Brexit plans and share ownership, principal risks, airline

easyJet plc – annual report – 30 September 2018

Industry: transport



Both the EU and the UK have said that their objective is to maintain flights between the EU and the UK, whatever the Brexit outcome. This gives easyJet confidence that flying rights will be maintained, and it continues to work with EU institutions, EU member states and the UK Government to ensure that this is achieved.

easyJet has established easyJet Europe, which is headquartered in Vienna and will enable easyJet to continue to operate flights both across the EU and domestically within EU countries after the UK has left the EU, regardless of the Brexit outcome. The new structure means that easyJet is now a pan-European airline group with three airlines based in Austria, Switzerland and the UK.

UK consumer demand remains strong, with bookings for next summer ahead of 2018.

In order to continue to operate air services within the EU, easyJet (and all other airlines with EU operating licences) must comply with the EU requirement that a majority of its equity capital must be owned and controlled by nationals of one of the member states of the EU, Switzerland, Norway, Iceland or Liechtenstein (‘qualifying nationals’).

With regard to its ownership easyJet is well prepared and begins from a position of strength with approximately 47% of its shares already held by qualifying nationals (excluding UK nationals). easyJet’s investor relations programme has focused mainly on Europe since 2016 with the intention of increasing this to above 50% prior to the UK’s exit from the EU.

easyJet’s Articles of Association contain provisions to allow it to take action if necessary to ensure it continues to satisfy the EU ownership and control requirements. These provisions permit easyJet to regulate the level of ownership by non-qualifying nationals by suspending rights to attend and vote at meetings of shareholders and/or forcing the sale of shares owned by non-qualifying nationals to qualifying nationals. Similar powers exist in the articles of association of other airlines as well as in the articles of companies in other sectors that have national share ownership requirements.

Whilst easyJet has no current intention of exercising these powers, the position will be kept under review pending the outcome of Brexit negotiations between the UK and the EU, along with other options.

Currently, approximately 47% of easyJet’s equity capital is held by qualifying nationals, if UK nationals are excluded, and therefore approximately 53% by non-qualifying nationals. Consequently, if no withdrawal agreement is agreed or approved, and there is therefore no transition period, it may become necessary for those powers to be exercised, and/or for other actions to be taken to reduce the proportion of non-qualifying nationals owning easyJet shares, in advance of Brexit on 29 March 2019, so as to be compliant with the relevant EU requirement.

easyJet currently expects to take action in respect of its level of ownership by non-qualifying nationals only if there is a real risk of a ‘no deal’ Brexit in the run up to 29 March 2019 and if the proportion of equity capital held by qualifying nationals (excluding UK nationals) remains below the required level of 50% plus one share. If the EU and the UK reach agreement on the terms of withdrawal, and a transition period is agreed, it is not anticipated that any action would be required in respect of the level of ownership by non-qualifying nationals until at least the later stages of the Brexit transition period (which is expected to end no earlier than 31 December 2020). easyJet continues to monitor developments but currently considers it would be inappropriate to commit to a set plan whilst the Brexit outcome remains uncertain. easyJet will provide a further update as appropriate in due course.