EasyJet in talks with several EU member states on moving main HQ there, from Luton, due to Brexit
EasyJet says it has opened talks with EU member states’ aviation regulators about relocating its legal headquarters from the UK, due to the Brexit decision. Sky News believes easyJet’s Carolyn McCall has had meetings with several unidentified EU states to explore the possibilities, but details could take months to be ironed out. It is thought that the most likely workable structure would be to be an EU-registered entity with a UK subsidiary”. easyJet would need to obtain a air operator’s certificate (AOC) that would enable it to base its HQ in an EU country. Some of the states would want an airline with an AOC to move the bulk of their operations there, but it is understood that easyJet is not willing to do that. One insider said moving the HQ could entail relocating just a handful of staff, depending on the regime operated by the individual country’s aviation regulator. Moving the AOC to another country would mean the current AOC in the UK would become just a subsidiary. Whether that would mean jobs being lost at easyJet’s main UK base, Luton, is not known. British Airways’ parent, International Airlines Group, already operates using a similar structure with its AOC. Ryanair, whose main source market is the UK, has also said it will obtain a UK AOC should it need to.
EasyJet has opened talks with EU member states’ aviation regulators about relocating its headquarters from the UK, underlining how the decision to leave the European Union is impacting corporate Britain.
Sky News has learnt that easyJet’s chief executive Carolyn McCall has signalled in private meetings this week that moving its legal HQ from the UK is almost inevitable in the wake of last week’s referendum result.
Details of the move are expected to take months to be ironed out, but sources close to the company said it had already held preliminary talks with a handful of unidentified EU member states about issuing easyJet with an air operator’s certificate (AOC) that would enable it to base its HQ there.
Some of those member states are said by City sources to be keen on airlines seeking relocation to move the bulk of their operational HQs, which in easyJet’s case Ms McCall and her executives would be unwilling to do.
One insider said moving the HQ could entail relocating just a handful of staff, depending on the regime operated by the individual country’s aviation regulator.
It would involve up-ending easyJet’s current corporate structure by making its existing UK AOC entity a subsidiary of its newly incorporated legal headquarters.
British Airways’ parent, International Airlines Group, already operates using a similar structure, while Ryanair could adopt such a model in future.
A source said that easyJet had received advice that “the most workable structure would be to be an EU-registered entity with a UK subsidiary”.
EasyJet employs roughly 1,000 people at its Luton base, in functions such as finance, IT and marketing – separate to the staff who work on its operations at the Bedfordshire airport.
While those staff would not be relocated, the prospect of easyJet moving its legal HQ reinforces the fact that leaving the EU will have animpact on the corporate structures of some of Britain’s biggest companies.
Vodafone said last Friday that it was “too soon” to determine whether the referendum result would trigger the relocation of its headquarters.
Existing rules in the EU mean that there is a single aviation agreement across the bloc, but the UK’s continued membership of that is uncertain.
Ms McCall told Channel 4 News earlier this week that it “remains to be seen” whether the company’s HQ would be shifted following Brexit.
In a statement to the London Stock Exchange in the aftermath of the Brexit vote, the company said: “EasyJet has been preparing for this eventuality in the lead up to the referendum vote and has been working on a number of options that will allow it to continue flying in all of its markets.”
Ms McCall added that she had “written to the UK Government and the European Commission to ask them to prioritise the UK remaining part of the single EU aviation market”.
In private discussions including with her fellow members of the Prime Minister’s Business Advisory Group, however, Ms McCall has gone significantly further.
One person who had been told of her stance said she had concluded that it was “likely” that easyJet’s HQ would move to the EU.
The airline is now expected to review all 27 of the remaining member states before holding further discussions with a number of them about the possible terms of an AOC.
A decision is likely later this year.
EasyJet declined to comment on Friday.
Ryanair CEO Says Actual Brexit Will Never Happen
by Shawn Tully JUNE 30, 2016, 12:50 PM EDT
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But a recession may.
Here’s a daring prediction of what from one of Europe’s top CEOs: Brexit, despite all you had heard, is not actually going to happen, ever.
Michael O’Leary, the CEO of Ryanair, says Britain will suffer a steep recession. A new government will be forced to raise taxes and slash spending. But, O’Leary says, the damage will be so devastating that the new Conservative government may totally reverse course by either calling a new referendum or championing a vote in Parliament to reject the Brexit vote. In a year or two, Britain will make a big, expensive, nerve-racking U-turn, and end up back where it started, as a full member of the European Community. In the end, Bremain prevails.
Michael O’Leary is as good an expert on what will happen to Europe as anyone. As chief of Ireland’s ultra-no-frills carrier for more than two decades, O’Leary, 55, has built Ryanair into Europe’s leading airline in both market cap ($19 billion) and yearly passengers flow (over 100 million), and ranks as Ireland’s most successful business leader. He’s almost as famous for his outrageous antics and pronouncements as his entrepreneurship, having donned Papal-style robes to promote Ryanair’s new route from Dublin to Rome, lauded a company calendar featuring the flight-attendants-of-the-month clad in bikinis, and flirted with the concept of charging passengers to go to the potty.
