BREXIT WRECKSIT Low cost EU air travel at risk

Posted on 07/07/2016 | About London, United Kingdom

Back in May Irish low cost carrier Ryanair ran afoul of Scotland Yard by advertising a ‘Brexit Special’ that offered expat Brits (who were still on the electoral roll) deeply discounted flights to the UK on the day of, or day prior to the referendum if they’d, “fly home to vote ‘remain.’”

The ‘leave’ camp’s campaign director Dominick Cummings complained to the Metropolitan Police that this offer was “corrupt” and contravened the Bribery Act of 2010. He then went on to compare it to “a pub next to a polling station offering cheap beer to people who voted a certain way.”
Despite having frequently described the EU as “the evil empire”, Ryanair boss Michael O’Leary was justifiably worried by the prospect of leaving it behind. And now, with the post-Brexit “Gosh, when I voted for it I never thought it could really happen,” level of angst deepening by the day, the European airline sector is facing gargantuan problems.
Over the last 20 or so years, the phenomenal success of ultra low cost carriers such as Dublin-based Ryanair, Luton-based EasyJet and others like Spain’s Vueling has been predicated on their ability to fly without hindrance throughout the EU’s 28 member ‘single market’. Now, on the back of the referendum’s surprise result, the rock-bottom fares that European fliers have come to take for granted could soon become distant memories.
Offering the kind of low fares Ryanair pumps out every year – in 2015 their average fare was €46.40, ($66.60) an incredible 4% lower than the previous year - necessitates maintaining scrupulously low operating costs. Efficient ground operations often using remote uncongested secondary and tertiary airports and forswearing jet-ways for hardstands, minimizes turn times and helps optimize aircraft utilization (the number of block hours per day): As the old saying goes, “Airplanes don’t make money when they’re sitting on the ground!”
A classic example of just how highly leveraged ground operations can be was seen in the US in 2001. When 9-11 gave birth to the TSA and a slew of new airport security protocols, it stretched out Southwest Airlines’ core 20-minute average turn-time by an additional seven minutes. While this may not sound like a lot, across their entire network it was enough for Southwest to have to add a dozen aircraft to the fleet in order to maintain their schedule integrity.
Imagine then what might happen if/when all the currently ‘domestic’ EU flights between the UK and hundreds of gateways across Ireland and continental Europe have to arrive and depart as international services. As the ability to better control immigration at its borders was a huge part of the rationale behind the Brexit campaign, this quite probably going to be the case for passengers arriving in the UK - and presumably EU member states will reciprocate with more of the same. Just imagine how it would work if air service between every province in Canada suddenly required a passport and customs checkpoint and you’ll get the less than pretty picture.
But that’s only the tip of this very nasty iceberg. The UK currently operates as part of a single EU aviation market and is a party to its open skies agreements with other nations such as the US and Canada. As a stand-alone state however the UK will most likely have to renegotiate all these air agreements – and, as anyone who has ever been involved with bilateral air treaties will testify, these are not things that happen overnight.
To put this in perspective, approximately 70% of flights operating to and from Britain’s airports are international, with 53% of these bound for EU destinations.
Within Europe, Irish-based Ryanair may need a new UK operating certificate to maintain its numerous UK bases, while EasyJet with almost half of its traffic outside the UK, has already announced its intention to seek a separate EU air operator certificate. BA’s UK parent company IAG, in addition to its potential transatlantic bilateral problems, faces further regulatory challenges with its other airline properties, Aer Lingus, Iberia and Vueling, which fly on Irish and Spanish certificates.
While IAG chief Willie Walsh optimistically maintained the vote “wouldn’t materially affect operations” the stock market didn’t seem to agree - as of Monday this week IAG shares were down by 29%, EasyJet by 29.5% and Ryanair by 15.6%. And with the pound trading against the dollar at its lowest rate in 30 years, that too is not good news for airlines that have to pay for their aircraft and fuel in USD.
It’s not very often that Ryanair’s Mister O’Leary fails to latch onto any outlandish scheme that will garner free ink for his airline – think pay-to- pee and standing room only flights – however had he’d only though to offer ‘Leave’ supporters a free flight OUT of the UK a day prior to the vote, things might have worked out very differently.