Air France-KLM has the right to sell the 31% stake it has acquired in Virgin Atlantic back to Virgin Group in the event that a hard Brexit inhibits the UK airline's ability to operate.
Speaking to FlightGlobal at a press briefing in Paris today, Air France-KLM finance chief Frederic Gagey said that there was a clause in the agreement under which it bought the Virgin Atlantic stake that stipulates that it can under certain conditions insist that Virgin Group takes the stake back.
"Suppose that one day we need absolutely Virgin Atlantic being UK – UK capital, UK equity, UK voting rights... due to a new regulation. There is the possibility to look at all the solutions. And if ultimately there is no solution there is a commitment by Virgin Group to buy back the shares," says Gagey.
Earlier this month, Air France-KLM received regulatory clearance from the European Commission to obtain the Virgin Atlantic stake. The group is purchasing the stake from Richard Branson's Virgin Group, which will retain a 20% holding. The remaining 49% is held by Delta Air Lines.
Under EU ownership and control rules, an airline based in the bloc must be 51% owned by EU nationals. The status of UK shareholders after Brexit has not yet been clarified.
Gagey predicts that Virgin Atlantic will secure US regulatory approval to join Air France-KLM in the transatlantic joint venture with Delta Air Lines in July.
He says this will add an operator with a presence comparable to KLM on the North Atlantic market to the immunised JV, and end the "confused set-up of multiple joint ventures", creating a "simplified" structure.
Air France-KLM is "not happy" with sales in the UK, and expects the inclusion of Virgin Atlantic to give it enhanced access to customers and markets in the country. Gagey says it is too early to say how Brexit will affect demand.
He says that it is up to new Virgin Atlantic chief executive Shai Weiss whether the airline joins the SkyTeam alliance, but adds that it would be "totally natural" were it to happen.
This story has been updated to correct the percentage in the fifth paragraph