Brexit: IAG may have to buy out British shareholders
Mar 5, 2018, 11:50 pm
#46
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Company bye-laws probably give the company the right to sell shares on their behalf and give them the cash. Believe Ryanair has that sort of rule as it had a large US shareholder base that was getting close to causing issues for a while - and they may need to exercise to remain an EU airline if UK ownership levels threaten that / isn’t permitted under a future UK-EU aviation deal
Mar 6, 2018, 12:48 am
#47
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Company bye-laws probably give the company the right to sell shares on their behalf and give them the cash. Believe Ryanair has that sort of rule as it had a large US shareholder base that was getting close to causing issues for a while - and they may need to exercise to remain an EU airline if UK ownership levels threaten that / isn’t permitted under a future UK-EU aviation deal
Mar 6, 2018, 8:24 am
#48
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UK-US Open Skies talks hit Brexit turbulence
(Mods: not strictly BA related, but BA will be the most impacted. Perhaps a run here before moving elsewhere?)
The US is offering Britain a worse “open skies” deal after Brexit than it had as an EU member, in a negotiating stance that would badly hit the transatlantic operating rights of British Airways and Virgin Atlantic.
British and American negotiators met secretly in January for the first formal talks on a new air services deal, aiming to fill the gap created when Britain falls out of the EU-US open skies treaty after Brexit, say people familiar with talks.
The talks were cut short after US negotiators offered only a standard bilateral agreement. These typically require airlines to be majority owned and controlled by parties from their country of origin. Such limits would be problematic for British carriers as they have large foreign shareholdings. Under existing arrangements, UK-based airlines are covered by the open skies treaty that requires them to be majority EU owned.
<snip>
One person attending the London meetings to “put Humpty Dumpty back together” said: “You can’t just scratch out ‘EU’ and put in ‘UK’.” A British official said it showed “the squeeze” London will face as it tries to reconstruct its international agreements after Brexit, even with close allies such as Washington.
<snip>
In its opening stance the US side rolled back valuable elements of the US-EU agreement, the most liberal open skies deal ever agreed by Washington. Its post-Brexit offer to the UK did not include membership of a joint committee on regulatory co-operation or special access to the Fly America programme, which allocates tickets for US government employees. Washington also asked for improved flying rights for US courier services such as FedEx
<snip>
The biggest sticking-point is a standard ownership clause in Washington’s bilateral aviation agreements that would exclude airlines from the deal if “substantial ownership and effective control” does not rest with US or UK nationals respectively. In effect it requires majority ownership by one of the two sides if an airline is to benefit.London asked the US to adjust its long-held policy since it would exclude the three main British-based transatlantic carriers, which all fall short of the eligibility criteria. These are IAG, the owner of British Airways and Iberia; Virgin Atlantic; and Norwegian UK.
A copy of the full article hosted by MSN can be viewed here
Originally Posted by The Financial Times
The US is offering Britain a worse “open skies” deal after Brexit than it had as an EU member, in a negotiating stance that would badly hit the transatlantic operating rights of British Airways and Virgin Atlantic.
British and American negotiators met secretly in January for the first formal talks on a new air services deal, aiming to fill the gap created when Britain falls out of the EU-US open skies treaty after Brexit, say people familiar with talks.
The talks were cut short after US negotiators offered only a standard bilateral agreement. These typically require airlines to be majority owned and controlled by parties from their country of origin. Such limits would be problematic for British carriers as they have large foreign shareholdings. Under existing arrangements, UK-based airlines are covered by the open skies treaty that requires them to be majority EU owned.
<snip>
One person attending the London meetings to “put Humpty Dumpty back together” said: “You can’t just scratch out ‘EU’ and put in ‘UK’.” A British official said it showed “the squeeze” London will face as it tries to reconstruct its international agreements after Brexit, even with close allies such as Washington.
