Delta, Etihad Under Scrutiny As EU Probes Foreign Holdings In Airlines

The European Commission is examining several foreign holdings in European airlines, including Delta Air Lines’ stake in Britain’s Virgin and Etihad’s stake in Germany’s Air Berlin , to see if they comply with rules for operating an airline within Europe.

A spokesman for Siim Kallas, the European Union commissioner for transport policy, said on Friday the Commission was also looking at Korean Air’s stake in Czech Airlines and Chinese investment vehicle HNCA’s 35 per cent stake in freight carrier Cargolux.

In order to obtain an operating licence in the EU as a European airline, a carrier must be more than 50 per cent owned and “effectively controlled” by an EU member state or EU citizens.

“Accordingly, the Commission has asked the member state concerned to provide further information on how these investments comply with the rules on ownership and control of European airlines,” the spokesman said in an emailed statement.

A spokesman for Delta, which owns a 49 per cent stake in Virgin, said the partnership was examined and cleared by the UK Civil Aviation Authority in 2013.

“Nothing has occurred since then that would lead us to believe that there are new issues,” he told Reuters, adding that Delta’s operations “continue to fully comply with our regulatory obligations.”

Air Berlin denied being controlled by Abu Dhabi-based Etihad Airways, saying that the two only worked closely together as strategic partners.

“Strategic decisions are made by Air Berlin alone. As a shareholder, Etihad has neither a blocking minority nor special rights,” a spokesman said in a statement.

Etihad owns 29.2 per cent of Air Berlin, which is Germany’s second-largest airline but is struggling with debts and has twice postponed the publication of its 2013 results.

Etihad, which is building up a network of minority stakes in airlines around the world as it seeks to drive traffic to its Abu Dhabi hub, has provided loans to Air Berlin and bought a majority stake in its frequent flyer programme.

Etihad is also looking at the possibility of buying a stake in Italy’s ailing Alitalia.

Separately, the Commission has asked Italy to be vigilant with regard to ongoing negotiations between shareholders of Alitalia and Etihad Airways, a Commission source told Reuters.