British-owned airline Iberia could lose its right to operate in the European Union after the United Kingdom officially leaves the bloc on March 30, 2019, if the British Parliament does not ratify the Withdrawal Agreement.
With 100 days to go until the UK exits the EU in a process known as Brexit, the European Commission said on Wednesday that airlines that fall below the 51% threshold for EU ownership will not be able to operate within Europe if no Brexit deal is signed.
44.7% flights to and from the UK are covered by European companies
Given that Ibera is owned by International Airline Group (IAG), which is also the parent group of British Airways and Vueling, the Spanish airline may be prevented from flying in Europe and even within Spain if no Brexit deal is reached.
But sources from the company appear unfazed by the warning and maintain they are working on strategies to ensure their services are not affected. They did not specify if they had found a solution, stating only that they were negotiating with EU authorities and had the support of the Spanish government.
But with Brexit fast approaching, it looks increasingly likely that the UK parliament will not ratify the Withdrawal Agreement signed with the EU. Other airlines at risk, such as Ryanair or easyJet, have announced they will adopt measures to ensure they pass the ownership threshold and transfer control to an entity or person in Europe. Iberia, which is controlled by the British-owned IAG, has not made a similar announcement.
The only exception: flights to the UK
The European Commission, in its contingency plans in the case of a no-deal Brexit, agreed to a 12-month truce period for flights between the UK and the 27 EU member states. In other words, Iberia will be able to fly from Spain to England and vice versa even if it is not majority owned and controlled by a company in Europe.
This decision was taken to avoid leaving the UK without any connecting flights to Europe given 44.7% of flights are covered by European companies and the only alternative form of public transport is to travel by train or by sea from Belgium, France and Ireland.
Iberia may be prevented from flying in Europe and within Spain if no Brexit deal is reached
Canceling the operating licenses of British airlines within Europe will have less impact as they only cover 19.3% of demand, according to the European Commission. This conclusion however, does not take into account that Iberia, the Spanish division of IAG, covers a large part of the Spanish market and withdrawing its license could leave the country almost completely without domestic flights. Iberia, for instance, would not be able to fly from the peninsula to the Balearic Islands or the Canary Islands.
Sources from Brussels have repeated their statement from March 2017 when Brexit negotiations began: “To maintain a valid operating license and enjoy the possibility of offering services within the EU, [airlines] must comply with all conditions, including being majority owned and controlled in Europe.”
For months Iberia has been trying to prove that it is a Spanish entity, arguing its complete infrastructure – headquarters, shareholder meetings, Custody of Bearer Shares – are based in Spain. But the Commission insists it must apply EU norms without any exceptions. Sources from the EU also doubt that the Spanish airline can meet the conditions concerning European control, given IAG in London has the final word on all its decisions.
Diplomatic sources from Brussels believe, however, that airlines that do not meet EU conditions may still be able to fly within Europe after Brexit, regardless of whether a deal is reached or not. These sources point out that the decision to revoke Iberia’s license falls to the European Aviation Safety Agency (EASA), which may agree to extend the airline’s license.
This however does not clarify doubts about the future of Iberia under a no-deal Brexit. “The EASA would extend the license in application of an EU norm and this means its decision would be subject to the supervision of the European Commission and jurisdiction of the European Court of Justice,” explains the diplomatic sources, who add that Iberia’s European competitors are likely to dispute the airline’s license on this basis to gain greater control of the European market.
English version by Melissa Kitson.