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Aviation: Still think Brexit is good?

The European Union might have thrown something of a lifeline to UK airlines and airports in the event of a 'no deal' Brexit yesterday, but it certainly didn't go as far as offering the freedoms the industry has enjoyed over the last few decades. Yes, its still possible that a deal that does not restrict aviation could be done but as its tied up with all the other negotiations and time is running out, that seems increasingly unlikely.

Taking a closer look at the latest legislative initiatives put forward by the EU (document COM2018(893) - Air Transport (Basic connectivity)), it is evident that the 'no deal' arrangements will - if enacted - inhibit growth of air travel from and to the UK, as well as restrict the operations of some airlines.

Halt to intra-country flying

Specifically Article 3 - Traffic rights states: "UK air carriers may... (a) fly across the territory of the Union without landing; (b) make stops in the territory of the Union for non-traffic purposes... (c) perform scheduled and non-scheduled international air transport services for passengers, combination of passengers and cargo and all-cargo services between any pair of points of which one is situated in the territory of the United Kingdom and the other one is situated in the territory of the Union."

What does that mean? Well, it means that UK airlines will still be able to fly between the United Kingdom and European destinations - and likewise no doubt the UK will reciprocate and European airlines will still be allowed to come into the UK - if a reciprocal arrangement is not enacted, there will be no flying between the UK and Europe). The text also means that UK airlines will continue be able to fly through EU airspace en route to and from countries further afield; primarily that means services to CIS countries, the Middle East, Asia, Australia and Africa will be unaffected. It also allows UK airlines to continue to land and take off in the EU to uplift fuel.

The problem is that some UK airlines operate flights solely within mainland Europe. This particularly affects Flybmi's, which runs a range of services radiating from Munich. By omission from the EU's document, these operations will be prohibited if a 'no deal' Brexit comes into effect. It seems reasonable to assume that if the EU applies these measures the UK will reciprocate - perhaps retaliate would be a better word - and that will prevent Irish airline Stobart Air flying between Southend and Newquay, as well as Ryanair between Stansted and Glasgow, Edinburgh and Belfast. Ryanair has the resources to set up a separate UK operation, while easyJet started moving aircraft to Austria some time ago to cover just this situation. The latest EU proposals suggest this expensive preparatory work was well justified.

No additional capacity

The same Traffic rights section also states: "the total seasonal capacity to be provided by UK air carriers for routes between the United Kingdom and each Member State shall not exceed the total number of frequencies operated by those carriers on those routes during respectively the IATA winter and summer seasons of the year of 2018."

Basically the condition will prohibit additional flights on existing routes between the UK and the EU after March next year; frequencies will be constrained to summer / winter 2018 levels, and opening any new routes will be out of the question. So there is a genuine risk of there being no growth in air services between the UK and the EU in 2019. That will inhibit airline expansion and airport development. The climatologists might be happy, but its not good news for aviation because when demand outstrips capacity prices go up.

Profits

Image: ChiralJon

The latest organisation in the sector to warn on the impact of the UK leaving the EU is Heathrow Airport. It has set aside £114m for contingency planning which will have a direct impact on its financial performance, pulling profitability down by as much as 3%. And this comes at a time when the airport is looking to fund the biggest investment in its history with the construction of the third runway just around the corner. The challenges are significant enough for Standard & Poor to downgrade its outlook for Heathrow - as well as for Gatwick and Eurotunnel's owner - from stable to negative.

Disinformation

The Aviation Oracle is getting annoyed now. Those in favour of severing Britain's relationship with the UK have spewed platitudes for years, making baseless claims things will be fine. The time for probablys and empty promises is over. There is now direct evidence that some airlines and airports, and by implication their staff, will be adversely impacted if the UK crashes out of the U.K. Did the UK electorate really understand, prior to the referendum, that the prospects of some businesses and their workers would take a turn for the worst if Britain left the EU?

Text © The Aviation Oracle

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