With the Brexit deadline of October 31st approaching, 48 days to be exact, it’s time to look at the possible impacts of a no-deal scenario on the UK’s aviation industry. Here, we try to put politics aside and look at key points made by various stakeholders.
First and foremost, we have the good, understood as business certainty which industry can appreciate.
- Traffic Rights – thanks to legislation passed on December 19th, 2018 (COM(2018) 893), the EU and the UK have agreed to maintain basic air connectivity until the 24th of October 2020. Under these provisional rules, UK carriers can fly across the EU without landing, make stops for non-traffic purposes, and perform services between any point within the EU and the UK. This regulation, however, limits the number of frequencies on any given route to those of the 2018 IATA winter and summer seasons.
- Safety – since the beginning of Brexit negotiations, the UK’s Civil Aviation Authority (CAA) has promised to mirror the EU’s EASA safety regulations for at least two years. Many licenses pertaining to maintenance, such as Part-145s and 66s, Air Operators Certificates, and Pilots licenses (Part-FCL) will still be applicable within the UK. Moreover, EASA has opened expedited applications for various UK-linked licenses and newly required certificates.
While traffic rights and certain licenses will remain largely unchanged, a no-deal Brexit could have a short-term negative impact in the following ways.
- Fear, confusion, and uncertainty – according to a survey by Which? Travel, one-third of consumers are worried that their flights to the EU could be disrupted by Brexit. Fear and a lack of confidence should in no way be underestimated. Consumers unsure if they can even fly to and from the EU may change their plans or, avoid flying altogether. In turn, the industry will not only have to invest time and effort into reassuring consumers but may have to do so while facing downward pressures on revenues. While Brexit has yet to affect bookings, this might change in a no-deal scenario.
- Immigration queues – when the UK leaves the EU, UK citizens traveling to the EU may face increased immigration checks and vice-versa. According to the Government’s Operation Yellowhammer, these checks may lead to delays at UK and EU airports. This past September, travelers at London Heathrow faced major immigration queues when e-passport gates failed. Passengers at Manchester Airport also faced hour-long queues when high volumes of non-EU individuals presented themselves to immigration checks. Though the events in London and Manchester are unrelated to Brexit, they are indicative of the infrastructure’s inability to cope with irregular operations.
Although UK aviation may face industry-specific challenges such as consumer fears and long immigration queues, it cannot escape the wider no-deal Brexit impact; a drop in UK economic output.
While nothing is admittedly more political than a statistic, or even an economic prediction, everyone from the Bank of England to the OECD to retailers expects that a no-deal Brexit will have a negative impact on the UK’s economy.
In a letter dated the third of September, the BoE’s Governor, Mark Carney, informed the House of Commons that in a worst-case scenario forecast, GDP could decline as much as 5.5%, and unemployment could rise to 7%.
For most UK based airlines, any economic headwinds could prove challenging. Not only do UK airlines face some of the highest costs in the industry, but those costs may rise even higher amid calls for an airline bankruptcy tax.
For aerospace manufacturers, however, an economic downturn could lead to lower lending rates, which, in turn, could generate investment. That is, of course, if the supply chain and regulatory issues can be mitigated.
What do you think a no-deal scenario would mean for the aviation industry? Let us know in the comments.