<snip>
In its opening stance the US side rolled back valuable elements of the US-EU agreement, the most liberal open skies deal ever agreed by Washington. Its post-Brexit offer to the UK did not include membership of a joint committee on regulatory co-operation or special access to the Fly America programme, which allocates tickets for US government employees. Washington also asked for improved flying rights for US courier services such as FedEx
<snip>
The biggest sticking-point is a standard ownership clause in Washington’s bilateral aviation agreements that would exclude airlines from the deal if “substantial ownership and effective control” does not rest with US or UK nationals respectively. In effect it requires majority ownership by one of the two sides if an airline is to benefit.London asked the US to adjust its long-held policy since it would exclude the three main British-based transatlantic carriers, which all fall short of the eligibility criteria. These are IAG, the owner of British Airways and Iberia; Virgin Atlantic; and Norwegian UK.
Mar 6, 2018, 9:10 am
#50
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I guess whomever thought it would be easy to replicate existing deals with 3rd party countries is insane. The country of origin (applied to goods) and ownership laws (applied to air transport) will be hard to renegotiate. 3rd party country will try to get extras from the UK for a trade deal to be approved. But in the case of IAG, it is going to be tough on many fronts:
- They will have to comply with UK ownership rules in order to operate from the UK which if transposed from EU law should be 51% British
- They will have to comply with EU laws in order to operate in the EU and that's 51% rEU
- They will have to comply with 3rd party countries ownership laws which are different
Mar 6, 2018, 11:42 am
#51
Join Date: Jan 2014
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BA will have to be UK- owned and controlled in order to benefit from any bilateral deals, whether they be US, EU or elsewhere. So IAG will need to restructure or divest.
BA will not have cabotage rights in EU as it will not be a community airline.
And it is looking increasingly likely that BA will not be able to benefit from any other EU/XX bilateral deals, so it is likely that a raft of new UK/XX bilateral will be needed.
And of course, in order to fly into some countries (USA included), I understand that the UK’s system for maintenance and certification of engineering will need to be approved by the bilateral partner, to ensure it is up to international standards (unless we pay EASA to do it)
BA will not have cabotage rights in EU as it will not be a community airline.
And it is looking increasingly likely that BA will not be able to benefit from any other EU/XX bilateral deals, so it is likely that a raft of new UK/XX bilateral will be needed.
And of course, in order to fly into some countries (USA included), I understand that the UK’s system for maintenance and certification of engineering will need to be approved by the bilateral partner, to ensure it is up to international standards (unless we pay EASA to do it)
Mar 6, 2018, 12:07 pm
#52
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Suspect IAG’s legal team are not short of work. My reading is that all IAG airlines except BA will want IAG to be EU based after Brexit but BA would prefer IAG to be UK based. Difficult times for Willie Walsh.
Mar 6, 2018, 12:14 pm
#53
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Oct 16, 2018, 3:44 am
#55
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A bump on this thread.
Bloomberg link to FT article
Bloomberg link to FT article
- EU Transport Commissioner Violeta Bulc tells the Financial Times that airlines have had plenty of time to prepare for a no-deal Brexit and the bloc won’t bend the rules to help IAG – owner of British Airways and Iberia.
Oct 16, 2018, 5:06 am
#56
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Surely is it BA (not IAG) that needs to be majority UK owned to comply with likely US (and other country) bilateral agreements? The solution therefore seems rather simple: IAG sells off a large chunk of BA (underwritten by UK Govt??), IB, Vueling and Level then continue to fly under existing rules, BA (and presumably BA Cityflyer) just have to wait for a new UK/EU and a refreshed UK/US agreement.
Oct 16, 2018, 5:13 am
#58
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Surely is it BA (not IAG) that needs to be majority UK owned to comply with likely US (and other country) bilateral agreements? The solution therefore seems rather simple: IAG sells off a large chunk of BA (underwritten by UK Govt??), IB, Vueling and Level then continue to fly under existing rules, BA (and presumably BA Cityflyer) just have to wait for a new UK/EU and a refreshed UK/US agreement.
Oct 16, 2018, 5:22 am
#59
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Welcome or not, them’s the rules.