It was the creation of a unified, barrier-free market for aviation in Europe that allowed carriers to fly from London to Warsaw and Lisbon to Paris, and opened the skies to budget carriers, led by Ryanair and Britain’s easyJet. Virtually no other business leader has benefited more from the single market than O’Leary. So you might want to take his views with a pinch of skepticism, particularly about how Brexit threatens Europe’s future prosperity. Indeed, O’Leary sees one of the EU’s historic accomplishments is to have delivered affordable airfares to hundreds of millions of travelers.
Nonetheless, O’Leary is certainly worth listening to. In a 40-minute phone interview on June 29th, one of the few he has given since the Brexit vote, O’Leary, as usual, didn’t hold back. He began by acknowledging that his predictions on the Brexit vote were all wrong. “I caution about all my predictions, because I forecasted that ‘remain’ would win with 54% of the vote, and we campaigned hard for remain,” he declared. “I’m not legendary for my good predictions.”
Still, that wrong call isn’t stopping O’Leary from a new set of predictions, expressed with characteristic confidence. “The ‘leave’ people said we were fear-mongering, and now we’re already in crisis, and the UK hasn’t even left yet. This is why the leave side is dangerous. They didn’t think it would happen, they never confronted these issue. All their promises are completely bull. They have no idea what to do next.”
O’Leary’s best guess is that the new leaders pull what he calls a “Tsipras” He’s referring to the gambit orchestrated by Greek Prime Minister Alexis Tsipras, who essentially ignored a referendum where voters rejected austerity measures, then imposed them anyway. “The pro-Brexit people won on the basis of leave, and then once in power, they will reverse all the promises of leave.”
What O’Leary does see as a possibility is an sort of EU-lite, where Britain exits the EU, but still follows nearly all of the regulations on labor and environmental issues, and pays dearly for rights to free trade. He says that may prevent an economic meltdown in the UK, but emphasizes that it will also inflict heavy costs, and that Britain would get a lot more in return simply by reversing course and remaining a full EU member.
“This is the ‘Norway solution,’” he says, “where Norway gets free movement of goods and accepts free movement of labor. But the UK would need to obey 90% of the EU’s regulations, and have no ability to reject those regulations.” He’s also run plenty of numbers on what the EU may charge Britain for trading privileges. “Britain pays in 19 billion pounds today and gets back half, so the net outflow is 9.5 billion pounds. The EU will make Britain pay at least the full 19 billion to access the common market, and it will get nothing back, plus it will need to pay its 5 billion pounds in farm subsidies now paid by the EU on its own.”
“The EU won’t do this out of spite. It’s a political calculation. It’s much more important to the EU to prevent contagion to other countries that may be getting in the queue to leave the EU, such as France and the Netherlands than to give Britain a good deal. And the UK isn’t even in the euro! They won’t make it easy for the UK to leave.”
Why is the UK limited to those two choices, a reversal to “remain,” or EU-lite? According to O’Leary, it’s because taking a hard-line, anti-immigration stance that would banish Britain from the common market would be so disastrous that even hard-liners would relent. “They can’t go rebel,” says O’Leary. Top example: airlines.
“European airlines can fly anywhere in the EU,” he says. “But a European airline with those rights has to be at least 50.1% owned by EU [or EEA] shareholders. A large part of Ryanair’s shares are owned by UK investors, so if the UK leaves the EU and doesn’t join the EEA, we’d have less than 50% European shareholders. We’d no longer be a European airline with rights to fly anywhere. The same problem would apply to IAG, owner of British Airways and Aer Lingus. It would be forced to sell over half its shares to European investors to remain a European airline. EasyJet is flagged in the UK. To fly all over Europe, it would have to reflag in another country with over 50% EU shareholders.”
The U.K., he predicts, would retaliate by applying similar rules for carriers seeking free access to its airports. “We’d need to set up a Ryanair UK with more than 50% UK ownership,” says O’Leary. “Britain would say, “What’s good for the goose is good for the gander,’ and apply the same ownership rules that the EU imposes on them. If Britain doesn’t at least remain in the EEA, it will chaos in the airline industry.”
The Brexit vote has already severely undermined investor confidence in airlines. Since the June 23 vote, Europe’s five largest carriers, Ryanair, IAG, Lufthansa, easyJet, and Air France-KLM have lost $14 billion, or 27%, of their market value, with Ryanair down 17%. Even now, O’Leary is reducing his investment plans for the U.K. “We’ll receive 50 new aircraft from Boeing over the next 12 months, and we were going to put 10 of them in the U.K.,” he says. “Now none of them will go to the U.K.”
What’s the outlook for Ryanair? “From our point of view, there will be a downturn in the EU. Traffic will rise but people will be a lot more price-sensitive. Our fares will probably decline, but we’ll gain market share with our price and cost advantage. In the short term it’s very challenging. IAG just issued a profit warning. But in the medium and long-term, it’s good.”
O’Leary had the right position on Brexit, though he missed the outcome by a big margin. This time, I’d bet that is forecast is right on. For Europe to skirt disaster, it better be.