Brexit: So Cheap Flights May Disappear?

Ryanair and easyJet campaigned against Brexit and like most airlines they remain gloomy about the consequences for cheap flights with Britain leaving the EU .

One reason for their concern is that the European Common Aviation Area allows member airline carriers to fly between any member airports through an agreement signed in 2006.

That agreement is tied to freedom of movement and the regulation of the European Court of Justice, two things the UK would leave behind in a hard Brexit.

Airline bosses like Ryanair’s chief executive Michael O’Leary claim that without a bilateral deal to replace that agreement there could even be a period of no flights to Europe from the UK after March 2019.

O’Leary’s Dublin-based company appears to be considering a drastic winding-down of its operations in the UK market.

Bilateral Agreements

While governments will obviously want to keep planes flying between the UK and the EU, some national carriers will be keen to take advantage of Brexit to stop budget competitors flying in their airspace, according to The Economist.

“The flag carriers of France and Germany, which have a close relationship with their respective governments, have every incentive to make sure that rivals are caught by rules that ban foreign airlines from flying within the EU,” said Andrew Charlton of the consultancy Aviation Advocacy.

Carsten Spohr, the CEO of Lufthansa, warned in February that he would resist any bid by easyJet or British Airways to re-enter the European Common Aviation Area after Brexit.

Many countries will likely fall back on previous agreements, given that planes did fly to the Continent before 2006 but the overall picture is, as ever, complex and uncertain.

The UK also desperately needs to form its own equivalent of the EU-US Open Skies agreement that allows carriers from the EU and US to fly between each other.

As with many EU arrangements there is also an associate option, which has seen Norway’s airline Norwegian become Europe’s third-biggest budget carrier, although this might be yet another “bargaining chip” that Brussels could withhold without a big return offer. It is understood that easyJet is trying to buy its own operating licenses but that £10 million “insurance policy” will still depend on government agreements.

The imposition of new restrictions on immigration could also affect long-term airline demand. The proportion of passengers flying within the EU to see friends and family rather than for normal tourism has grown from 5% in the early 1990s to about a third. New limits on immigration between Britain and the EU could obviously undermine that traffic.

Ryanair in the departure lounge?

While airlines suffered a particularly heavy drop in share value because of the Brexit vote in last year’s referendum Ryanair has enjoyed a rebound this year. The Financial Times reported that the company announced a €600 million (£530 million) share buyback scheme in May. O’Leary’s decision to sell €72m (£63.5m) of his own shares on June 6 may suggest that he is indeed pessimistic about the future as Brexit aproaches.

As for easyJet, its main shareholder Sir Stelios Haji-Ioannou has dual British–Cypriot citizenship and the airline could have the choice of presenting itself as being either British or EU-owned. Ryanair is believed to be increasingly shifting its focus to flights within Europe as the UK provides just 2% of its business, so it looks like British holiday-makers may lose many of their options for cheap travel. Some of the more parochial Brexiteers would probably be delighted to see the “staycation” replace cheap holidays abroad.

by Stewart Vickers

 

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