Brexit and Airlines

About a week before the UK government triggers Article 50, and the stories are just rolling out about taking control how difficult untangling the UK from the EU is going to be, how much business is going to head across the Narrow Sea (and to a much lesser extent, across the Irish Sea), and how very little influence the UK government is going to have on the process.

EU chiefs have warned airlines including easyJet, Ryanair and British Airways that they will need to relocate their headquarters and sell off shares to European nationals if they want to continue flying routes within continental Europe after Brexit.

The Guardian adds a little British understatement, “The ability of companies such as easyJet to operate on routes across the EU has been a major part of their business models.” Indeed.

Some airlines have started to seek headquarters within the EU and to restructure their ownerships. EU holding requirements could include “the forced disinvesting of British shareholders.” At least some business leaders were hoping the problem would go away. Because reasons, I suppose. “EU officials in the meetings were clear, however, about the rigidity of the rules, amid concerns at a senior EU level that too many in the aviation industry are in denial about the consequences of the UK’s decision to leave the bloc.”

Getting a new agreement won’t be easy, either. At present, the European Court of Justice is the final arbiter of disputes that arise under the agreements that cover air travel within Europe. The current UK government has signaled that it wants to leave the ECJ’s jurisdiction entirely. And of course undoing a multilateral agreement opens the door for some states to assert their individual interests in negotiating a new one: Spanish diplomats have said that they will not sign on to any international accord that recognizes the airport in Gibraltar. Somebody might be taking back control.

This is shaping up to be a very good couple of years for corporate relocation businesses, and possibly for people looking to sign on at the new headquarters locations replacing folks who were unwilling or unable to leave the UK when their jobs picked up and went.

6 thoughts on “Brexit and Airlines

  1. It is sad that in a fit of childish pique, the EU seeks to punish a former member to punitive extremes. They are not punishing NYC over being a major financial center not in the EU and there is absolutely no reason for London not to continue being one of the other major centers, just more conveniently located.

    I would recommend the UK adopt a tax haven mentality with equal secrecy to the Swiss (before they were cowed) and watch the inflows of monies to their banking system.

    IMHO the rest of the EU will eventually split into nation states once more, there is simply no way to integrate producers and non-producers into a uniform system run by unaccountable bureaucrats. It has to fly apart, matter of when, not if.

  2. It is sad that in a fit of childish pique, the EU seeks to punish a former member to punitive extremes

    The UK leaving the EU will hurt both the UK and the EU economies. It is the UK that chooses to inflict this damage.

    Of course, insofar as being part of the EU was reason for companies to settle in the UK, that is not something the EU should remedy. It is a reason to be an EU member. Neither is the “divorce settlement” on prior commitments something that is “punitive”. The UK signed up for these commitments.

    Now, the EU can use its regulatory muscle to force a bit of the City to move to the Eurozone. That would be new. That may be construed as punitive but even there: (a) the ECB was pretty clear in advance that it wanted Euro trade under ECB jurisdiction, and (b) if it compensates the EU -and especially Ireland – somewhat for the damage the UK is doing, it’s tit for tat but still not punitive.

    I’d rather have something less toxic than financial industry but that seems to be all there is.

  3. I’ve been watching the Swiss run their banking operation for years from the U.S. and it doesn’t look like anything is going to change anytime soon.

  4. Swiss banking relied on the secrecy afforded by the 1934 Swiss banking act.

    The secrecy was basically ended in 2009. In 2018 Swiss banks will automatically exchange information with the EU.

    The City of London is a major hub in financial dealings, not financial secrecy (the Brits use the Crown Dependencies and Overseas Territories for that). The City does 30-45 percent of trade in Euro denominated assets. The ECB will make sure that the contracts for these trades have to be struck under ECB jurisdiction, so inside the Eurozone.

  5. No, Switzerland basically no longer is a tax haven.

    Jersey, Guernsey, the Isle of Man, the British Virgin Islands, Bermuda on the other hand….

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