The global aviation sector is, unsurprisingly, saturated with regulations linked to security, air traffic management, safety, noise limitations and environmental impact.
At present, British Airways and easyJet are the two airlines that count as UK-owned due to their ownership by predominantly British-based companies/people. However, only EasyJet really benefts from Britain’s membership of the European Common Aviation Area (ECAA), as British Airways has a much lower focus on intra-continental routes.
The EU Passport
ECAA membership allows for freedom to operate anywhere within the EU without any restrictions on capacity or frequency. After leaving the EU, British-owned airlines could lose their right to hold ECAA membership and thus all their automatic rights to operate in the EU.
This has the potential to be a huge blow, as around 53.5% of UK airline passengers fly to/from EU member states. Furthermore, around 270,000 jobs in the UK are linked to UK/EU air travel. The corresponding figure in the rest of the EU is 285,000. Proportionally, the impact on labour would, therefore, be much greater in the UK should a weak deal emerge after Brexit negotiations.
Due to the differences in membership between British Airways and EasyJet (mentioned above), most of this negative blow would land on EasyJet, in addition to many other airlines who operate a large proportion of their flights to/from the UK, such as Ryanair.
Any broader aviation agreements that Britain had benefited from as part of the EU would also become void, such as the EU-US “Open Skies” agreement. British Airways, therefore, is by no means immune. Should Brexit negotiations fail to reach an agreement that would forego Britain’s loss of aviation rights – something that appears likely considering the scale of the task facing the under-resourced Brexit ministers – airlines such as EasyJet would be forced to base far more of their operations outside of the UK.
Such restrictions on supply would lead to a much lower rate of flights arriving/departing from Britain. The demand for flights would also be predicted to fall if one considers that an end to freedom of movement is a possibility. This would severely cut European business trips for workers during the week, for example.
Such a situation would not come at a good time for the UK’s two busiest airports – London Heathrow and London Gatwick – which both have large infrastructure plans in the pipeline for the near future. At Gatwick, this is part of a wider airport expansion to be completed over the next five years, costing £1.15bn.
To add to this, the weakened pound means that holidays have become notably more expensive for British holiday-makers. This will ensure that staying in Britain for holidays will become an increasingly popular option, and will therefore further reduce demand for international flights. The EURGBP rate stood at 0.76 in June 2016.
Today, it is nearly 0.91. This means that a week in a hotel for €250 now costs just under £230. Back before Brexit, it would have cost £190. This is about a 20% increase in price, perhaps not an increase that everybody’s wallet can accommodate.
However, there are some possibilities for negotiation. Similar to Switzerland, Britain could negotiate a bilateral open skies agreement with the EU which would see it obtain almost identical status as it would have as part of the ECAA, without actually holding membership. Whether this is something Britain could achieve without incurring costs elsewhere seems unlikely.
Alternatively, Britain could negotiate bilateral deals with EU countries individually. However, this would be arduous work, and something one can assume Britain would want to avoid. Like all other aspects of Brexit negotiations, therefore, the future of British aviation business rests on the ability of British negotiators to succeed in damage limitation.