How Will Brexit Affect Aviation And Travel?
One of the most talked about topic in the past few years is Brexit. A very bizarre decision is turning out to be diving people all around the British Isles, damaging the British economy and affecting business decisions all around the globe. As the uncertainty of Brexit is still hanging above the skies of the United Kingdom, airlines and travelers have just one thing in their minds.
How will Brexit affect me?
The answer to this question is quite complex. Anyhow, in this article I will present the current situation of the British aviation industry. Then, I will try to showcase the potential impact of the political debacle to airlines, the aviation industry in Britain and to people that travel via air.
Aviation In Britain – The Current Times
Currently, the UK boasts the third biggest aviation sector in the world. According to Eurostat, over 264 million passengers have traveled by air in Britain in 2017. The second biggest market in Europe is Germany, with airlines transferring over 212 million passengers. To illustrate, the passenger gap between the UK and Germany is about the same size as the market in Greece. In 2017, Greece has seen 50 million passengers travel to and from the country.
Airports in the UK are also performing phenomenally. For example, out of the top 20 airports in the European Union, 4 airports are in the UK. London Heathrow, Gatwick, Manchester International and London Stansted is the 1st, 7th, 15th and 19th airport in Europe by passenger traffic respectively.
The United Kingdom also carries the most passengers between the European Union Countries. Eurostat measures that in 2017, 165 million travelers flew from/to UK’s airports from/to states in the European Union. Considering that the next largest country is Spain, which carried 143 million people, UK’s airports also carry a lot more passengers.
Trans-Atlantic routes play a very big part in the British aviation industry. 20 million passengers traveled between the UK and the US in 2017. Canada added 3 more million passengers. According to KMPG, more than 30% of flights between the US and Europe land in British airports.
And finally, probably the 2 most important numbers of them all. A study by Oxford Economics has concluded that aviation contributes £29 billion to Britain‘s GDP. The number includes contributions made by tourists that have landed in the UK via air. The same study also indicates that aviation, with tourism included, creates more than 565 thousand jobs. In the grand scheme of things, that’s almost 5% of Britain‘s GDP and workforce created by aviation.
To sum up, the aviation sector is in a very healthy state. Record-breaking numbers for the last few years, rising economic impact makes aviation an important part of the British economy.
However, is it really in a healthy state? Some numbers might state otherwise.
Brexit affecting airlines
As mentioned just above, the grass might not be so green after all. After the British government announced Brexit, financially airlines were hit hard. On average, airlines that were registered in the United Kingdom lost 33% share value. Comparing to other economic sectors, Brexit hit the airline industry the hardest.
And to be honest, that should not surprise anyone. UK’s airlines still operate under the laws of the European Union and EU agencies control UK’s aviation laws. To be exact, ECAA, EASA and ECJ regulate the unified airspace above Europe. If Brexit goes through without a deal, the airlines registered in the UK and operating under a British AOC (Air Operator’s certificate) will have their inter-EU operations stopped. The potential consequences could be catastrophic. Airlines already struggle due to rising fuel costs. For example, Monarch went bankrupt, Flybe is hoping for a messiah to rescue them (and it seems like they have found one).
Plus, the EU negotiated the Open Skies agreement with the US. If the UK were to exit the European Union, this deal would not include the UK. Thus, any air traffic between the UK and the US would be stopped.
And those are British airlines which struggle amidst rising passenger numbers. Imagine if they had to stop operations for a short period of time. Many more airlines would bury their brand names 6 feet under.
IATA has predicted the potential consequences of a soft, moderate and hard Brexit in passenger numbers for 2035. If Britain negotiates a soft exit, their passenger numbers in 2035 are forecast to be 309 million. Moderate exit drops that number to 301 million. Similarly, a hard exit means a drop in the forecasted numbers and equals 290 million passengers.
Measures against dire consequences
Chris Grayling, the Secretary of State for Transport has noted that even in an event of a no-deal, one of the main priorities would be that operations would continue. If Britain wants to still be a part of the European Common Aviation Area (ECAA), they must obey the laws of EU regarding aviation. If any issue arises, airlines would be forced to handle the argument in the European Court Of Justice, rather than using their own courts. This is quite ironic, knowing that the British aviation industry would still be forced to use European courts.
Meanwhile, airlines have been preparing for the worst. For example, easyJet has already obtained an AOC in Austria, meaning they would still be able to operate within the EU. Currently, easyJet has 130 registered aircraft in Austria. Other low-cost carriers from Europe, namely Ryanair and Wizz Air, have obtained UK AOC’s to continue operating within the UK after Brexit. This is crucial for low-cost carriers, as their profits also rely on making as many flights per day as possible. If any flight disruptions do happen between the UK and EU, those airlines will feel a lot of pain in their pockets.
While airlines are preparing for the worst, the problem is that nobody knows what to prepare for. As no deal has been struck as of now, businesses around the EU and UK are expecting and preparing the worst. Yet at the same time, they are completely lost on their future. Do you even let travelers book tickets after March 2019?
Impact on passengers
Nonetheless, airlines currently still allow passengers to book tickets for flights after the March deadline.
That’s a good point to start with – what will be the economic impact for flyers? If we were to follow with IATA’s predictions, we can conclude that travelers would be forced to compensate as a result of the dropping passenger numbers. One of the ways that airlines can try to regain its profits is raising their ticket prices. On the other hand, there are other ways to regain profits. For example, Wizz Air announced a new bag policy last year. That allowed Wizz Air to increase their ancillary profits by 22%, compared to 2017.
Secondly, there is one very important EU law that protects passenger rights in case of a canceled or delayed flight. The Regulation No 261/200462 sets out very concrete rules what happens in those cases. If the UK were to exit without a deal, passengers departing from British airports would not be protected and this could potentially result in a lot of cash lost for the passengers. Regardless, the British government is set to maintain the standard of service and has promised to respect the current regulation. Whether that promise becomes anything, is yet to be seen.
Thirdly, there is sort of an elephant in the room regarding visas. If the United Kingdom strolls off without a deal, passengers might become subject to a visa regime when traveling. Thus, that means that passengers will have to spend more money on visas. Subsequently, more time will be spent when checking in into the United Kingdom. Again, meaning more expenses for everyone involved. Passengers will lose time, while countries will have to allocate more funds towards border patrol in airports.
Nothing is certain
I think those 3 words sum up the current situation at hand perfectly. As the deadline nears, nobody knows what kind of Brexit will happen. There are questions whether it will happen at all.
And thus, the whole aviation sector is perplexed. With airlines preparing for the worst, passengers are left praying that a deal will be struck to maintain their rights when traveling. Whatever the case might be, the worst part is that treaties are held accountable by the countries in question. If trade deals fail, the World Trade Organization can provide some backup. However, aviation is in a whole lot of trouble.
All that we can do is speculate what happens after March and anxiously await for the future that lies ahead.
Whatever the end result might be, we hope for the best for everyone involved.