ. I wonder if this will finally see the new VS route to ICN

    https://www.koreatimes.co.kr/www/tech/2024/11/129_387278.html

    1. NS Diamond

      VS is set to take Asiana's slot over and to launch ICN flight. I've heard that they might launch the flight in 2025 with SAS also coming to Seoul.

  12. Icarus Guest

    Makes sense given their coverage of Latin America that would complement AFKL The problem is their product.

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Tim Dunn Diamond

correct. LH has been the strike queen of Europe for a number of years.

2
Mark Guest

Giving how LH treat their partners, I hope both UX & TP ended with AFKL (or at least, UX managed into AFKL group). And that would be good big wake up call of LH/UA/AC, if AFKL successfully got both of them

1
Samo Guest

LOT :) Okay, just a wishful thinking, mostly because LOT isn't for sale, but it would be a great addition.

1
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