Brexit: Iberia says it is controlled by El Corte Inglés to prove it is Spanish
The airline, which is owned by IAG, could lose its flying rights in the bloc if there is no deal
The IAG group has a problem: if the United Kingdom leaves the European Union in March without a Brexit deal, airlines that are not over 50% controlled by EU nationals will lose their flying rights within the bloc.
Iberia, which is 100% owned by IAG, could be affected by a no-deal Brexit. But according to business sources, the parent company thinks it can prove to EU authorities that Iberia is in fact over 50% controlled by the Spanish business group El Corte Inglés, known primarily for its department stores. And that makes it Spanish.
We are convinced that we will comply with all applicable norms over ownership and control
IAG spokeswoman
The Spanish executive has been mediating to help convince the European Commission that Iberia is Spanish, although neither the government nor company officials have provided any public details about the effort.
In the meantime, IAG holds that there is no problem. “We are convinced that we will comply with all applicable norms over ownership and control, both in the UK and in the EU, after Brexit,” said a company spokeswoman.
A spokesperson for the Spanish Public Works Ministry said that “we are convinced that Iberia is a Spanish company, and we are also convinced that, if necessary, the company will make the required adjustments to ensure it complies with European norms.”
There was a first attempt to prove that IAG, which controls 100% of Iberia and Vueling, as well as owning British Airways and Aer Lingus, is itself mostly in European hands.
But the numbers do not add up: 21.4% of IAG is controlled by Qatar Airways, 5.26% by the US fund Europacific Growth, and the rest is shared out among minority stakeholders and shareholders who operate in the Madrid and London stock exchanges.
The Garanair strategy
The second line of defense involves claiming that Iberia is Spanish because it is headquartered in Spain, and also because the former Spanish flag carrier is mostly controlled by a very Spanish company: El Corte Inglés. IAG is basing this claim on the complex corporate structure that was set up in 2011 to facilitate the merger between Iberia and British Airways. While there have been a few important changes since then, the political rights remain in Spanish hands.
Iberia has two kinds of owners: at the time of the merger, in order to “guarantee the company’s Spanishness,” Iberia became 100% owned by a company called Ib Opco, where voting rights and economic rights were decoupled. All the economic rights went to IAG, while the voting rights were split between IAG (49.9%) and Garanair (50.01%). Today, Garanair is wholly owned by El Corte Inglés.
The Spanish executive has been mediating to help convince the European Commission that Iberia is Spanish
Garanair has no economic rights over Iberia, and is itself nearly worthless (its 7,000 shares are worth one euro). It was created in 2010, has one administrator – Jorge Pont Sánchez, an executive at El Corte Inglés – and one employee, according to business register records.
As for Vueling, which is owned by Iberia, the parent company figures that if it can prove the latter’s Spanish nationality, both airlines will be protected.
The question now is whether the European Commission will accept that Iberia is a EU company considering that all economic rights over it are in the hands of the British IAG. Whether El Corte Inglés has any real power over the airline is a matter of debate; Jorge Pont, a Corte Inglés executive, is also the vice-president of Iberia.
Lufthansa and Air France, which are IAG’s competitors and would like to take over its European business, will almost certainly object if the EU accepts the argument that political rights over Iberia make it a Spanish company.
English version by Susana Urra.
