European Union imposed rules could mean big changes for IAG and British Airways

European Union imposed rules on ownership and control of airlines could mean big changes for IAG and British Airways. The owners of BA are being threatened with a challenge from Germany and France concerning legacy rules on ownership imposed by Brussels before Brexit. This challenge could potentially see the break-up of IAG, with some or all of British Airways having to be spun off from the Group as a result.

Within Europe, the fall-out from Brexit seems to be the gift that keeps on giving. As the airline industry in Europe struggles to get back on its post-pandemic feet, along comes another issue that could throw some of its key players into doubt.

The International Airlines Group is a powerful force within the European aviation scene, with British Airways one of the founding companies within the Group. However, its status as a cornerstone of IAG is under threat, following indications from France and Germany that the airline’s ongoing membership is contrary to pre-Brexit regulations set out by the European Union (EU) in Brussels. The United Kingdom legally separated from the EU in January 2020. This effectively renders British Airways no longer an EU carrier.

British Airways is a significant player in the International Airlines Group (IAG), alongside Iberia. Formed in 2011, when the two flag carriers of the United Kingdom and Spain signed a merger agreement, both airlines became wholly-owned subsidiaries of IAG. The Group has since expanded its portfolio of airlines with the acquisition of Aer Lingus and Vueling. It also owns the Level brand as well as the Avios rewards program.

Analysts at HSBC have today warned that IAG might be forced to make British Airways a truly independent company. This is because EU rules dictate that any airline within the bloc is “owned and controlled” by an EU-based company. Talks between the EU and UK to resolve the issues this presents for IAG were suspended post-Brexit. However, in the thirteen months since the talks were re-instated, negotiations have failed to make any headway towards a resolution. The regulation regarding ownership and control remains at the center of those talks. It is suspected by many that certain EU member states will be keen to see the rules re-instated to protect their airlines.

According to one analyst at HSBC, while Spain, Hungary, and Ireland would support the scrapping of those rules, it is likely that France and Germany could put up a fight in an attempt to gain a market advantage over British Airways. Meanwhile, airlines across the EU have formed their own opinions about the precise definition of “owned and controlled.” The most commonly held view amongst the EU airlines is that this means more than 50% of the shareholders are based within the EU, reported by the Telegraph and simpleflying.com