Aviation: IATA warns on no-deal Brexit
As the United Kingdom lurches towards a potential no-deal exit from the European Union, the International Air Transportation Association (IATA) has warned about the consequences for aviation in Europe.
EU position on aviation no-deal
On January 15, members of parliament rejected the proposed UK-EU exit deal, increasing the likelihood that the UK will leave the union at the end of March without robust plans to support a number of industries including airlines. The Aviation Oracle covered this subject on December 20, 2018 but it is worth highlighting again one of the critical challenges that will arise.
Document COM2018(893) - Air Transport (Basic connectivity) outlines the EU position on airline activity in the event the UK exits without a deal: "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."
This condition prohibits additional flights on existing routes between the UK and the EU after March 29 - which is when the UK is scheduled to leave the EU and the airline summer season gets underway. Frequencies from then on will be limited to summer / winter 2018 levels, and opening any new routes will be out of the question. Therefor there is a genuine risk of no growth in air services between the UK and the EU for the rest of 2019 and into 2020. But with traffic continuing to grow one of the likely consequence is that airfares will rise - if indeed all of the demand can be accommodated.
Crowded skies: if the UK leaves the UK without a deal on March 29, there is a real risk that some flights already on sale could be cancelled. (Phillip Capper)
Here's the real rub though: airlines have already prepared summer 2019 timetables and flight are on sale. Slots have been allocated. New equipment including aircraft has been acquired in an expectation that growth in demand will be met through additional frequencies. If the UK exits without a deal, some of the additional flights that airlines have already planned for this summer will have to be cancelled.
Following the vote against the proposed deal in the UK Houses of Parliament, IATA (the trade body that represents most of the world's leading airlines) highlighted the risks posed by a no-deal Brexit. In a statement issued on January 17 it said: "A ‘no deal’ Brexit could lead to a cap on flights that will stunt important economic opportunities and may lead to higher prices for consumers. The proposed guidance from the EU Commission in the event of ‘no deal’ calls for the current level of flights between the UK and the EU to be maintained, but does not allow for an increase in flight numbers in 2019 compared to 2018."
It continued: "Research estimates that up to five million extra seats are scheduled for 2019 compared to 2018 in order to meet consumer demand. Many of these will be in the peak Summer season when families will be booking holidays. These are at risk if a ‘no deal’ Brexit occurs."
IATA Director General and CEO Alexandre de Juniac added his thoughts: "That current flight levels will be protected even with a hard Brexit is an important assurance. But with two months left until Britain leaves the EU, airlines still do not know exactly what kind of Brexit they should be planning for. And there is legal and commercial uncertainty over how the Commission’s plan to cap flight numbers will work. In the small window remaining before Brexit it is imperative that the EU and UK prioritize finding a solution that brings certainty to airlines planning growth to meet demand and to travelers planning business trips and family holidays."
The risk is real - and time is running out
So there it is in black and white - as many as 5m extra seats that airlines planned to offer this summer may not be available after all. No doubt supporters of a no-deal exit will come along with all sorts of platitudes and claims that the EU will never let this problem develop, and there movement will be developments before the deadline. Proponents of the UK's exit will say that everything above, all the concerns about the problems airlines face, are 'maybes' and 'coulds' and may not come to pass. They'd be right. Clearly neither side wants the no-growth scenario to be enacted, but as yet there is no solution in place and time really is running out.
There is only one way that the airline industry's future can be assured at this stage. That is for the UK to remain in the EU, at least until a solid deal is in place and everyone understands its implications. Failing that and with little more than two months to go until the start of the airline summer season, some passengers might find flights they have already booked do no take off.
Text © The Aviation Oracle