Post-Brexit ownership and control rules remain a significant hurdle for several of Europe’s largest airlines, according to analysis by HSBC.

In a note to its clients’ published last week, the bank said that despite the UK’s departure from the EU “now being quite a distant event”, inconclusive negotiations throughout 2021 “leave airline O&C [ownership and control] a real issue.”

EU rules state that the block’s airlines must be majority EU-owned and controlled. Following the UK’s departure from the bloc, the issue presents a challenge for IAG, Ryanair, Wizz, and to some extent EasyJet, following the UK’s departure, given the level of UK ownership in the carriers.

“Whilst the regulatory challenge did not come to a head in 2021, this matter has not gone away,” said HSBC.

Progress on ownership discussions has stalled

The December 2020 EU-UK trade agreement committed the parties to further discussions on ownership and control, yet progress appears to have stalled, possibly tangled up with broader discussions on subjects such as Northern Ireland.

HSBC’s statement read: “The affected airlines have all made various structural actions, including disenfranchising non EU shareholders and adjusting board structure. The airlines, with notably varying vehemence, argue that the changes they have made mean their structures comply with EU law. We do not share this confidence.”

The bank believes that although airlines’ moves strengthen majority EU control, they do not demonstrate majority EU ownership. It continues that although the EU may have suspended action while 2021’s talks were ongoing, should a liberalisation agreement fail to be reached soon, “we think the EU, encouraged by home countries of Air France-KLM and Lufthansa, may move to require the affected airlines to adjust their ownership structures to be unequivocally majority EU owed.”

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