Buying an airline: AOC, operating licence and ownership control

Article 3 of Regulation (EC) No 1008/2008 prohibits the commercial carriage of passengers, mail or cargo without the relevant operating licence. Article 4 requires, among other things, the principal place of business in the relevant Member State and a valid AOC issued by the national authority of that same Member State. The AOC defines the activities covered by the air operator certificate. The operating licence builds on that certificate and concerns the company's right to conduct commercial air transport.

The data room should record both levels separately: the licence decision, AOC, operations specifications, conditions, open proceedings, aircraft list, leasing agreements and insurance evidence. A valid AOC therefore does not automatically cover every activity planned by the buyer. Conversely, a change to the AOC may affect the operating licence because Article 6(2) requires relevant AOC changes to be reflected in the operating licence where appropriate.

Review the corporate structure as well. Article 4 requires a structure that enables the competent licensing authority to apply the rules of the chapter. Where a holding, intermediate companies or a new acquisition vehicle are involved, the actual management and control relationships must remain transparent.

Article 4(f) generally requires Member States or nationals of Member States to own more than 50 percent of the undertaking and to exercise effective control. Control may be direct or indirect through one or more intermediate undertakings. Whether an agreement with a third country allows a different outcome requires a case-specific assessment.

A list of immediate shareholders is therefore insufficient for an acquisition review. The file should show the current chain up to the ultimate controlling company or person, including voting rights, veto rights, management rights, financing ties and shareholder agreements. A structure that gives economic control a different shape from the register position needs its own authority assessment.

The review must distinguish signing from completion. Article 8(5)(b) requires intended mergers or acquisitions to be reported in advance. A change in ownership of individual holdings representing at least 10 percent of the total capital of the airline, its parent or its ultimate holding company must be reported within 14 days under Article 8(5)(c). The SPA should therefore require complete ownership updates and cooperation with authority enquiries.

Article 8(5)(b) requires the airline to report intended mergers or acquisitions to the competent licensing authority in advance. This report is distinct from the question whether a formal approval, an amended decision or an AOC change is needed. That classification should be prepared before the purchase agreement is signed.

Under Article 8(7), when legally relevant circumstances change, in particular in a merger or acquisition, the competent licensing authority decides whether the operating licence must be submitted again for approval. The buyer should plan for written authority communication and keep the result in the completion file. A general reference to a change of ownership does not control the transaction.

If the acquisition is significant for the airline's financial position, Article 8(6) allows the authority to request a revised business plan. It must reflect the changes and cover at least twelve months from their implementation. The financing structure, planned fleet changes and integration costs belong in the preparation of the report.

Article 9(1) allows the competent licensing authority to assess an airline's financial fitness at any time. The operating licence may be suspended or revoked if the authority is no longer satisfied that the airline can meet its actual and potential obligations for a period of twelve months. The assessment therefore continues after completion.

An acquisition file needs reliable information on financing and expected performance. Depending on the business, this includes a realistic business plan, liquidity needs, aircraft leases, maintenance obligations, insurance, personnel costs, fuel exposure, planned investment and financial links with related undertakings. The buyer's purchase-price financing must be tested against the continuity of the flight operation.

Article 9(2) requires an immediate thorough financial assessment where clear signs of financial difficulty or insolvency proceedings exist. If the AOC is suspended or revoked, Article 9(5) requires the operating licence to be suspended or revoked immediately. This connection makes the regulatory status a central completion condition and a continuing post-completion risk.

The SPA should treat the authority review as a dedicated workstream. It should allocate advance reporting, applications and information, seller cooperation, costs and the handling of conditions. If an authority decision is required for the transfer of control, the AOC or continued operations, the decision belongs in a precisely described condition to completion.

The parties should also set a long-stop date, an extension mechanism and consequences if the authority does not confirm the licence or continues it subject to commercially unacceptable conditions. A promise to maintain the licence does not answer the questions about ownership control, AOC scope and the business plan.

A release matrix is useful: status before signing, required report, authority response, status before completion and post-completion duties. The general article on conditions to completion should be read together with the aviation-specific issues. The article on buying a regulated business provides a comparison with other regulated sectors.