Airlines Seeing Headwinds Ahead as Brexit Vote Looms
The April 12th vote could have a ripple effect for air transport throughout Europe
April 2, 2019
As an April 12th Brexit exit of some sort inches closer with no resolution in sight, reports from Europe’s popular discount carrier easyjet is warning that airlines could be in for some exceeding bumpy times. Uncertainty about the deal or lack of one in Britain’s departure from the European Union is causing travelers to hold back on booking tickets until Britain’s future relations with the bloc are clarified.
According to George Salmon, analyst at U.K.’s Hargreaves Lansdown, the airline is facing issues with “two main moving parts.” These are mainly fuel prices and customer sentiment. Higher fuel costs are hitting profits and Britain’s pending EU break is giving customers pause before booking their trips.
While Anti-Brexit demonstrators have been taking place near the Houses of Parliament in London this week, Britain’s Parliament is looking toward Monday to offer a way forward on Britain’s stalled divorce plans, holding a series of votes on Brexit alternatives in an attempt to find the elusive idea that can command a majority, the Associated Press reports.
EasyJet’s shares have fallen almost 10% in London while shares in other airlines and travel companies also fell, with British Airways owner IAG down 1.6% and travel group TUI 2%.
The discount carrier said that it expected its earnings to be weaker in the second half of the year. Its first half loss of 275 million pounds ($360 million) was within expectations, and its outlook for the six months through September is “more cautious.”
“For the second half, we are seeing softness in both the U.K. and Europe, which we believe comes from macroeconomic uncertainty and many unanswered questions surrounding Brexit which are together driving weaker customer demand,” easyJet CEO Johan Lundgren said in a statement. “We are rolling out further initiatives to support our trading.”
Added Salmon, “The group reckons demand will pick up later in the year, but a more pragmatic observer would say it’s difficult to put a timeframe on when (the U.K. government) and the EU will solve the Brexit puzzle,” he said. “This uncertainty means easyJet requires some blue sky thinking just now.”
The International Airline Transport Association published this study last month on the effects of Brexit on airlines operating flights to and from the U.K.
The UK has the largest aviation industry in Europe, and the UK’s geographical position in the network is key, with around 80 percent of all North Atlantic traffic passing through the UK or Irish controlled airspace. Changes to the relationship between the UK and the EU could potentially have considerable implications for all players in this important market.