Brexit clouds horizon for Britain’s airlines

By: |
London | Updated: June 26, 2016 11:51:50 AM

Britain's vote to leave the EU could open a period of turbulence for the country's airline industry, which has soared under the EU's Single European Sky system over the last two decades.

Among the mass of agreements that Britain will have to renegotiate with Brussels are those governing flights between Britain and the rest of the EU. (Reuters)

Britain’s vote to leave the EU could open a period of turbulence for the country’s airline industry, which has soared under the EU’s Single European Sky system over the last two decades.

Among the mass of agreements that Britain will have to renegotiate with Brussels are those governing flights between Britain and the rest of the EU.

Also Read: European airlines slump on Brexit vote, IAG warns on profit

“They are not long, the days of wine and roses,” whether for airlines, airports or British air travellers, said Peter Morris, chief economist at Ascend Flightglobal Consultancy.

The single sky system lifted trade restrictions on airlines controlled by EU member states or their nationals, and whose headquarters are located within the EU.

Unless British negotiators manage to secure preferential conditions, British airlines will lose this status.

This will mean they no longer enjoy rights including being able to freely set airfares, and to launch any route in Europe without getting authorisation in advance.

In concrete terms, passengers leaving or arriving in the United Kingdom will face new taxes, while British airlines will be slower to develop new routes.

On the frontline are Britain’s two main actors, EasyJet and the International Airlines Group (IAG): their shares plummeted Friday on news of the shock Brexit vote, losing 14.35 per cent and 22.54 respectively on the London market.

Low-cost airline Ryanair, which campaigned vocally for Britain to remain in the EU, is a little less exposed because it is based in Ireland, even if it has a large presence in Britain.

As soon as the referendum result became clear, EasyJet wrote to British and EU authorities pressing them to ensure that Britain remains in the Single European Sky.

“Britain being in Europe is the best thing for Britain,” EasyJet chief executive Carolyn McCall told AFP a few months before Thursday’s referendum.

“That is based on the fact that deregulation of aviation has been a fantastic benefit to consumers,” she said, noting that it had reduced fares by 40 percent and increased routes by 170 percent.

On Friday the airline insisted that Brexit will not have a major impact on its strategy, but also said it was working on alternative options to allow it to maintain its current network and operations.

According to Morris, EasyJet, currently based at Luton airport north of London, “will doubtless already have plans under way for a head office within the EU, perhaps under a different brand”.

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