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French and Germany pressure may force IAG to spin off British Airways

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An investigation has been launched after two passenger planes collided while one of the aircraft was being towed at Heathrow Airport.
An investigation has been launched after two passenger planes collided while one of the aircraft was being towed at Heathrow Airport.

British Airways’ (BA) parent company IAG could be forced to spin off BA as Germany and France might push to reinstate EU ownership rules.

According to HSBC analysts, IAG – who owns the likes of Aer Lingus, Iberia and Vueling – might be forced to make BA a truly independent company as regulations require airlines that operate within the bloc to be “owned and controlled” by EU companies, the Telegraph reported.

Suspended post-Brexit, the regulation is still at the centre of talks between the UK and the bloc but has yet to be finalised.

HSBC analyst Andrew Lobbenberg said that while Spain, Ireland and Hungary would support the scrapping of ownership rules, France and Germany could put up a fight, in an attempt to gain a market advantage over BA.

“National interests are ever present in the airline industry, which is often the home for mercantilist policy making,” he told the Telegraph. “The commercial interests of Air France-KLM and Lufthansa would unquestionably be supported by adding new strategic challenges to IAG.”

The company said it complies with EU ownership laws, as its board has a majority of independent EU non-executive directors.

“As stated in December 2020, our EU airlines’ remedial plans were approved by the national regulators in Spain and Ireland who confirmed that they comply with the EU ownership and control rules,” the company told City PM “They have been in place since 1 January 2021.”

Despite IAG’s reassurances, HSBC analysts believe the rules could be reinstated as they were put on hold because of Brexit negotiations.

“We think that through 2021 the EU has simply suspended disbelief on this matter as negotiations were ongoing between the EU and UK,” added Lobbenberg.

As IAG is between 10 and 20 percentage points away from a majority EU ownership, analysts believe IAG could get away with it if it demerged a part of BA.

“The company could consider demerging its non-EU business of British Airways into a separate non-EU owned company, leaving the legacy business EU owned,” Lobbenberg told the outlet.