IAG International Airlines Group’s ownership of British Airways (BA, London Heathrow) is at risk of a challenge from France and Germany under legacy European Union rules that could force the group to break up, aviation experts have warned.

According to analysts at the investment bank HSBC, IAG - which also owns Aer Lingus, Iberia, LEVEL, and Vueling Airlines - may be forced to spin off the British flag carrier because of EU ownership rules. A regulation requires airlines operating flights between EU countries to be “owned and controlled” by member state entities.

Thirteen months after Brexit, this regulation is currently suspended but has been part of ongoing talks between the United Kingdom and the bloc.

As HSBC analyst Andrew Lobbenberg told The Telegraph newspaper last week, while countries such as Spain, Ireland, and Hungary would support the scrapping of ownership rules, France and Germany could resist in an attempt to gain market advantage over BA for Lufthansa and Air France-KLM.

“National interests are ever-present in the airline industry, which is often the home for mercantilist policy making. The commercial interests of Air France-KLM and Lufthansa would unquestionably be supported by adding new strategic challenges to IAG,” he said.

IAG has argued that it already complies with EU ownership laws, as its Madrid-based board has a majority of independent EU non-executive directors. But the group is still 10 to 20 percentage points away from having a majority of EU shareholders.

It said in a statement: “We comply with the EU ownership and control regulation. As stated in December 2020, our EU airlines’ remedial plans were approved by the national regulators in Spain and Ireland who confirmed that they comply with the EU ownership and control rules. They have been in place since Jan 1, 2021.”

However, Lobbenberg told the newspaper: “We do not share this view. We think that through 2021 the EU has simply suspended disbelief on this matter as negotiations were ongoing between the EU and UK. The company could consider demerging its non-EU business of British Airways into a separate non-EU owned company, leaving the legacy business EU owned.”