April 15, 2021

Brussels offers Iberia between 7 and 12 months to adapt its shareholding to the hard Brexit | Economy

Brussels offers Iberia between 7 and 12 months to adapt its shareholding to the hard Brexit | Economy



The Brexit countdown continues to advance and the lack of agreement on the departure of the United Kingdom can cause an unprecedented upheaval in the Spanish air market. The EU will offer Iberia and Vueling, owned by the British group IAG, a period of between seven and 12 months to reorganize its shareholding structure if the departure of the United Kingdom is consummated on 29 March without agreement with the community partners.

During this period, they must work to ensure that 51% of the shareholder is European. It is a condition that they do now (IAG has decided to limit to 47.5% the maximum capital held by foreign shareholders that they do not come from the European Union), but counting the British shareholders, and with a hard Brexit they would lose that condition, since the British capital will be computed as extra-community.

The definitive deadline (now a seven to 12 month period) to guillotine the license will be set in a negotiation round between the EU Council and the European Parliament, the two bodies in charge of finalizing the draft regulation that sets the measures of contingencies for the air sector in case of hard Brexit.

If the airlines did not complete the restructuring in the time granted, the two main Spanish airlines are exposed to losing their flight licenses, which would open a huge gap in the Spanish market. Between the two they add almost 46 million travelers per year (in 2018), more than the market leader (Ryanair with 40.9 million passengers).

The legislative text has entered this Friday in the final stage of its processing, with an agreement of the 27 European partners that offers a period of only seven months (until October 26 of this year) to companies that must restructure their shareholding to to be able to maintain the community license. But the European Parliament approved on Wednesday an amendment that establishes a non-extendable period of one year (until March 30, 2020) to carry out the restructuring. The two institutions must now begin a conciliation process to iron out the divergences that have arisen during the process. The first appointment will be on February 19 and a quick agreement is expected.

Two opposing postures

The European Commission and several community partners are in favor of offering the shortest possible time within the range between seven and 12 months, to make clear the differences between a pacted Brexit or without an agreement. Brussels also wants the affected airlines to submit a share restructuring plan two weeks after the Brexit.

The European Parliament, on the other hand, has opted for a more benevolent reading and calls for a longer period of restructuring (up to one year), without a precise timetable for the presentation of the plan. The parliamentary amendment only states that the plan must be presented "as soon as possible".

The most favorable option to Iberia, however, would be the signing of the UK Exit Agreement. That treaty contemplates a transitory period, until December 31, 2020, in which the conditions of the license would remain intact. The agreement also contemplates the possibility of prolonging the transition by one or two years, which would allow it to continue operating normally even until January 1, 2023.

But the agreement is blocked in the British Parliament, which rejected it by an overwhelming majority last January. The House of Commons has called on Prime Minister Theresa May to renegotiate the text to limit the duration of the so-called Irish safeguard, a compromise that guarantees free movement between the two parts of Ireland whatever happens with the Brexit. .

The threat of hard Brexit

Brussels has agreed to resume contacts with London despite the closure of the Brexit agreement on 25 November. The EU, however, has warned that the text can not be modified and only offers changes in the attached Political Declaration which outlines the future relationship between Brussels and London.

Even so, May trusts to start enough concessions to convince his Parliament. And he plans to submit the agreement to a new vote by the end of February. Community sources fear a new rejection if the prime minister does not first reach an agreement with the Labor opposition, a pact that at the moment does not appear. The definitive derailment of the agreement would lead to a hard Brexit that would set in motion a very dangerous countdown for Iberia.

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