EC: Air Serbia investigation ongoing

European Commission continues investigation into effective control

The European Commission (EC) says its investigation into Air Serbia’s ownership structure is progressing. The EC launched an investigation into Etihad’s investments in European airlines in April last year as part of a wider examination into whether foreign ownership of European carriers complies with EU airline licensing rules. An EC spokesperson for Transport says, “We can confirm that the Air Serbia investigation is still ongoing. For confidentiality reasons, we cannot go into further details at this time. The Commission has doubts whether Etihad’s investments are in line with European Union rules on ownership and effective control of EU airlines”. While Serbia is not an EU member state, as a candidate country it must adhere to the Union’s pre-accession policies and guidelines. Following Etihad’s takeover of Jat Airways, the EC requested for Serbia to clarify the airline’s new ownership structure. While a carrier from outside Europe can hold a minority stake in an EU airline or a country aspiring to join the block, it must prove that the effective control is still in the hands of the majority shareholder.

The EC has already issued suggestions to the Serbian government in order to deal with the issue, which have since been approved and implemented. Last year, Siniša Mali, the President of the Air Serbia Supervisory Board, said. “The European Commission, in a way, did us a favour, by reducing Etihad’s participation. Etihad now doesn’t have the right to decide but only gives suggestions for preparation of the business plan”. He added, “None of the agreements signed between the Serbian government and Etihad Airways are contrary to the European Common Aviation Area Agreement, including those concerning corporative control. The most distinguished lawyers from London drafted these agreements and they wouldn’t make an oversight”. Etihad Airways has maintained that the effective control in each of its investments lies with the majority shareholder “I can’t sit in Abu Dhabi and manage a Swiss, German or Serbian business but I can be a strong and responsible shareholder. There is a strong local team running each airline”, Etihad’s CEO, James Hogan, said previously.

Other airlines can influence the Commission to open formal investigations into cases concerning fair competition. Low cost airline Rynair made it no secret it played a major role in the EC’s decision to investigate Adria Airways over state aid and went as far as publicly criticising the Commission for being too slow to rule on the case. It is believed Lufthansa played an instrumental role in the EC's decision to investigate Etihad’s investments in Europe, irked by the carrier’s plans to increase its capital in Germany’s second largest airline Air Berlin and its investment in Alitalia. As a result, Air Serbia found itself in the crossfire of Lufthansa’s dispute with Etihad. Lufthansa CEO, Carsten Spohr, said in April this year, “Etihad should respect European laws and engage in more due diligence in order to avoid clashing with the EU in relation to its purchase of equity stakes in European airlines. In Germany and Europe we believe in the law and whatever the law allows to be done shall be done, like it or not … if it’s illegal it shall not be done”.