EU to review airline ownership rules, threatening easyJet bids

The official said that the review, likely in the autumn, would look to clarify which kinds of corporate structures were allowed, especially around control and ownership.

The official said Apollo, Castlelake and easyJet had not spoken to the European regulators about the details of their proposed deals.

EasyJet and Apollo declined to comment. Castlelake did not immediately respond to a request for comment.

"The concern is that the industry is on the wrong foot, thinking that we no longer enforce the rules strictly. People will go down the wrong alley because there's a wrong perception," the official added.

The European Union is preparing a review of airline ownership rules to prevent foreign investors from gaining effective control of carriers, an EU official said, a move that could complicate U.S. bids for low-cost airline easyJet EZJ.L.

The EU review, previously unreported, would "protect strategic autonomy" to ensure control of regional carriers remains within the bloc, the official said. It comes amid a bidding war between two U.S. investment firms for the control of major European budget airline easyJet, which is likely to test the limits of EU rules that demand 51% local ownership.

EasyJet shares fell 8% after the initial Reuters report. The stock was down 6.5% in later trading.

"This is to ensure that foreign investors don't have full control," the official told Reuters, asking not to be named due to the sensitivity of the matter. "We need to make sure we have sufficient headroom when it comes to control."

EasyJet earlier this month backed a £5.7 billion ($7.65 billion) offer by Apollo Global Management APO.N, which trumped an earlier £5.5 billion bid by Castlelake, but did not explain how it plans to meet EU majority ownership requirements, a key hurdle for any non-EU acquisition of a European airline.