28 Mar 2017

Brexit To Cut The Wings of UK Airlines

It seems like Brexit will cut the wings of British airlines. European Commission (EC) officials have said that once the process of leaving the EU is finished, airlines based in the UK will be only allowed to operate direct flights from Britain to the EU. That will mean serious problems for British carriers who currently have routes between EU cities, like easyJet and BMI Regional. Both companies operate between cities like Milan and Munich or Zurich and Thessaloniki. The restriction may also affect non-British registered companies, such as Ryanair, which could be banned from operating internal flights in the UK.

The probability of a hard Brexit has risen since Theresa May, made her plans clear to leave the EU’s single market and end the authority of the European Court of Justice over British courts. A lot of companies are now operating under European aviation law and if the UK Prime minister stays firm on her positions, it will cost the airlines dearly and millions of travelers will be affected. According to aviation experts quoted by Weekly Travel, “services from UK airports will be reduced as a result of this, more limited fleet flexibility, with the companies only focusing on the most profitable routes from the UK to offset the increased operating costs.”

Be Ready for The Worst

Despite the terms of the UK leaving have not yet been determined, some flight operators are preparing for the changes. easyJet recently announced their plans to invest £10 million in the next two years into building an EU-division with European licenses to operate their continent flights.

However, according to EC officials, the European leaders will not be as patient and the ban could take effect from tomorrow, when Article 50 will officially be triggered. That will force the airlines to take major and quicker steps in order to secure their future.

Nevertheless, a spokesperson from BMI Regional has already announced that the company will wait until the end of 2017 before taking any big steps.

Another carrier to be affected is Ryanair. In fact, the company is registered in Ireland, so it won’t experience a direct effect from the restriction. However, Ryanair has many internal British flights and the UK government might decide to mirror the EC restrictions. Earlier this year, an article in the Financial Times quoted Michael O’Leary, chief executive of Ryanair, who said that the implementation of such rules will cause “chaos in the airline industry.” According to the magazine, such a development of the negotiations will force some of easyJet’s and Ryanair’s shareholders to sell their stakes to others with EU passports, so they can prove majority of EU ownership and be able to keep licences and flying rights.

Curiously, British Airways doesn’t face restrictions, as all their flights depart and arrive in the UK. Still, International Airlines Group, who owns the company and owns 20% of Qatar Airways, might also need to provide majority of EU-shareholding in order to satisfy the regulators on the continent.

Another airline giant, Virgin Atlantic is also worried about the post-Brexit future of their company. Despite declaring 3 years of continued growth, the carrier is now fearing 2017 won’t be as prosperous. Virgin Atlantic chief financial officer, Tom Mackay said: “A decline in both bookings and the rate of the pound following the EU referendum materially impacted our revenues, but through sensibly managing capacity and network, our load factors increased and we grew our UK point of sale market share on our routes.”