EU bosses have told UK airlines that they must move their operations to the EU or risk having their continental routes axed, the Guardian has reported.
The moves could see airlines restructuring, with subsequent economic impacts for the UK such as job losses and lack of investment.
According to the report, airlines, including Ryanair, easyJet and British Airways, have been warned in private meetings with EU chiefs that to run intra-continental routes – such as Rome to Madrid – they must have a “significant base” in Europe.
EU regulations also stipulate that the majority of capital shares in a European airline must be owned by EU shareholders, which could leave firms little choice but to sell off shares to European citizens.
Intra-continental routes are a key part of operations for budget airlines such as easyJet, meaning that firms could be willing to divest from the UK in order to maintain their business interests.
Although British Airways does not fly between European destinations, its owner IAG may still have to sell off British-held shares because the group owns other airlines that provide intra-continental flights.
The Guardian reported that some UK-based airlines are already looking to move their headquarters to Europe and are examining how to make their shares majority EU owned.
The UK government may seek to retaliate in kind by forcing EU-based airlines operating in Britain to follow similar “nationality” rules.
Clyde & Co’s aviation expert, Thomas van der Wijngaart, told the paper: “It might be that carriers choose to have domestic flights (on the continent) operated by their new European operating licence, which would probably mean a reduction in staff in the UK.”