Many newspaper headlines have been devoted to voicing concerns about the visa status of UK citizens looking to travel abroad on holidays this summer. What may be a greater concern to would-be travellers is whether or not those planes can even take off. UK-listed airlines have been busy in recent months preparing for all possible Brexit scenarios. Some have been more transparent about their plans than others, leading shareholders to become understandably nervous about those companies who have been quiet on the matter.
It's not only investors who are feeling frustrated. The EU is, too. European transport commissioner Violeta Bulc has criticised airline groups for “gambling” that the UK would indeed get an extension in the lead-up to the original 29 March deadline, according to reports by the Financial Times. Ms Bulc claimed that some have not submitted plans for their course of action in the event of a hard Brexit, as is required by the EU. One airline that the EU commissioner confirmed had not submitted plans was International Consolidated Airlines (IAG), owner of British Airways and Iberia, but added that those who have not done so will have a two-week extension to file with the EU following a no-deal Brexit.
One set of rules that UK-listed airlines have been preparing for are those around shareholder ownership. The EU requires that more than half of shareholders in airlines flying routes within Europe must be EU citizens. Ahead of Brexit, UK investors count towards this threshold, but naturally this will no longer be the case once the UK leaves. IAG notified shareholders in February that it would cap the number of non-EU investors allowed to buy its shares at 47.5 per cent, the existing proportion at the time of the announcement. Those investors outside the EU who buy shares in IAG will now be forced to sell within 10 days if that purchase means that non-EU ownership exceeds that threshold.
Budget airlines Ryanair (RYA) and easyJet (EZJ) have both announced that they will strip the voting rights of non-EU shareholders so that the companies adhere to the rules that airlines must be majority EU owned and controlled. As soon as UK shareholders are no longer considered EU citizens, they will be categorised as restricted shares, whose owners are not able to attend, speak or vote at a general meeting. Ryanair has yet to disclose what proportion of its shareholders to which this will apply. easyJet stated that its EU ownership currently stands at 49.92 per cent, still below the 50 per cent plus one share threshold.
Fellow UK-listed budget airline Wizz Air (WIZZ) has faced the opposite issue. It is based in Budapest, Hungary, so the proportion of EU shareholders is not an issue. Instead, it established Wizz Air UK and has secured a UK route licence, a “future-proofing” measure so that the airline can continue to fly between the UK and the EU regardless of the outcome of Brexit discussions, deal or no deal.
There is still some time remaining for UK-listed airline groups such as IAG to sort out Brexit preparations, with a two-week grace period following a hard Brexit for companies to submit their plans to the EU, and six months to comply with applicable EU ownership and control requirements.
