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Tough EU Brexit demands sacrifices from airlines

March 30, 2017 Headline News No Comments Email Email

Airlines may be hit hard and early following British Prime Minister Theresa May’s action yesterday in officially triggering the Brexit process – withdrawal from the European Union – by signing Article 50.

In the event of a “hard Brexit” – a quick departure from the EU – a transitional deal would let British carriers operate only non-stop flights between the UK and points in the EU, London’s Financial Times reported.

Moreover, some airlines with strong British links may need to relocate their headquarters or make other major changes if they want to keep enjoying their current rights.

Representatives of IAG, easyJet, Ryanair and the owners of British holiday airline Thomson met the EU’s Brexit taskforce last week.

To be allowed to keep flying routes within continental Europe after Brexit, airlines may need to sell shares to European nationals. Airlines must have a significant base on EU territory and most of their capital shares must be EU-owned, according to an ultimatum from EU aviation chiefs reported in the Guardian, the Financial Times and other news outlets.

If the EU takes a tough stance – in part to deter other countries from daring to leave the EU – Britain may hit back with its own reciprocal restrictions on EU-owned airlines. Britain’s aviation industry is the largest in Europe and has plenty of clout. Reciprocal restrictions would prevent Irish carrier Ryanair from flying directly between points within the UK, for instance. Such a tit-for-tat aviation war would benefit nobody.

EU officials are reportedly insisting on a rigid interpretation of the rules. Resolving any disputes may be tricky as Theresa May plans to remove the UK from the jurisdiction of the current umpire in such matters, the European Court of Justice.

While British Airways does not fly intra-Europe so is not directly affected, the Guardian says BA’s parent, IAG, will probably need to disinvest shareholders to become majority EU-owned. IAG also owns Europe-based Iberia and Vueling.

EasyJet will shortly establish an EU operating company to obtain an EU air operating certificate, reports say, though EasyJet insists it will continue to be headquartered in Britain.

Ryanair is headquartered in Ireland, which is in the EU, but the airline will still need to boost its EU share ownership to comply with regulations.

In a statement in February, Ryanair said: “While it appears that we are heading for a hard Brexit, there is still significant uncertainty in relation to what exactly this will entail. This uncertainty will continue to represent a challenge for our business for the remainder of financial year 17 and financial year 18.”

Written by Peter Needham

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