EU air rules could drive Ryanair’s investors from UK

Ryanair’s ownership structure could come under pressure following Brexit if UK investors in the airline are considered non-European Union residents for the purposes of shareholding rules.

At the airline’s 20th annual general meeting as a public company yesterday, chief executive Michael O’Leary warned that in a worst-case Brexit scenario, the carrier’s UK shareholders could be considered non-EU residents and could be forced to sell their shares.
Investors based in the UK currently own about 20pc of the airline.

Under EU rules no more than 49.9pc of an EU airline can be owned by investors from outside the Union.
Mr O’Leary also said that the airline could have to seek a UK air operator’s certificate if it wanted to continue operating its three existing domestic UK routes.

But Ryanair chief financial officer Neil Sorahan insisted that the issue of whether UK investors would be considered EU shareholders would be a minor complication.
“Nobody knows what’s going to happen with Brexit,” Mr Sorahan said.

“The funds are very good at moving into Frankfurt, Dublin, Milan and places like that, so I’d see it as a very small issue from that perspective.”
Ryanair also has an investor base in the United States, and it has previously taken steps to ensure that the airline doesn’t breach EU ownership rules.

In 2001, it indefinitely suspended the issuance of new ADR shares in the US.
In 2002, it implemented additional measures to restrict the ability of non-EU nationals to purchase its ordinary shares.

As a result, non-EU nationals are currently effectively barred from purchasing ordinary shares in the airline. The carrier’s directors also have the power to prevent non-EU holders of shares in the airline from speaking or voting at general meetings, and to require non-EU shareholders to dispose of their shares to EU nationals.
If a non-EU national shareholder is requested to but does not sell their ordinary shares to an EU national within a specified time period, Ryanair can then take legal action to compel such a sale.

At yesterday’s AGM, Mr O’Leary also effectively dismissed concerns raised by UK corporate governance watchdog Pirc.
He said that he hoped chairman David Bonderman would continue to serve in his role for many more years.

Mr Sorahan said that the airline does not just pay lip-service to corporate governance rules.
“We’re exceptionally lucky with the talent we have on the board and we’d be mad to ask any of them to step aside. They’re extremely independent individuals,” he added.

“David Bonderman brings huge experience and knowledge not only of aviation, but of all sectors, and has been helpful with our AGB (Always Getting Better campaign).”

Mr O’Leary also said that forward bookings for the remainder of the calendar year are about 2pc ahead for September and October, and 1pc higher for November and December, compared to last year.
However, he said that those bookings are being made on the back of lower fares.

Ryanair has predicted that it will make a profit of between €1.37bn and €1.42bn in the current financial year.

“That guidance remains very heavily dependent on no material adverse changes, and certainly no more negative events such as terrorist attacks across Europe or elsewhere,” said Mr O’Leary.

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