easyJet Shares Rocket amid IAG Takeover Reports

DALLAS - After reports of a potential merger between TAP Air Portugal (TP) and IAG, the Anglo-Spanish multinational airline holding company is now looking to acquire low-cost carrier (LCC) easyJet (U2).

The British LCC expects £180m in losses this financial year, having implemented a planned route network cutoff for the winter season. This is compared to other LCCs such as Ryanair (FR) or WizzAir (W6), which are growing more in their respective markets.

However, the latest reports from the stock market showed a clear rise in U2's shares of 6%, after industry analysts received the news on the interest of IAG to take over the LCC.

AJ Bell investment director Russ Mould said U2 being a takeover target for IAG made “perfect sense,” as the company led by Luis Gallego had earned €1.1bn between its airline members, making the group capable of assuming such a transaction.

However, IAG is not the only airline group with its eyes set on U2. IndiGo Partners has also expressed its interest in a merger with the LCC, and it's willing to add U2 to its member list, which counts among its ranks carriers Wizz Air (w6), Frontier Airlines (F9), and Volaris (Y4).

IAG to Take Control over Western Europe?

The International Airlines Group is made up of major European players, including British Airways (BA) and Aer Lingus (EI) in the north, and Iberia (IB), LEVEL, and Vueling (VY) in the south. The potential takeover by IAG of TP and U2 would mean total control over the commercial traffic between the British Isles and the Iberian Peninsula with the rest of Europe and America.

Due to its colonial history, the flow of passengers from Brazil, Mexico, Argentina, Chile, and the United States to Europe connects mainly through Lisbon (LIS), Madrid (MAD), and London (LHR). These are, of course, the main hubs of TP, IB, and BA.

A large part of budget airline routes in the European continent is operated by the easyJet group comprised of its easyJet UK, Europe (EC), and Switzerland (DS) brands.

The pattern seems to be clear: European commercial aviation is slowly but surely becoming an oligopoly controlled by three big holdings: Air France-KLM, the Lufthansa Group, and IAG.

Will this pattern lead to fewer opportunities for new airlines and startups that want a piece of the European pie, putting in danger the economical freedom of the air travel market in Europe?

What are your thoughts? Will IAG be able to go through with its takeover plans? Be sure to leave your comments on our social media channels!

Featured Image: EasyJet Airbus A320neo: Alberto Cucini/Airways