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.

Dare we hope?

Bad news for the old crook.

Through his family-controlled Fininvest empire, Berlusconi runs Mediaset, by far the biggest commercial TV broadcaster in Italy. His empire also runs the biggest national advertiser, the biggest publisher and much else. Given Italy’s long tradition of political interference with public sector broadcasting, this means that when he has been prime minister he has wielded influence over almost everything watched by Italians on TV, from news programmes to adverts.

But on January 31 the European Court of Justice made a first dent in Italy’s unusually concentrated media market when it ruled that the national broadcasting system failed to foster competition. In essence, the court recognised what anyone who has lived in Italy (I did so for five years) knows: the present system is a stitch-up between Mediaset and Rai, the state-controlled broadcaster.

This was an important moment because it reminded Italians that, even if they cannot fix what is wrong in Italy, Europe can sometimes do it for them. Since Berlusconi entered politics in 1993-94, turning his media dominance into a serious national issue, Italy has had two spells of centre-left government – 1996-2001 and May 2006 to the present day. In neither spell did the centre-left succeed in passing laws to reform the media sector or curb politicans’ conflicts of interest.

One can speculate as to the reasons why. In the late 1990s, it was perhaps because former premier Massimo D’Alema was too clever by half and Berlusconi outmanoeuvred him. More recently, Prodi’s government was probably too weak and divided to pass such laws – though it had promised it would.

In any event, the spotlight will now move to Brussels. Buoyed by recent victories such as the landmark Microsoft case, the EU competition authorities have never felt stronger when it comes to taking on corporate power. At some point in Berlusconi’s future premiership (assuming he wins the election), it is a safe bet that a test case challenging his media dominance will under the scrutiny of Brussels.

The credibility of the EU as a regulator with worldwide influence will be on the line. But so, too will the reputation of the multi-billionaire Berlusconi. It will be some spectacle.