April 11, 2021

The EU is considering giving Iberia seven months to adapt its shareholders after the Brexit | Economy

The EU is considering giving Iberia seven months to adapt its shareholders after the Brexit | Economy



A hard Brexit can become a brutal precipice for airlines with abundant British and extra-community capital, such as Iberia. The EU is considering allowing a period of only seven months, starting on March 29, for these companies to restructure their shareholding and meet the rule of having a majority of community capital. If this is not achieved, they would lose their flight licenses in Europe, which would leave Spain without its main airline company.

Brussels was considering more benevolent options, which could have extended the restructuring period between nine and 12 months. But in the last weeks, after the British Parliament's resistance to approving the exit agreement, the Union has hardened the tone towards London. And it seems willing to show that a break without an agreement will have dramatic economic consequences for the British economy and for the companies established there.

The 27 partners are preliminarily considering a period of seven months to adjust the capital of the affected airlines, according to a draft of the agreement quoted by Financial Times. If it came into force, the rule would only allow two weeks for companies to submit the adjustment plan.

Diplomatic sources specify to this newspaper, however, that the negotiation on the regulation is in an initial phase and the text is not yet closed and has not been addressed at the diplomatic level in the Council. The deadlines, in any case, must now be negotiated with the European Parliament and may vary. But the starting point denotes the intention to maintain a very firm stance in case of hard Brexit

The hardening has come accompanied by the irruption in the negotiations of Martin Selmayr, general secretary of the European Commission and until last year chief of staff of the president of the Commission, Jean-Claude Juncker. Selmayr participated this week in the meetings of the representatives of the Member States to stop any attempt at flexibility. Their interventions are described as "blunt" by diplomatic sources and have ruined the proposals of several countries, including Spain, to cushion the consequences of a Brexit without agreement.

Transitory period

The fear of a catastrophic March 29 for sectors such as road transport has led the countries of Central and Eastern Europe to request a transitional period as long as possible for the free movement of goods, an activity with significant presence of truckers Polish, Romanian or Bulgarian, among others. The same demand raised by Spain for air transport, in order to give Iberia more time to resolve its delicate shareholding situation.

But the Commission has blocked the expectation of a temporary relaxation of the rules after March 29. Brussels is committed to give the least possible margin of adaptation, which will make clear the goodness of the exit agreement rejected in the British Parliament with 432 votes against and 202 in favor. The EU trusts that the chaos that would cause the definitive rejection of that agreement will force London to reconsider its position.

The collateral damage of the Brussels strategy on Iberia could be devastating if the government and the airline fail in their attempts to prove that it is a Spanish company despite belonging to the holding company British IAG (former British Airways).

The European Commission has not accepted the arguments raised by Spain and Iberia up to now. The body refers to the community regulation that requires that more than 50% of the company's property, as well as its effective control (…) fall on the Member States or on their nationals ".

After its merger with British Airiways, Iberia became the property of a company called Ib Opco, whose ownership corresponds 100% to the British group IAG. The airline, therefore, would not meet the property criteria required by Brussels.

Iberia has argued, however, that the political rights of Ib Opco were shared between 49.9% of IAG and 50.01% of a Spanish company called Garanair, 100% ownership of El Corte Inglés. The airline defends, therefore, that the effective control of Iberia is completely in European hands. But the European Commission considers it essential that the two criteria, ownership and effective control are met, something that, according to Brussels does not occur in the case of Iberia.

The airline seems to have surrendered to that evidence and, according to the Minister of Development, José Luis Ábalos, on Thursday, he has already prepared "a proposal for Spanishness". The company has transferred the plan to the government, according to Abalos, who pointed out that these are "necessary" changes to comply with current European regulations and thus maintain flight licenses.

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