deltaflyertoo
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Posts: 1479
Joined: Tue Nov 14, 2000 3:18 pm

Foreign Ownership In VS Question

Tue Oct 02, 2012 6:25 am

Is there any treaty/law, etc in the UK that would prohibit VS being wholly owned 100% by a foreign interest (say a company in the US, etc). I ask cause their route system (as of now I know its changing) is 100% UK to foreign destinations (vs having an extensive euro network like BA).
 
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adg737800
Posts: 79
Joined: Fri Sep 12, 2008 1:42 am

RE: Foreign Ownership In VS Question

Tue Oct 02, 2012 8:00 am

There's nothing in UK law to stop complete foreign ownership of VS or any other UK airline as far as I'm aware. The main problem would probably come from some of VS's route authorities. I imagine this could be worked around, just like it seems to have been at KLM, Swiss etc.
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Sheridan125
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Joined: Sat Jun 30, 2012 5:54 pm

RE: Foreign Ownership In VS Question

Tue Oct 02, 2012 8:06 am

EU laws require that any airline registered in the EU is majority owned within the EU. Almost all of the Air Services Agreements within which VS operates require "substantial ownership and effective control " to be within UK. So there is absolutely no way that VS or any other EU airline can be more than 49.9% owned outside the EU. There are rare exceptions granted to non-EU airlines when the first EU airline liberalisation came into effect in 1987. I think the only one remaining with this "grandfather approval" is Monarch which is owned entirely in Switzerland.
 
bill142
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Joined: Wed Aug 04, 2004 1:50 pm

RE: Foreign Ownership In VS Question

Tue Oct 02, 2012 8:08 am

Quoting adg737800 (Reply 1):
There's nothing in UK law to stop complete foreign ownership of VS or any other UK airline as far as I'm aware. The main problem would probably come from some of VS's route authorities. I imagine this could be worked around, just like it seems to have been at KLM, Swiss etc.

But the EU would block it.
 
vv701
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Joined: Fri Aug 19, 2005 10:54 am

RE: Foreign Ownership In VS Question

Tue Oct 02, 2012 12:49 pm

No airline can fly any international route covered by a bilateral air services agreement unless it is at least 50.1 per cent owned by one of the signatories to that agreement. However I believe an EU based airline operating an international route where one of the signatories is the EU is only required to have a minimum of 50.1 per cent EU ownership.

Multi-national airline conglomerates, AF/KL, IAG and Lufthansa Group address these restrictions in their complex corporate structures. So, for example, International Consolidated Airlines Group (IAG) is a Spanish based corporation. When formed it was majority owned (55 per cent) by the former shareholders of British Airways plc. In turn British Airways plc had been majority owned by British individuals and financial institutions. However it had a substantial foreign (mainly American) ownership that was in excess of 40 per cent.

IAG owns 100 per cent of the economic rights of British Airways. However it only owns 49.9 per cent of the British Airways B shares. 50.1 per cent of these shares in which operational control of BA is vested, are owned by a private British registered company.

This structure is illustrated in Slide 63 of a presentation by Willie Walsh (then CEO of British Airways, now CEO of IAG) that can be viewed here:

http://media.corporate-ir.net/media_.../01_ID_2010_Full_presentations.pdf

Because of these restrictions airlines like LH and BA before their merger into the current conglomerates used to monitor foreign ownership of their shares. They published the level of that ownership in their Annual Report. Their Articles of Association gave them the authority to force foreign owners that had bought shares so that the 49.1 per cent barrier was broken to sell sufficient shares to take foreign ownership below that barrier.

I do not know whether the same applies to the likes of IAG but believe that since IAG does not have operational control over BA or IB that this is no longer a requirement.
 
Viscount724
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Joined: Thu Oct 12, 2006 7:32 pm

RE: Foreign Ownership In VS Question

Tue Oct 02, 2012 10:20 pm

Quoting VV701 (Reply 4):
No airline can fly any international route covered by a bilateral air services agreement unless it is at least 50.1 per cent owned by one of the signatories to that agreement.

When LH ownership of LX first reached 50% (now 100%), the Swiss government had to renegotiate all their bilaterals to avoid losing their traffic rights.

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