Brexit offers up plenty of uncertainty for airlines, not least what to do about their shareholders.
EasyJet, based in Luton, England, is holding investor roadshows in France and Germany this week and last week in a bid to increase the proportion of stock held within the European Union once Britain leaves. Ryanair, Europe’s biggest discount airline, said Monday that it will remove the voting rights of non-EU holders in the event of a so-called hard Brexit.
With less than a year to go before the U.K. is scheduled to leave the EU, terms of a post-Brexit relationship remain elusive. The slow progress of talks has forced airlines with strong ties to the U.K. to plan for contingencies, because under EU rules carriers must be more than 50 percent owned by people and institutions based in member states in order to have an operating license within the bloc.
“On balance you would think common sense will prevail,” Ryanair Chief Executive Officer Michael O’Leary said in a Bloomberg Television interview on Monday. “But the Brexit discussions have not been characterized by a lot of common sense so far.”
Ryanair, though based in Dublin, wouldn’t fulfill the EU criteria after Brexit because it has 20 percent of its shareholders in the U.K. and a large number of U.S. investors holding American depositary receipts. EasyJet’s EU ownership comes up slightly short of a majority at 49 percent once the U.K. is excluded.
“In a hard-brexit scenario we’d have to go out and restrict the voting rights of non-EU holders,” Chief Financial Officer Neil Sorahan said in a phone interview. “It’s part of our contingency plan.”
EasyJet has increased its investor activity in continental Europe over the past year to 18 months, according to a spokesman, with the focus previously having been more on the Britain and the U.S.
While the U.K. carrier says it’s confident the 50 percent requirement can be met by broadening the investor base, its articles of association would also permit the forced sale of shares where operating rights are compromised.
British Airways parent IAG SA may face similar issues, since 20 percent of its stock is held outside the EU by Qatar Airways, though CEO Willie Walsh has dismissed concerns that Brexit could affect the structure of the group, which has its head office near London Heathrow airport but is registered in Madrid.
EasyJet has already had to set up a company with a base and air operators certificate in Austria in preparation for Brexit, something that will be necessary for it to carry on flying between EU states.
Ryanair has said it may need to acquire a separate British license in order to retain a handful of domestic U.K. routes. IAG already hold licenses in Britain, Spain and Ireland.
©2018 Bloomberg L.P.
Photo credit: An EasyJet plane. Airlines are still dealing with the uncertainty surrounding the United Kingdom's exit from the European Union. easyJet