Air France (AF, Paris CDG) Air France-KLM has included a "put option" clause in its agreement to acquire a 31% stake in Virgin Atlantic (VS, London Heathrow), the Franco-Dutch carriers' Group Chief Financial Officer, Frédéric Gagey, said in a 2Q17 earnings call last week.
Under the transaction announced last week, valued at GBP220 million (USD287.6 million), Virgin Group's shareholding in the carrier will decrease to 20%. Delta Air Lines (DL, Atlanta Hartsfield Jackson) will maintain its shareholding, acquired in 2013, at 49%.
According to Gagey, the put option is to deal with the possibility of a Hard Brexit scenario i.e. one in which the United Kingdom and the European Union fail to reach a free trade agreement by March 2019. Should that occur, then either sides' substantial-control ownership rules for locally-registered airlines are expected to kick in. For both the UK and the EU the cap on foreign ownership is 49%.
"There is a put option together with Delta in case of hard Brexit. Hard Brexit, I mean, if after all this negotiation, it was necessary to immediately guarantee that the shareholding structure of Virgin with 51% at least of UK citizens," he said.
"Then we have already discussed with Delta and with Virgin, an option which can help us to immediately be in full agreement of the possible new regulation. But, again, nobody knows today exactly what will Brexit mean in terms of civil aviation. So, we have to wait and to stay still."
To cope with the possibility of a Hard Brexit, easyJet (London Luton) has already proceeded to establish its own EU-based unit - easyJet Europe (EC, Vienna) - which commenced operations last month. Thus far, no other large-scale EU/UK-based commercial carrier has publically confirmed it is pursuing an EU/UK-based AOC at this time.
