Foreign ownership of UK airlines

[Supermattt]

Hi All,

I have assume for ages that there was some restriction on foreign ownership of UK airlines as there is for US airlines (max 25% I beleive). I have gone to investogate however and can't find anything o it. Is there any restriction of Foreign ownership of UK airlines and how is this imposed, i.e. legislation, regulations?

thanks in advance
Matt

[The SSK]

As regards operations within the single market (EU27 plus Norway and Iceland), there is no such thing as a 'UK airline' or a 'German airline' or a 'Maltese airline', only 'Community airlines' which must be majority owned (50% plus one share) by EU interests.

The rules were formulated in the Third Package of liberalisation measures, which came into force in 1993. At the time, three airlines which did not meet the ownership requirements were granted special Community status - SAS (Sweden was not an EU member at the time and it was only 2/7ths Danish), Britannia and Monarch (both of which were majority Canadian-owned).

For the purposes of operations outside the EU, these are governed by bilateral air service agreements which will normally include a clause on airline nationality - eg only British or Angolan airlines are allowed to fly between Britain and Angola. An exception is the USA which last year implemented the 'Open Skies' agreement which from the US side recognises the Community ownership rules, while keeping their own 25% ownership limit.

These 'nationality clauses' in bilaterals do not conform with EU rules and there is an ongoing process to renegotiate them, country by country, to replace the nationality clause with a Community clause (i.e. only EU and Angolan airlines are allowed to fly between the EU and Angola).

Most of these so-called 'horizontal agreements' so far have been signed with smaller countries. Those with more negotiating clout don't give up something in a bilateral without wanting some kind of quid pro quo.

There are some issues at the moment with the Russians buying into distressed Central European carriers like CSA and Malev. My guess is that, if this is the only way to save these airlines from going under, they would be granted special Community status in a similar way to the 1993 exceptions.

Here endeth the lesson.

slightly edited, because I'm a fussy b***er

[Rainboe]

There is no restriction of foreign ownership of UK airlines. I think it probably fair to say that the UK is the most liberal and free market for all business, including airlines, of all countries in the world. Anybody can buy up any company unless there is a significant defence interest. Several airlines have complete foreign ownership. For a start, how about Astraeus (100% Icelandic owned), TUI (Thomson and First Choice) German owned, Thomas Cook (German owned), even BA is significantly foreign share owned without the golden share anymore, BMI 100% Lufthansa owned....... You will spend a long time finding rules!

The list goes on. It is a cause of shame for our competitors with their tightly restricted and limited ownership rules! Which is best? I believe the UK aviation market has shown its strength versus our competitors for years. The UK has undoubtedly been 'punching above its weight', and will continue to do so.

[The SSK]

To pick up on Rainboe’s comment – in the case of an internationally-quoted public company like BA it cannot be easily ascertained at any given moment what their foreign ownership is. There will be a register of shareholders but I don’t know how it is updated or how closely the nationality is scrutinised – for example a multinational company with both EU and non-EU ownership could hold BA shares.

I think I read some years ago that BA was at the time ‘substantially’ foreign (that is, non-EU) owned, in percentage terms maybe in the high 30s or low 40s and it was approaching the point where more careful oversight might be needed to make sure the 50% limit was not overstepped. Quite how it is enforced once you get very close to the limit I don’t know.

[davidjohnson6]

Quite how it is enforced once you get very close to the limit I don’t know. From memory (and if I'm wrong, could someone please correct me):

The company secretary (this is a formal role) is obliged to maintain the register of shareholders. Procedures can be set up such that where the ownership limit is close to being breached, certain transfers of shareholdings can be required to gain approval from the company secretary.

One of the major causes that prevents this happening, is that BA shares are denominated in GBP, and thus pension funds and insurers without substantial UK operations tend to avoid taking on the inherent currency risk that major cross-currency share purchases would entail. Of course, when you talk about hedge funds, that is a completely different story !

[boredcounter]

Maersk Air UK was the first to be 100% owed overseas, by the AP Moller Group, when the Plimsole Line disolved. That was in 1993.


Bored

[racedo]

The company secretary (this is a formal role) is obliged to maintain the register of shareholders. Procedures can be set up such that where the ownership limit is close to being breached, certain transfers of shareholdings can be required to gain approval from the company secretary.
The company will contract it out to company like Computershare or others who maintain the shareholders register but you are correct the Company Sec is the person responsible.

A lot of shares will be owned by nominee accounts or by financial institutions who can be forced to declare some of the ownership.
Annual accounts show who has more than 3%.

Substantial interests in shares

The Company has been notified pursuant to the DTRs of the following interests in 3 per cent or more of the Company’s issued ordinary shares as at May 15, 2008:
Name of shareholder Percentage of holding Direct % Indirect %
INVESCO plc 11.05 Nil 11.05
Standard Life plc 9.07 7.69 1.38
Barclays PLC 6.90 6.90 Nil
AMVESCAP Plc 6.74 Nil 6.74
AXA S.A. 4.85 0.75 4.10
Legal & General Group Plc 4.07 4.07 Nil

42% of Shares owned by these companies.