The European Commission has approved the tie-up of Air Nostrum and CityJet, just one year after the two companies announced at the Farnborough Air Show in July 2018 the intent to create what they described as the “largest pan-European regional airline group” with a combined fleet of close to 100 aircraft and annual revenues of some €700 million. In a statement released on Wednesday the EU’s antitrust regulator said that the proposed transaction would raise no competition concerns because the companies “have moderate market shares, a sufficient number of competitors remains on the market, and the barriers to entry are low.”
Brussels received notification of the proposal on June 19 and analyzed the deal under the EU’s normal merger review procedure.
The transaction calls for the creation of a joint venture that will combine the activities of Valencia, Spain-based Air Nostrum and Dublin-headquartered CityJet. According to the filing to the EC, CityJet is part of the portfolio of assets managed by Fortress Investment Group. The investment management firm, based in New York City, is also the ultimate parent company of Falko Regional Aircraft. The UK lessor has a fleet of nearly 100 regional aircraft, including Avro RJ85s; ATR 72-500s; CRJ200s and CRJ900s; de Havilland Q400 NexGens; and Embraer E170, E175, E190, and E195 jets. Japan’s SoftBank Group acquired Fortress at the end of 2017. Air Nostrum rests under Air Investment Valencia, a holding controlled by Carlos Bertomeu.
Air Investment Valencia and Fortress did not disclose the name of the joint venture nor their respective shareholdings, but Bertomeu in March indicated the Valencian airline would own the majority of the capital.
At the signing of the heads of terms last year, Bertomeu said the combination of Air Nostrum—which operates as Iberia Regional under a franchise contract with Iberia—and CityJet’s aircraft, crew, and support services would put the new entity on solid footing to compete in the wet-lease market. The regional ACMI market has grown rapidly in Europe in recent years, but it hasn’t reached the level in of outsourcing in North America, where the majors subcontract most of the regional flying to partner airlines under capacity purchase agreements. CityJet and Air Nostrum operate similar fleets—Cityjet deploys CRJ900s and Avro RJ85s; Air Nostrum flies CRJ100s, -900s, and -1000s as well as ATR 42/72s.