MarketLine Blog

UK airline industry: The threat of the permanent side-effects of Brexit

The future of the UK airline industry is likely to be worse after Brexit even after the end of uncertainty, as the free movement of EU citizens is likely to be over. This automatically means that the prosperous international segment of the UK industry will be severely hit by restrictive regulation regarding new limiting open skies agreements and border controls.

The termination of open skies agreements will jeopardize the growth of the UK airlines industry, the revenues of which are greatly dependent on UK-EU traffic. Extensively, the UK airline industry that is led by its domestic carriers is under threat considering that more than 65% of its international traffic is located in EU routes.

Most importantly, the termination of open skies agreements does not seem to be a pessimistic scenario, but the reasonable ending of a bargaining game that the UK industry, particularly UK carriers, are not in a strong position to gain from. Indeed, UK carriers have much to lose from restricted access to the single market, as well as the industry as a whole. Limited routes between the UK and the EU mean restricted capacity and erosion of competition due to protectionism policies, eventually leading to tariff hikes.

Finally, the ease of travelling is also expected to be undermined. Specifically, given the ban of free movement in the UK, UK nationals will no longer be considered as EU nationals, being subject to border controls that are only some steps away from visa authorization. Accordingly, demand at least from UK travelers will also weaken in the face of complex transactions and increased bureaucratic costs.

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