British Airways to leave Europe? *

According to a report in The Telegraph, British Airways (BA) could be forced to leave International Airlines Group (IAG) if Germany and France insist on the airline complying with EU ownership rules.

The newspaper says that, according to HSBC analyst Andrew Lobbenberg, IAG might be forced to make BA a truly independent company as regulations require airlines that operate within the bloc to be “owned and controlled” by EU companies.

It goes on to say that the regulation is still at the centre of talks between the UK and the bloc but has yet to be finalised.

Lobbenberg said that while Spain, Ireland and Hungary would support the scrapping of ownership rules, France and Germany could put up a fight, in an attempt to gain a market advantage over BA.

“National interests are ever present in the airline industry, which is often the home for mercantilist policy making”, he told The Telegraph. “The commercial interests of Air France-KLM and Lufthansa would unquestionably be supported by adding new strategic challenges to IAG”.

The company said that it complies with EU ownership laws, as its board has a majority of independent EU non-executive directors.

“As stated in December 2020, our EU airlines remedial plans were approved by the national regulators in Spain and Ireland who confirmed that they comply with the EU ownership and control rules,” the company told City AM who has also highlighted the situation. “They have been in place since 1 January 2021”.

Despite IAG’s reassurances, HSBC analysts believe the rules could be reinstated as they were put on hold because of Brexit negotiations.

“We think that through 2021 the EU has simply suspended disbelief on this matter as negotiations were ongoing between the EU and UK,” added Lobbenberg.

As IAG is between 10 and 20 percentage points away from a majority EU ownership, analysts believe IAG could get away with it if it demerged a part of BA.

“The company could consider demerging its non-EU business of British Airways into a separate non-EU owned company, leaving the legacy business EU owned”, Lobbenberg said.

There is still a school of thought that BA would be better off without the extra layer of management that IAG represents, still a large airline and with oneworld, marketing wise, in a powerful position.

www.ba.com

www.iairgroup.com

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Bill Bates, United Kingdom

I am not sure the return of BEA is such a good idea but surely it would be easy to create one company as British Airways (Europe) Ltd based in Paris (or somewhere). That way you don’t lose the brand.