On Monday Spanish language El Pais reported that British Airways parent company IAG was in talks with that country’s government about ensuring the airline conglomerate would be a European – rather than UK – company once Britain leaves the EU, if no bilateral aviation deal is done in time.
While London is the most lucrative aviation market in the world, and the carrier’s transatlantic routes and long haul business destination routes their bread and butter, they could find themselves with limited European traffic rights as a result of the move by the British government to exit the European Union.
IAG, the parent company of British Airways, has been in contact with Madrid since at least last month, El País newspaper reported on Saturday, citing Spanish government and EU sources.
According to the newspaper, IAG is speaking to Madrid in order to ensure it will still meet EU ownership rules if Britain leaves the European Union in a no-deal Brexit. This would be needed to ensure that its operating rights are not jeopardized following the UK’s exit from the bloc.
However, Madrid and Brussels reportedly doubt whether the company’s status of an EU airline would be maintained in a no-deal scenario.
British Airways 747
IAG, which owns British Airways, Iberia, Aer Lingus, and Vueling as well as a small stake in Norwegian, currently has majority European ownership. Post-Brexit, UK owners would be excluded from that calculation and the company — which is registered in Spain — is expected to fall beneath that threshold. (Qatar Airways is the largest shareholder in IAG, and is neither British nor European.)
The company’s headquarters, alongside British Airways near London Heathrow, could also prove problematic.
Brexit is schedule to happen March 29. There’s an initial 500 page deal that’s been reached which Prime Minister Theresa May must sell to her cabinet today and ultimately pass through the Parliament.
The full document will only be released once it’s through the cabinet, however without this draft agreement time begins to run out and getting to an aviation deal becomes less and less likely. easyJet has created easyJet Europe and moved aircraft outside the UK in preparation for what may happen next.
Without a clean Brexit deal British Airways needs to lose its Briitshness. With enough coverage that could ultimately be enough to scare Parliament to pass it.
I suspect that this report is misguided in several crucial details. First off, it’s almost inconceivable that BA will not have thought this through many months ago and already put in place a plan – as you point out, EasyJet has put in place a plan. It would be particularly easy for BA to do this, given its corporate structure, whereas this report suggests that BA has a binary choice – either operate in the EU outside the UK or operate in the UK outside the EU. In reality it has subsidiaries in both jurisdictions which, with some legal manoeuvres could separately be able to continue in their respective jurisdictions.
So what does that mean for us, the consumer? Specifically those in the US. Is this good, bad or indifferent?
Time to rebrand to Iberia I guess.