Structure Permitting EU Airlines to Attract Non-EU Capital with the Investor's Interest Exceeding 50%

Abstract

Current legal regime binding to EU airlines requires that the companies are continuously majority owned and controlled by EU nationals (natural or legal persons) or EU Member States; see EU Regulation No 1008/2008 of September 24, 2008; Art.4(f). In practice, noting the scarcity of any EU originating financing (that would be willing to accept the level of speculation and uncertainty inherent in the current EU aviation environment), the EU airlines obviously seek financing sources outside of EU. At the same time, the investors see prudence in demanding more efficient safeguard than the formally permissible "50%-1" share, on grounds of concern that their financing can be gulped up by the majority owners without consideration of investor's interests at their best. Accommodation of the investor's financial safety quest with mandatory EU legal provisions implies invocation of novel modes of cooperation. The following paper puts forward one such novel structure. The idea is to create a "virtual equity majority" for the Investor in the existing Airline's newly created spin-off units, the latter units being mutually bonded through 100% cross-shareholdings. EU aviation industry players are invited to consider the model for their operations with regard to terms and conditions of prospective non-EU investor engagements.