Brexit: IAG may have to buy out British shareholders
Feb 2, 2019, 8:44 am
#121
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With respect, I think you are missing the point. The rule is not about E.U. airlines but about airlines allowed to operate domestic flights (ie flights within the EU). The rule is exactly similar to (or more progressive than) what most other countries do - from US to Australia, and from India to South Africa. A British airline can not operate flights from New York to LA but a US airline can, and yes, in the same way, a US airline cannot operate MAD-BCN or NCE-LHR but EU airlines can. In that context, EU airline is defined as one with >50% ownership. Suspending that rule would mean that you’d allow Chinese, Indian, or US airlines to come and compete for EU domestic pax without E.U. airlines being allowed the same anywhere else, and frankly, I think that would be a bit silly.
The answer depends on how laissez-faire you are. Orbitmic has outlined some reasons in support, I would not view them as good.
Feb 2, 2019, 10:21 am
#122
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This is universal practice in airline regulation the world over. Most countries similar or identical rules on ownership and control, with some countries (such as the US) having even stricter rules, and all international air service agreements between countries are based on this.
Feb 2, 2019, 10:36 am
#123
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This is universal practice in airline regulation the world over. Most countries similar or identical rules on ownership and control, with some countries (such as the US) having even stricter rules, and all international air service agreements between countries are based on this.
I’ll leave that particular debate to others, however.
Feb 2, 2019, 10:50 am
#124
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However, the situation is also wider than Brexit. The EU has no incentive to cede further unilaterally on foreign ownership when the US has moved not an inch on the intent of the 2007 EU-US Open Skies Agreement to move towards a mutual limit of 49% ownership of each others airlines. The US limit remains at 25%, and Japan’s is at 33%. Aviation remains politicised. There’s an interesting CAPA article on the subject
https://centreforaviation.com/analys...nduring-345816
Feb 2, 2019, 11:02 am
#125
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I was reacting to the wording of Kanderson1965's question, which seemed to be premised on it being some kind of strange, exceptionally restrictive EU practice whereas it is in fact standard practice the world over.
Feb 2, 2019, 12:56 pm
#126
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Of course, but the debate is essentially identical to debates as to whether any kind of protectionist measure is a good thing or not and whether unilateral economic disarmament by offering others advantages that those others do not offer you is a good thing or not. In other words, it is a bit like the debate in the UK between ultra-liberal economists like Minford who argue that the UK should unilaterally abolish all tariffs and mainstream economists who take a more nuanced view, even when they consider that tariffs are generally a bad thing.
I was reacting to the wording of Kanderson1965's question, which seemed to be premised on it being some kind of strange, exceptionally restrictive EU practice whereas it is in fact standard practice the world over.
I was reacting to the wording of Kanderson1965's question, which seemed to be premised on it being some kind of strange, exceptionally restrictive EU practice whereas it is in fact standard practice the world over.
Feb 2, 2019, 1:05 pm
#127
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So, presumably, to be consistent, you would also argue that the UK, after a no-deal Brexit, should unilaterally abolish all tariffs on all imports and should also abolish all restrictions on access to economic activity by non-UK nationals?
Feb 2, 2019, 1:16 pm
#128
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Getting back on topic, I would not imagine the the UK would ban BA domestic services if it became minority UK owned.
Feb 2, 2019, 1:19 pm
#129
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Feb 2, 2019, 1:24 pm
#130
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Exactly, however they may be able to achieve more if their investment was not limited. by statute; investment can only be good for customers.
Feb 2, 2019, 1:35 pm
#131
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Except that very logically, what you propose would most precisely spell the end of any such investment. If EU domestic services were open to airlines without conditions of EU ownership, QR, EY, and DL would not invest more in IAG, AZ, or VS, they'd merely be flying their own QR, EY, and DL planes from LHR to DUB and from MAD to BCN. So whilst you can of course support the idea that one should fully open one's market without getting any reciprocity whatsoever (not something, I hasten to add, that the UK has ever been remotely in favour of), boosting investment is one of the least likely outcomes that this would produce.
Last edited by orbitmic; Feb 2, 2019 at 1:41 pm
Feb 2, 2019, 1:44 pm
#132
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Except that very logically, what you propose would most precisely spell the end of any such investment. If EU domestic services were open to airlines without conditions of EU ownership, QR, EY, and DL would not invest more in IAG, AZ, or VS, they'd merely be flying their own QR, EY, and DL planes from LHR to DUB and from MAD to BCN. So whilst you can of course support the idea that one should fully open one's market without getting any reciprocity whatsoever, boosting investment is one of the least likely outcomes that this would produce.
Last edited by kanderson1965; Feb 2, 2019 at 1:57 pm
Feb 2, 2019, 1:57 pm
#133
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Last edited by orbitmic; Feb 2, 2019 at 2:07 pm
Feb 2, 2019, 2:31 pm
#134
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If you look at the agreement between the UK and Russia, for instance, it is very restricted an only slightly changed since 1957 (to allow flights to/from Manchester). Only two government-nominated carriers from each country may operate flights, and only between specified airports, and only up to a specified volume of flights per week.
When more liberal air traffic agreements became the norm, there was a danger that, for instance, a person in country A can form a company in country B to operate air traffic between A and B, bypassing whatever restrictions were negotiated on country A by country B.
Therefore country B will usually insist that the traffic rights it grants to country A will flow only to companies well grounded in country A rather than only existing on paper in country A. That measure of well-groundedness is usually based on the citizenship of the natural persons who have ultimate ownership of the company.
Whether that amounts to a "good reason" is a deeper question.
Last edited by Calchas; Feb 2, 2019 at 2:37 pm
Feb 2, 2019, 3:19 pm
#135
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Almost certainly not. They would indeed establish bases in various European airports, most definitely with single aisle planes (except of course where traffic density may ultimately justify), but much better for them to go for their own airlines, with their own lower paid staff, far more unfavourable work contracts and in many cases generous state subsidies. As we all know and often discuss, it costs QR, TK or MU a lot less to pay their staff than it does BA, AF, or LH, and they can work them much harder too.