“in order to obtain and keep an EU operating licence and benefit from the intra-EU air traffic rights, air carriers must comply at all times with the conditions under Article 4 of Regulation (EC) No 1008/2008 on air services. The conditions include, among others, the need to have one's principal place of business within an EU Member State, and to be majority owned and effectively controlled by EU Member States and/or nationals of EU Member States. If the conditions are no longer fulfilled as a consequence of the United Kingdom becoming a third country, the operating licence at issue will no longer be valid.”
https://ec.europa.eu/info/sites/info...ansport_en.pdf
“in order to obtain and keep an EU operating licence and benefit from the intra-EU air traffic rights, air carriers must comply at all times with the conditions under Article 4 of Regulation (EC) No 1008/2008 on air services. The conditions include, among others, the need to have one's principal place of business within an EU Member State, and to be majority owned and effectively controlled by EU Member States and/or nationals of EU Member States. If the conditions are no longer fulfilled as a consequence of the United Kingdom becoming a third country, the operating licence at issue will no longer be valid.”
https://ec.europa.eu/info/sites/info...ansport_en.pdf
Oct 16, 2018, 5:51 am
#60
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I had this conversation earlier this morning. BA and IAG are quite clear in their Annual accounts that they do not consider this a major risk. It's way down at the end of the BA strategic risk register (brand perception is at the top, cybersecurity is in there at about number 5 I think, ironically given what's just happened). Why? Because they have invested considerable time and effort discussing their position with the EU and UK. They understand the issues, and despite what people may think here, they are a professional business with strong capability in the regulatory and legislative areas, given the significant impact of regulation on aviation. They are aware of and are tracking the risk of a "no deal" outcome.
It's also worth noting anyway that "ownership" of shares in the framework of global capitalism is a fluid concept and fairly easily portable outside the context of a foreign purchase of the entire airline. The biggest single BA shareholder is Qatar at 20%. Problem? No. Its owned by a Luxembourg based part of Qatar. Institutional investors can transfer ownership to EU based funds fairly easily.
And there's a subtle point which is the shares have maximal value if and only if BA is able to trade in Europe. So worst case if it can't because of too many non-EU shareholders unwilling to sell, their self interest is to sell their holdings because the company they own can't trade. And the self interest of EU investors is to buy because when they do, the company can get a license and gets its value back. So there is a natural transfer, it self adjusts. But IAG are also clear in their report that they believe they meet ownership criteria. The most recent IAG and BA reports are well worth a read:
IAG - International Airlines Group - Annual Reports
But honestly, all of the risk factors are known and priced in to share prices and profit expectations, BA and IAG are aware of the issues and are confident in the outcome. Beyond the political posturing it is in no-one's interest to damage the UK and EU economies by artificially blocking a deal to "punish" the UK, and the most likely outcome deal or no deal is a fudged "backstop" style of arrangement.
It's also worth noting anyway that "ownership" of shares in the framework of global capitalism is a fluid concept and fairly easily portable outside the context of a foreign purchase of the entire airline. The biggest single BA shareholder is Qatar at 20%. Problem? No. Its owned by a Luxembourg based part of Qatar. Institutional investors can transfer ownership to EU based funds fairly easily.
And there's a subtle point which is the shares have maximal value if and only if BA is able to trade in Europe. So worst case if it can't because of too many non-EU shareholders unwilling to sell, their self interest is to sell their holdings because the company they own can't trade. And the self interest of EU investors is to buy because when they do, the company can get a license and gets its value back. So there is a natural transfer, it self adjusts. But IAG are also clear in their report that they believe they meet ownership criteria. The most recent IAG and BA reports are well worth a read:
IAG - International Airlines Group - Annual Reports
But honestly, all of the risk factors are known and priced in to share prices and profit expectations, BA and IAG are aware of the issues and are confident in the outcome. Beyond the political posturing it is in no-one's interest to damage the UK and EU economies by artificially blocking a deal to "punish" the UK, and the most likely outcome deal or no deal is a fudged "backstop" style of arrangement.