Will Brexit will be a disaster for UK airlines? The clock has started ticking!

After years of operating – highly successfully – within the single skies of Europe, UK-registered airlines are imminently threatened by the prospect of withdrawal of their freedom to operate without restriction throughout the European Union. Moreover there are several European airlines that would relish the thought of these aggressive competitors being excluded from their home markets. Reversion to the need to negotiate individual bilateral agreements with each EU country would almost certainly be highly disruptive and potentially lead to much more restrictive operating conditions.

Despite there being so much at stake for UK-registered airlines (and, by extension possibly Irish registered airlines), there is little to suggest the UK government is treating the airline industry with any level of priority. It has bigger issues to address. We are all fully aware of the doomsday scenario predicted by Ryanair boss Michael O’Leary that flights could ultimately be suspended upon the UK’s Brexit departure. Others are more pragmatic that some agreement will be reached. However, what everyone agrees on is that airlines need a clear view of how Britain’s exit from the European Union will affect aviation.

Alexandre de Juniac, head of the International Air Transport Association (IATA) that represents the majority of the world’s airlines, has warned that time is running down and a clear path needs to be created within the next 12 months. “Brexit is not good news for aviation,” he told reporters in Taipei last week. “We sell the tickets one year in advance, we put the programme in place six months in advance, so at the latest we should have a clear vision of what is going to happen in October 2018.”

The topic of Brexit formed the basis of ‘Brexit will be a disaster for UK airlines? The Great Debate’ at the recent CAPA-ACTE Global Summit in London, where experienced aviation officials discussed the topic. While the consensus view is that connectivity issues may be resolved with a pragmatic approach on all sides it is clear that Europe’s leading airlines have a lot to gain from raising barriers in the pursuit of an agreement. While publicly the likes of Air France-KLM and Lufthansa may say they are happy for UK carriers to enjoy continued access to the single European market, in private they would be happy if they have problems with access.

Here’s some of the insights from the session:

CityJet, Executive Chairman & CEO, Patrick Byrne

Brexit an ‘unconceivable folly’, UK Government leadership continues to ‘scramble’
Brexit is an “unconceivable folly”, according to Mr Byrne. He referred to Brexit as “toxic and divisive”, while UK Government leadership continues to “scramble” instead of hold power as first envisioned. Mr Byrne said many formally in the ‘leave’ campaign are now anti-Brexit. “Brexit is not going to mean everything will be alright”, he said, instead stating it is an “unmitigated disaster”.

No one in UK Government leadership ‘has a clue’ on airline operating structure post-Brexit
Mr Byrne said he does not know what regulatory structure airlines will operate under post-Brexit, and nobody in a UK Government leadership position has a “clue either”. He referred to adopting Brexit as re-entry into the 1970s, highlighting the GBP has slipped 15% while “everything to do with aircraft has gone up”. He said the UK’s aircraft maintenance and leasing sectors are already less affordable as a result. “We don’t know what liberties will be removed because nobody is talking in fine detail”, he concluded.

Short term impacts for airlines ‘have long term consequences’
Airlines are “not configured to take short term impacts”, said Mr Byrne, adding they “have long term consequences”. He highlighted the difficulty in attempting to plan when “we don’t know two years ahead” due to Brexit. Mr Byrne expects some airlines will not survive in the UK in 2019 because of a lack of shareholder confidence.

UK Government leadership with Brexit is ‘nothing short of despairing’
Mr Byrne criticised leadership in the UK regarding Brexit. He said the Government is “nothing short of despairing”, and the region could benefit from “more clarity” with another vote on whether the population still wishes to exit the EU.

Brexit uncertainty will lead to ‘some airlines’ not surviving beyond 2020
Brexit uncertainty is disrupting the aviation industry, said Mr Byrne, citing Monarch Airlines’ insolvency as an example. he added: “It is impossible to plan with this uncertainty. The damage has already started and some airlines will not survive into 2020 if they continue with this level of uncertainty… The best outcome for aviation is to go nowhere and maintain the status quo”

BKH Aviation, Chairman, Barry Humphreys CBE

Brexit currently the ‘greatest threat’ facing European aviation
Brexit is currently the “greatest threat” facing European aviation. Mr Humphreys emphasised the success of the EU internal aviation market, which lead to more competition and lower fares. Mr Humphreys believes maintaining the status quo is the best outcome on Brexit for aviation. “Fighting to maintain everything we achieved is in everybody’s best interest”, he added.

Risks associated with Brexit ‘affect everyone in Europe’
A Brexit deal for aviation is “certainly doable”. Mr Humphreys affirmed the UK is “by far the largest aviation market in Europe”, adding risks related to Brexit “affect everyone in Europe”.

Safety issues and role of EASA must be considered in Brexit negotiations
Safety issues must be addressed in Brexit negotiations. “The UK is the largest contributor to EASA”, he said, adding the UK’s departure would “be a real setback for everyone”. Mr Humphreys believes it would be “virtually impossible” for UK CAA to replicate what EASA does in the short to medium term. He noted non-EU states Norway and Switzerland are EASA members, and the UK should retain its position at EASA on similar terms. The only hurdle is a “political dogma” by the European Court of Justice, he said.

A UK reversion to bilaterals with Europe ‘would be a disaster’
A UK reversion to bilateral agreements due to Brexit would be “a disaster”, which would not replicate any benefits achieved through the EU Internal Market, according to Mr Humphreys, however he believes “there will be those that seek short term commercial advantage” from Brexit.

European Aviation Club, Chairman, Rigas Doganis

Expects Brexit aviation deal to inevitably be reached
There is a social, economic and business imperative to reach a Brexit deal on aviation. “It is inevitable”, he said, adding the UK’s withdrawal bill foresees the country adopting EU regulatory laws on aviation once leaving the EU. “All EU aviation rules will be part of the UK”, he affirmed.

UK airline restructuring to enable operations as EU airlines
Corporate restructuring in the UK airline industry will enable carriers such as easyJet and IAG to “operate as EU airlines” post-Brexit, According to Mr Doganis.

Strong mutual incentive for new UK/US aviation agreement
There is a “strong incentive” mutually for the UK and US to form a new aviation agreement post-Brexit, which allows all freedoms that currently exist under the North Atlantic Open Skies agreement, according to Mr Doganis. He emphasised the agreement is required to enable transatlantic JVs to continue.

Norton Rose Fulbright, Partner, Emma Giddings

‘Easy to take for granted’ the rights of access of EU Single Aviation Market
It is “so easy to take for granted” the rights of access of the EU Single Aviation Market. Ms Giddings stated progress is “threatened” by Brexit, and while the UK could legislate unilaterally to allow EU carriers to operate to the UK, the same may not occur vice versa. Ms Giddings also believes if the UK joins the European Common Aviation Area, it would contradict Prime Minister Theresa May’s control objectives.

Access rights to EU ‘just one issue’ for UK under Brexit
Access rights in the EU Single Aviation Market is “just one issue” related to Brexit, according to Ms Giddings. Other factors include: role of EASA; certification and standardisation; whether UK will retain voting rights; wet leasing changes; data transfer restrictions.

Clarity needed soon on Brexit as airline ticket sales for 2019 open in 2018
Mar-2019 is “too late” for a Brexit deal on aviation. She noted ticket sales open around 300 days before an airline operates a service, meaning an aviation deal is needed in early 2018. Aviation is “just one of a myriad” of issues to be sorted out under Brexit negotiations, she said.