ZURICH Swiss authorities have warned that a plan by Etihad Airways to buy a third of Switzerland's Darwin Airline does not meet legal requirements to be approved, as foreign stakes in European airlines come under increasing scrutiny.
Switzerland's Federal Office of Civil Aviation (FOCA) said that Darwin, rebranded as Etihad Regional, has until Sept. 30 to make changes to the agreement, which would then undergo a second review.
FOCA examined whether the deal complied with rules that the majority of Darwin shares must be owned by Swiss or EU citizens, who must also effectively control the airline.
Etihad, the national airline of the United Arab Emirates, plans to acquire a 33.3 percent stake in Darwin, adding to its portfolio of minority stakes in global airlines, but the FOCA said the deal as it stands would nevertheless give Etihad effective control over the Swiss carrier.
"After looking at the documents, the FOCA concludes that the proposed mechanisms of cooperation can lead to control of Darwin by Etihad, and thus would be incompatible with statutory provisions," the agency said in a statement on Wednesday.
Etihad Regional said it was working closely with the FOCA and that the statement did not constitute a final decision on the deal.
"The Federal Office of Civil Aviation (FOCA) has clarified its position and confirmed that it has not made or announced a decision in relation to the control of Swiss-based Etihad Regional, operated by Darwin Airline," Etihad Regional said in a statement.
It said a majority of 66.7 per cent of the airline would be retained by Swiss investors and that their interests would not be compromised.
The statement comes months after the European Commission opened a similar investigation into several foreign holdings in European airlines including Etihad's 29.2 percent stake in Germany's Air Berlin and Delta Air Lines' 49 percent of Britain's Virgin [VA.UL].
Abu Dhabi-based Etihad already owns stakes in five other carriers including Air Berlin, Virgin Australia and Aer Lingus.
A spokesman for Air Berlin said on Thursday the German airline was not affected in any way by the Swiss announcement.
(Reporting by Alice Baghdjian in Zurich, Peter Maushagen in Frankfurt and Praveen Menon in Dubai; editing by Jane Baird)