Ryanair, Wizz Curtail Non-EU Voter Rights, Citing Brexit

Ryanair Holdings Plc and Wizz Air Holdings Plc will strip non-European Union shareholders of their voting rights to comply with the bloc’s airline ownership rules after the Brexit transition.

All non-EU nationals will lose their rights from Jan. 1, Irish discounter Ryanair said Tuesday in a statement. Hungarian rival Wizz said separately it would take the same step, disenfranchising a majority of its shareholders.

Other carriers have also made contingency plans in anticipation of a split regulatory environment post-Brexit. The EU requires airlines that operate routes between two destinations within its borders to be majority controlled by nationals of the bloc. U.K. citizens will no longer count as EU-based with the end of the Brexit transition.

The issue was left unresolved in the Brexit accord reached last week, though the sides agreed to explore a liberalization of the ownership rules over the next 12 months. This will potentially insulate carriers from challenges based on their ownership structure, but not before further talks.

Airlines with a large U.K. ownership “will either need to wait for a favorable agreement,” said Daniel Roeska, an analyst with Sanford C. Bernstein, or “design alternative ownership and holding structures to safeguard EU-nationality of individual airlines.”

Wizz Holders

The ownership issue and a related one involving flying rights affect carriers in slightly different ways, depending on where they are based and their structure. In response, companies have either limited who can buy their stock or eliminated voting rights.

Wizz has a high quotient of U.K. investors because it chose London for its primary listing. Without any action, more than 80% of the low-cost carrier’s ownership would reside outside of the EU, threatening both its license and its right to fly EU-only routes. The airline said it will take away the same proportion of voting rights from all its non-EU shareholders. As a result, shares representing about 60% of its equity will be prevented from voting.

Ryanair said all of its non-EU shareholders would lose voting rights. As of July, the company said 53% of shares were considered EU-owned, based on the definition that lasts until year-end. Britons will also join other non-EU nationals in not being able to buy its shares, a policy in place since 2002.

The issue also affects the rights of airlines like British Airways owner IAG SA and EasyJet Plc to operate within the bloc.

IAG, which also owns Iberia and Vueling, is incorporated in Spain but has significant U.K., U.S. and Qatari ownership. It has submitted plans in Spain and in Ireland, where it owns Aer Lingus, to bring those airlines into compliance. Under the current set-up, their status as EU-controlled could be tested.

“We are confident that we will comply with the EU and the U.K. ownership and control rules,” IAG said in an emailed statement.

U.K.-based EasyJet said on Dec. 23 that it would suspend voting rights of some holders on a “last in, first out” basis if necessary to lift its EU voting base above 50%. At the time, it was at 47%, excluding the U.K.

The airline didn’t respond to requests for comment on Tuesday.

ADR Premium

U.K. investment managers Baillie Gifford & Co., Schroders Plc and Jupiter Fund Management Plc are listed as shareholders of at least one of Ryanair, Wizz, EasyJet or IAG. None of those firms responded to requests for comment on Dec. 29.

In a note, Roeska said any restrictions on direct ownership may place a premium on airline depositary receipts. He suggested U.K. shareholders hold on to stocks if possible and EU investors may see buying opportunities created by volatility in coming weeks.

Ryanair advanced 3.7% as of 4:12 p.m. in Dublin. Wizz rose 0.4%, EasyJet was up 3.8% and IAG gained 2.1% in London, in their first trading session since the Brexit deal was announced.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.