Iberia’s purchase of Air Europa and the impact on the ‘Madrid hub’


Several primary hub airports in Europe would like to be recognised as the most significant one connecting that continent with Latin America; Paris Charles de Gaulle and Frankfurt numbered amongst them, and Lisbon. But it has been Madrid that has usually ruled the roost.

Spain’s economic recession and its impact on Iberia threatened that position several years ago when the airline cut many of its westbound long haul routes, opening a window of opportunity for competitors.

The recently announced purchase agreement between Iberia (part of IAG) and Air Europa (Globalia), which is scheduled for completion in 2H2020, theoretically alters the balance again in favour of Madrid, but it is not clear yet how the combined airline will accommodate that Latin American region as the larger Iberia seeks to become a '360° hub'.


  • Iberia to complete the purchase of Air Europa in 2H2020.
  • Air Europa will join Spanish airlines that are already a significant chunk of International Airlines Group (IAG).
  • The deal has raised competitive concerns from airlines, including Ryanair, but that carrier might even benefit as much as lose out.
  • Madrid is not a genuine 360° hub yet.
  • Regions to the east demand more coverage.
  • But that risks cannibalising the routes of Iberia's IAG fellow member British Airways.

Iberia will have as many long haul aircraft as Air France

Iberia’s CEO Luis Gallego, commenting on the purchase agreement for around EUR1 billion with Air Europa Lineas Aereas, said the acquisition will allow the Madrid hub to compete with other European hubs. He added: "The Madrid hub has lost its position with other European hubs", and explained that with Air Europa's long haul fleet Iberia will be able "for instance, to have 63 long haul aircraft, similar to the 65 aircraft that Air France-KLM has". At Madrid Barajas Airport Iberia will have a "360° hub".

Mr Gallego is confident that while the purchase process could take 18 to 24 months, it will be done in 2H2020. He insists that Iberia has carried out a route by route analysis and is convinced that the acquisition will be beneficial to the users.

Iberia is part of IAG, along with Iberia Express and the majority-owned Vueling, both of which have a presence at Madrid Barajas Airport, though not so much Vueling, whose emphasis remains on Barcelona where it is by far the largest airline by seat capacity. IAG’s low cost short and long haul brand LEVEL also has a base at Barcelona (its first), but it is a minor player.

Air Europa, the third largest airline in Spain and owned by Globalia, is based in Mallorca and operates scheduled and charter services from its bases in Madrid, Barcelona and Tenerife South to destinations in Europe, North America and South America.

Madrid far more important to IAG than Barcelona

IAG believes consolidation is needed so that Madrid Barajas can be a genuine rival to Europe’s big four hubs: Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle – the 'FLAP' airports, as they are known. Interestingly, little mention is made of Barcelona or anywhere else.

Ryanair raises anti-competitive concerns, but could benefit from the deal

But the deal has raised anti-competitive concerns. Not least, nor surprisingly, from the largest carrier in Spain: Ryanair.

The IAG/Air Europa combination would dominate Spain-Latin America services, which are routes that Ryanair doesn’t fly but where it benefits from self-connection by both outgoing and incoming passengers. The link-up would thus have a considerable impact on wider Europe-Latin America services.

The way IAG played it was to posit consolidation between the two airlines as a side issue to its desire to boost the Madrid hub, and that is something that will always play well with governments.

But Ryanair might conversely also benefit from the establishment of Madrid as the premier European gateway to and from Latin America.

It already has 10.4% of seat capacity at Barajas. By comparison, it has (taking the FLAPs in initial order) 2% at Frankfurt International; 0% at London Heathrow;  less than 1% at Amsterdam Schiphol; and 0% at Paris CDG. It is likely that slot divestments will be made to carriers like Ryanair, which could be perceived as “losing out” under this deal.

So how does all this play out with reference to Madrid’s comparative hub power after the conclusion of the deal? Mr Gallego claims it will be a "360°" hub.

Madrid’s long haul route network is firmly oriented westwards

That claim is true today, but only up to a point, as the route map for Barajas Airport demonstrates.

Madrid Barajas route map