Thu. Mar 21st, 2019

The high risk of Vueling and Level, the threats of the hard Brexit for El Prat

El alto riesgo de Vueling y Level, las amenazas del Brexit duro para El Prat

While from the Ministry of Public Works messages of tranquility are transmitted regarding the effects of a Brexit hard for Iberia's operations in intra-European flights, the situation of Vueling, leader in traffic at the airport El Prat and property of IAG, has been in the background. The company, until 2013 owned by Iberia, is currently controlled by Veloz, which has 53.65% of the capital, as recorded in the last annual financial report of IAG for the year 2017, presented at the end of February 2018. Veloz is a holding of shares owned by IAG at 100%. After that date, the regulator has not been informed of a change in this situation.

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Therefore, the CEO of Vueling, Javier Sánchez Prieto has a position on the management committee of IAG at the same level as Luis Gallego, CEO of Iberia. And for this same reason the situation of Vueling in case of a hard Brexit is disassociated from the fate of Iberia. In fact, on page 64 of the 2017 report, IAG declares that it owns Vueling at 99.5% and considers it one of its main subsidiaries, at the same level as British Airways, IAG Cargo and Iberia.

Companies that do not have a majority of capital and control of the EU will not be able to continue with their internal flights

"I understand that they have not communicated changes in the shareholding because they have not occurred. To maintain the license to operate IAG should demonstrate that at least 51% of its capital is in community hands, something that today does not meet, "says Felipe López-Gálvez, Self Bank analyst. For its part, IAG defends that it is a Spanish company and its airlines have long-established stable AOCs (Air Operator Certificate), as well as a large part of the business in Ireland, France, Spain, Austria and the United Kingdom. "We are confident that we will comply with the rules of ownership and control post Brexit agreed by the EU and the United Kingdom," say sources of the company.

Brussels has long been calling on airlines to prepare for the possibility, ever closer, of a hard Brexit. In 2017 the transport commissioner, Violeta Bulk, already issued a first alert, followed in January of last year by an official note from the EC to the interested parties and finally, in November with the presentation of the Brexit contingency plans. The message is clear. Any company that is not "majority owned and effectively controlled" by EU states or nationals will lose their license, and will not be able to continue making internal flights in Europe. In order to limit damages, for one year these companies will be able to maintain their flights between the European Union and the United Kingdom, as long as they are "point-to-point" journeys, that is, without stopovers. A scenario that would bring little relief to Vueling or Iberia.

To limit damages, for one year these companies will be able to maintain their flights

In Brussels, they acknowledge that Iberia's situation is particularly complex in determining whether or not it will comply with the conditions to continue being considered an EU company, given its ownership structure, and in any case, point out that the decision corresponds to the Spanish regulator, the Agency State Air Regulation (AESA). But, European sources also add that "the European Commission is prepared to act if the rules are not respected".

In case of detecting that an operational license does not meet the required requirements, a "date limit" would be set for taking corrective actions or actions, and if the breaches continued "the company concerned could not continue to exercise its right to operate in air services within the Union. " The IAG group is also recommended by the European Commission to ensure that it is in a position to meet the requirements of operational licenses in case of a non-agreement scenario "in the Brexit.

Level, linked to the destination of Iberia

The flights from Barcelona from Level, the low cost IAG group long-haul flights are Iberia flights in all but the brand and in this case, any effect of the Brexit in Iberia would be immediately transferred to the operation of Level in El Prat. In Paris, the brand is operated by the French company Openskies, wholly owned by British Airways. In addition, Level has an Austrian subsidiary for operations from the Vienna airport, which started last July.

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