IAG share price down as CMA opens investigation into transatlantic alliance

Move comes ahead of 2020 expiry of previous competition deal

IAG share price down as CMA opens investigation into transatlantic alliance

Shares in International Consolidated Airlines (LON:IAG) have fallen into the red in today’s session, underperforming the broader market selloff, as the Competition and Markets Authority (CMA) announced that it will probe the company’s partnership on transatlantic routes. The watchdog, however, noted that the  case is at an early stage and no assumption should be made that the Atlantic Joint Business Agreement, which includes American Airlines, Finnair and IAG’s British Airways and Iberia units, infringes competition law.

As of 08:55 BST, IAG’s share price had given up 2.30 percent to 577.80p. The shares are underperforming the broader UK market, with the benchmark FTSE 100 index having plunged 1.44 percent to 7,042.69p amid ongoing risk-off sentiment around the world.

CMA reviews transatlantic alliance

The CMA announced in a statement today that it had launched a review of the Atlantic Joint Business Agreement, which includes American Airlines, Finnair and IAG’s British Airways and Iberia units, allowing the airlines to cooperate on pricing, capacity and scheduling. The watchdog noted that the European Commission had first investigated the agreement during 2009 to 2010 when it accepted 10-year commitments from the parties in relation to six routes, five of which are from the UK.

“On expiry of the parties’ commitments, due in 2020, the European Commission may re-assess the agreement, but there is no requirement for it to do so,” the CMA explained, adding that it was preparing “for the time when the European Commission may no longer have responsibility for competition in the UK”.

IAG noted the watchdog’s announcement, saying in a short statement that it will respond to the review.

Analysts on British Airways parent

Liberum Capital reaffirmed IAG as a ‘buy’ last week, valuing the shares at 875p. According to MarketBeat, the British Airways and Iberia parent currently have a consensus ‘buy’ rating and an average price target of 767.18p.

As of 09:06 BST, Thursday, 11 October, International Consolidated Airlines Grp share price is 576.80p.

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