Airlines - UK Investors beware

“Ryanair and Wizz Air are to take away the voting rights of UK shareholders as a result of Britain’s exit from the EU.
The airlines are acting to comply with EU ownership rules once Britain leaves the bloc on Friday.
Ryanair said on Tuesday it had to “take steps” to ensure it would remain majority EU-owned and controlled to comply with European regulations.
The Irish airline said in a stock market announcement it would issue restricted shares to non-EU investors, specifying that holders were not entitled to speak or vote at any general meeting.
Wizz issued a similar stock market announcement. The airline expects to serve about 60 per cent of its investor base with restricted share notices. Without the action, the airline would have been 80 per cent owned by non-EU nationals from January 1.
Both airlines are enacting long-held plans to ensure they maintain their flying rights after Brexit.
EU regulations demand that airlines with EU operating licences, including BA-owner IAG and easyJet, are majority owned and controlled by nationals of the bloc, Switzerland, Norway, Iceland or Liechtenstein.
This enables airlines to fly between two destinations within the EU borders.
From January 1, UK nationals will be treated as non-EU and their shares will no longer count towards that ownership requirement.
While potentially problematic for UK shareholders, the arrangement will not present immediate operational issues, analysts say.
UK investors that may be affected include Baillie Gifford, which is the second-biggest investor in Ryanair, and Wizz top 20 investors Jupiter, Legal & General Investment Management and Schroders, according to Refinitiv’s latest filings.
Baillie Gifford said it thinks the UK and EU agreed to “explore a liberalisation of the ownership rules over the next 12 months, potentially insulating carriers from challenges based on their ownership structure”.
Daniel Roeska, an analyst at Bernstein, said airlines with large UK ownership will either need to wait for a favourable agreement on airline ownership rights or design alternative ownership and holding structures to “safeguard EU-nationality of individual airlines”.
Analysts have long said that IAG, the owner of airlines including BA, Iberia and Aer Lingus, face the most complex problems on ownership after Brexit. The group has never disclosed how many of its shareholders are EU nationals when the UK is excluded.
UK-based easyJet said last week it would suspend voting rights of some investors if necessary to raise its EU voting base above 50 per cent from 47 per cent, excluding the UK” -FT

If so much of the ownership is really going to get served such shares, I can expect plenty of people to be selling their shares and a dip in price to be realised. could be the chance EU investors need to pick up more of the ownership at value prices.

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To be fair before this news came out i have already sold off my airline stocks as am less optimistic and maybe a bit biased as i work in the A & D industry. I would keep the likes of Airbus, Boeing, Safran, BAE, Raytheon etc simply because of their exposure to defense sector is helping to sustain their commercial aerospace sector. The focus and resources are now predominantly geared towards the defense sector and so am not sure how this gonna play out for the aerospace sector post pandemic. One thing for sure there’s only so much that these airlines can push down on aircraft manufactures and especially first tier suppliers…interesting times to watch.

I don’t think any of the airlines will have too many problems.
Ryanair is irish and IAG is spanish so their governments will find a solution.
Easyjet, its founder and main shareholder is greek so as you say, it is quite close to being at 50% EU ownership. I guess the founder might be 3% more shares and that will be it :slight_smile:. (Even though he had some problems with the CEO/Board a few months ago regarding new plane orders)

WizzAir, I can’t say. I don’t know.

Having said this, a dip caused by this could be a good opportunity to buy :slight_smile:.