European authorities’ scrutiny of Etihad Airways’ bid to win approval to buy minority stakes in several European airlines has been branded as “nonsense” by IAG’s Willie Walsh, the CEO of one of Europe’s largest airline groups.
“I have no issue with Etihad investing in these airlines, from a principle point of view I would say I’m fine with it. My view is very simple, I believe ownership and control restrictions should be removed and I think it is nonsense,” Walsh told Arabian Business in an exclusive interview.
“I have argued for as long as I have been a CEO. I argued it at Aer Lingus that we shouldn’t have ownership and control restrictions in the airline industry and I have consistently argued that position while I have been at British Airways and IAG.”
Swiss authorities last month warned that a plan by the Abu Dhabi carrier to buy a third of Switzerland's Darwin Airline and rebrand it as Etihad Regional does not meet legal requirements to be approved.
The announcement is part of a wider probe by the European Commission into Etihad’s investments in European airlines, which includes Switzerland’s Darwin Airline, Air Serbia, Ireland’s Aer Lingus, Germany’s Air Berlin and the recently signed deal to buy a 49 percent stake in Italy’s Alitalia.
The regulation at the centre of the current European Commission investigation is Article 4 of Regulation No 1008/2008, which states that a condition of obtaining and maintaining an operating license in the EU is that a Member State and/or nationals of the Member States own more than 50 percent of the airline and effectively control it.
“The thing I would say is, while the rules exist the rules should be applied…. I think actually applying the rules might well accelerate a move to get rid of these restrictions… It is ridiculous… A better way would be to just remove the regulation, then you don’t need the regulators to access whether somebody has effective control because it shouldn’t matter. And really does it matter whether Etihad controls Alitalia? I can’t understand why it would matter,” added Walsh, who became CEO of IAG in January 2011 after the merger of British Airways and Spanish flag carrier Iberia.
“Our industry would benefit from the removal of these restrictions and I can’t understand why they still apply. They may have had a role 50 years ago and I can understand that at a period in time countries felt that they needed to have a national flag carrier to ensure connectivity. I don’t think you need that today.”
Walsh points to the example s Malév Hungarian Airlines, which was the flag carrier of Hungary and operated out of to 50 cities using a fleet of 22 aircraft before it went bust in February 2012. Within six days of the collapse of Malév, its base airport had recovered over 60 percent of its traffic as rival carriers flooded back into the market.
“The evidence is quite clear that where you have had former carriers and former flag carriers that have failed the market will replace the capacity that disappeared and replace it almost overnight,” Walsh said, adding to his argument that ownership regulation is irrelevant in the modern aviation world.
Walsh’s stance was echoed by Saj Ahmad, the chief analyst at UK-based Strategic Aero Research. “I agree. The EU needs to take a good hard look at the regressive aviation policies they have and examine the forward looking ones developed by the likes of the UAE which allow greater aerodrome freedom.
“On ownership, EU flag carriers are saddled with legacy costs like a noose. To prevent the likes of the Etihad's of this world from investing ultimately condemns these ailing airlines to death row and job losses. Rather than continually whine about ownership, the EU needs to break off the blinkers and look at policy more openly.”
While Etihad said on Sunday it is comfortable with the review by Switzerland’s Federal Office of Civil Aviation (FOCA) concerning its agreement to acquire 33.3 percent of Darwin Airline, the real test will be the rubberstamping of the $751 million deal to buy a 49 percent stake in Alitalia. This week, a source told Reuters the tie-up was likely to win clearance by the end of the year, with just a few minor concessions expected.
The full exclusive interview with Willie Walsh will be printed in Arabian Business later this month.
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