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Brexit: the time bomb for airlines?

At a time when the French government is launching its "plan linked to a Brexit without agreement", there are many concerns for tourism players: sterling decline, loss of trade agreements between the EU and the United Kingdom, flight cancellations... A look back at the concerns of heads of airlines about a difficult Brexit

Since the British embarked on the path to exit the European Union, airline executives have expressed doubts about the financial health of their industry.

Thus, according to Moody's, the aviation industry does not have legislation that is comparable to WTO rules that apply to other industries and is one of the most in need of an agreement between the various European trading partners.

The iconic boss of the Irish low-cost airline, Ryanair, said he was "concerned about the growing risk of a hard Brexit in March 2019." Michael O'Leary says, "We hope that a 21-month transition agreement, starting in March 2019, will be concluded, recent events in the United Kingdom have added uncertainty and we believe that the risk of a hard Brexit - which could lead to flight cancellations for several days or weeks - is underestimated."

Richard Gustafson, CEO of Scandinavian Airline SAS, is also concerned about the UK's exit from the EU for the aviation industry: “[W]e can only hope, I guess, that we end up in a controlled Brexit scenario rather than a hard Brexit.” [...] I think that will not have a negative impact on SAS but on European aviation as such. And thereby also by the European economy. So we try to the best of our ability…to plan and prepare but those are things that are out of our control.”

Virgin Atlantic Airways Ltd. and the low-cost operator Jet2 have stated that demand is being held back due to the weakness of the British pound. Virgin Atlantic Chief Executive Officer Craig Kreeger wrote to the House of Commons transport committee on Wednesday saying the slide in sterling since the 2016 Brexit referendum “has already had a demonstrable impact on U.K. leisure demand as the cost of holidaying has increased.”

An affected industry with a solid foundation

British Airways and easyJet would, according to Moody, be particularly vulnerable in the event of a hard Brexit. However, it stated that the high liquidity of BA, easyJet and Ryanair should enable them to "overcome the financial impact" of a Brexit without a transaction, even if flights were disrupted.

Finally, tour operators TUI AG and Thomas Cook Group Plc say that UK bookings for next summer are higher and that this suggests for TUI “demand is not diminishing despite the backdrop of Brexit,”

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