Secret British Airways plans to establish a franchised airline in Italy have been hit by allegations that Australian regional carrier National Jet Systems (NJS), which had aimed to launch the service, has been trying to circumvent European regulations to gain an air operators certificate (AOC).
NJS had hoped to source an AOC for the new airline by buying a major stake in struggling Irish scheduled carrier CityJet.
The Irish Public Enterprise Ministry, meanwhile, has launched a probe into the planned transaction, which would have employed a complex ownership structure to overcome a 49.9% limit on ownership of an Irish airline by a non-European Union national. That purchase is on hold after NJS failed to complete payments on the deal.
According to copies of NJS documentation in Flight International's possession, the new BA carrier has the working name Italian National Airlines (ILAN), and would have been based at Rome Fiumicino Airport, which Alitalia has chosen to downgrade as a hub as it builds up Milan Malpensa.
The documents reveal that BA, NJS and Italian merchant bank Gallo collaborated on the new airline project. The study, says the NJS document, concluded that competition in Italy is in its infancy, and that although Alitalia enjoys 85% market share, satisfaction with it "is low as product standards and seat availability are poor".
BA already runs significant operations in France and Germany, leaving Italy as the major European market where it does not have a foothold. The choice of NJS to launch ILAN stemmed from the airline's links with Qantas, for which it provides regional aircraft services. The Australian flag carrier is 25%-owned by BA.
NJS planned to launch the start-up with five British Aerospace 146-300s purchased from Taiwanese carrier UNI Air by Global Air Australia, and leased to NJS.
The NJS plan faced a major hurdle, however - that of securing a relevant AOC, given the restrictions on non-EU ownership of European carriers. NJS chief executive Warren Seymour's bid for CityJet (and its AOC) was inspired - at least in part - by the need to surmount this obstacle.
CityJet chairman Paul Coulson proposed "an obvious fix" to this problem, suggesting that Seymour buy 49% of stock and an additional 11% be held "in trust" for him and NJS partner Adele Lloyd, before being transferred to "an EU national" of their nomination.
As part of this mechanism, a holding company, Girner, was to have been set up, transferring 49% of its shares to Seymour and Lloyd, who would "also have voting rights on additional shares in order to apply effective management and voting control".
In parallel, National Jet Ireland (NJI) was to have been formed (51%-owned by Girner and 49% directly by Seymour/Lloyd) to "provide for the establishment of a mirrored AOC-based on the existing CityJet AOC", the documents show.
ILAN, meanwhile, would be formed independently by a syndicate of international investors, together with Seymour and Lloyd, with NJI providing aircraft, crew, maintenance and insurance on a "performance based wet-leasing arrangement". The airline would have run domestic and regional services.
NJS documentation reveals that ILAN would then have bought 100% of NJI, thus securing "full independence of the BA franchise operation from CityJet activity in order to ensure no conflict between BA and Air France [a commercial partner of CityJet]".
NJS agreed a Ir£3.5 million fee ($5 million) for control of CityJet, paying nearly Ir£1.95 million. The deal collapsed when Seymour was unable to raise the balance.
The Irish public enterprise ministry says it has "been in correspondence" with BAe146 and Saab 2000 operator CityJet over the deal, and adds that the inquiries continue. BA declines to comment, while CityJet and NJS failed to respond to telephone calls.
Source: Flight International
