UPDATE 1-EU opens in-depth study of IAG planned purchase of Air Europa

(Adds IAG response)

BRUSSELS, June 30 (Reuters) - The European Commission said on Tuesday it had opened an in-depth investigation into International Airlines Group’s planned purchase of Spain’s Air Europa.

The Commission, which oversees EU antitrust policy, said it had concerns that the proposed transaction would reduce competition for Spanish domestic routes and on international routes to and from Spain.

IAG said in response that the deal would boost Madrid’s competitiveness and benefit consumers, adding that it would continue to work with the European Commission.

The EU executive said it had 90 working days until Nov. 5 to take a decision and that the airlines had decided not to submit potential remedies during the initial investigation.

“IAG, which flies with Iberia and Vueling among others, and Air Europa are leading airlines in Spain. They are also key providers of connectivity between Spain, the rest of Europe and Latin America,” Commission executive vice president Margrethe Vestager said in a statement.

“We will carefully assess whether the proposed transaction would negatively affect competition on domestic, short-haul and long-haul routes to and from Spain, possibly leading to higher prices and reduced quality for travellers,” she continued.

She added that, although the financial situation of many airlines was still fragile, it was important that the recovery of the sector took place in a competitive environment, preserving choice for customers.

IAG, which owns British Airways and Iberia, agreed to buy Air Europa for 500 million euros ($594.75 million) in January, after the pandemic cut the initial price in half and IAG struck a deal to defer payments for six years.

“We believe this deal is pro-competitive and will benefit customers, employees and the Spanish economy and connectivity,” IAG said in a statement. “This transaction remains strategically important for the future of both IAG and Iberia and we continue to work with the European Commission.”

The EU probe could delay the completion of the deal, which IAG had hoped would take place in the second half of this year.

$1 = 0.8407 euros Reporting by Philip Blenkinsop, additional reporting by Sarah Young; editing by Marguerita Choy and Jason Neely