The Brexit phantom got the airlines arming up
Although the negotiations over the access to European markets after Britain leaves the EU are just starting, several airlines operating in the UK have already expressed deep concern and plan to move some – or all – business to continental Europe. easyJet has already obtained an Austrian air operator's certificate (AOC), and Ryanair has been quoted to look into the possibility of moving shop. So, what does the post-Brexit world hold for airlines?
The (un)open skies
The European Union and the United States signed Open Skies agreement in 2007, allowing US and EU carriers to freely fly from any airport in the US or the EU to any airport on the other side of the Atlantic.
For instance, other non-EU countries like Switzerland only have seven of the nine freedoms of the air granted to them. It is missing the right of an airline to operate between points in two countries on services which lie entirely outside its own home country, meaning its planes must always either depart from or arrive at a Swiss airport.
Therefore, when the UK leaves the EU, it will have to make sure to sustain the freedoms, although it might be not as easy as it sounds. If the UK is not granted all of them, foreign carriers, Ryanair for instance, won’t be able to fly inner routes in the UK.
What this agreement means for the European Union and the United States is much more than hassle-free operations. Open skies not only opened air routes but also brought new destinations and lower prices for travelers, opening up the opportunities to a wider public. For the UK in particular, the agreement also meant liberating the international skies from the BA and Virgin duopoly, as they were the only UK airlines that had permission to operate UK-US routes.
Now, after the UK leaves the European Union it will no longer be covered by the agreement, meaning that new terms and conditions have to be negotiated.
Keeping in mind what is at stake, UK carriers are naturally concerned. “It’s in Europe’s interest to have a fully liberalised aviation agreement. 900 million travellers each year have benefitted from open skies in Europe,” a representative for International Airlines Group, which owns British Airways, has told AeroTime in an email. “That not only benefits customers but creates jobs and wealth. We are confident that a comprehensive air transport agreement between the EU and the UK will be reached.”
Ryanair preparing to wave good-bye?
Ryanair states it might cancel flights and move at least some of the UK-based aircraft to continental Europe if there is no clarity on whether UK remains covered the EU Open Skies agreement. The news comes in as part of Ryanair’s Q1 financial announcement.
Ireland’s Ryaniar, Europe's largest airline by number of passengers carried, says it remains “concerned at the uncertainty which surrounds the terms of the UK’s departure from the EU in March ’19”. And it definitely has a right to be worried, because the lack of a new agreement would mean Ryanair losing access to the UK slots, like the one in London, consequently closing many of its vital ‘gates’ to international operations.
The airline is “seeking clarity” on the issue before publishing summer 2019 schedule in the second quarter of 2018. If there won’t be certainty about the legal basis for the operation of flights between the UK and the EU by autumn 2018, Ryanair “may be forced to cancel flights and move some, or all, of their UK based aircraft to Continental Europe from April ’19 onwards”.
It has been known that the airline is preparing for the negative consequences of Brexit for a while now. A year ago, its CEO Michael O'Leary announced that the carrier would shift the emphasis from the UK to Europe in its development plans. He also did not rule out that to preserve commercial rights, Ryanair can apply for a British operator's certificate.
easyJet – one foot out?
Another UK-based airline, easyJet, has already obtained an Austrian air operator's certificate, protecting itself from the possible legal consequences of Brexit - Britain's seemingly inevitable withdrawal from the EU. The newly established airline is called easyJet Europe. For the time being, it will operate only one aircraft, which made its first flight on July 20, 2017.
In October 2016, easyJet predicted that the UK's break with the EU would become one of the factors that would provoke a decrease in the revenue of the LCC in the 2015/2016 fiscal year (completed in September 2016). The results showed that the decline in pre-tax profit was 27.8% (to 495 million pounds). The pre-tax profit will be 380-420 million pounds in 2016/2017 fiscal year, easyJet predicts.
The American point of view
European (including soon-to-leave Britain) airlines are not the only ones concerned. Airlines of America, the biggest aviation trade body of US, which members are carriers like American Airlines, Southwest and United, have also expressed their concern.
The body has asked to treat the airline industry separately during Brexit negotiations, fearing that air transport-related interests might be lost in the sea of other very important issues if the industry is not distinguished. According to it, Brexit is threatening the aviation sector in general, because it does not have “historic rules to fall back on in the event the UK and EU cannot strike a Brexit deal”, according to the Telegraph.
Meanwhile in the UK
On July 21, 2017 Britain launched ‘consultations’ over the creation of a long-term strategy for aviation. The consultations will last for the upcoming 18 months and will ultimately prepare a sector strategy for life in the post-Brexit world, Reuters reports. However, the strategy is separate from the negotiations over access to European markets after Britain leaves the EU – which is the topic those concerned has their eyes on.
Residents of Britain voted to leave the EU in a referendum on June 23, 2016. The country is expected to officially part ways with the EU in March 2019.
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