Brexit’s effect will limit UK travellers to UAE and beyond
Brexit could curtail air traffic to the emirates from Britain.
Saif Mohammed Al Suwaidi, the director-general of the General Civil Aviation Authority, has said a plunging British pound and the expected downturn in Britain’s economy could cut into the number of passengers from the country, which he said was a “key” market for UAE carriers.
“The reaction could effect the purchase power of the British people who are coming to the UAE, or flying to Australia via the UAE,” he said.
Among the Gulf carriers, Qatar Airways appears to be the most exposed to the UK market, because of its 15 per cent stake in IAG, the company that owns British Airways. Akbar Al Baker, the chief executive of Qatar Airways, said this month that he was happy with the stake in IAG and had no plans to raise his shareholding beyond this level. Qatar Airways did not comment on the UK leaving the EU after Thursday’s referendum.
Tim Clark, the president of Emirates and a British national, was a vocal critic of Brexit during the annual Iata airline industry meeting in Dublin early this month.
“My concern is what will happen in the rest of the EU,” Mr Clark said. “Instability means lowering demand, lowering in demand means less people travelling on aeroplanes. How long that would last, I don’t know,” he said.
But the airlines based in the UK have the most to lose.
Analysts have described Brexit as a “disaster” for airlines in the UK, with significant falls in their traffic likely because of the sterling devaluation, economic downturn and loss of business confidence.
Peter Morris, the chief economist at Ascend Flightglobal Consultancy in London, predicted that air travel to, from and through the UK could fall by between 3 and 10 per cent a year until 2020.
“This [Brexit] will affect airline networks, which will rebalance to accommodate traffic levels. Finances of UK-based airlines will be hit in a variety of ways that it is premature to estimate,” Mr Morris said.
The UK airlines have already started to lower their profit targets for this year. IAG said operating profit will not increase at a level similar to the 70 per cent jump posted last year, but will still be “significant”. The British airline easyJet also said it expected to feel the effects of economic and consumer uncertainty this summer.
IAG, however, has diversified beyond its British holding. The company also owns Spanish carriers Iberia and Vueling, and Ireland’s Aer Lingus, giving it exposure across Europe and reducing the pain of lower demand to London Heathrow, its hub.
Mark Martin, the chief executive of Martin Consulting in Dubai, said the effect of Brexit on the UK aviation industry “will be gradual, cancerous and terminal”.
“British aircraft manufacturing today is terminally ill and practically living off life support from European manufacturing conglomerates. Apart from BAE Systems that produces the Hawk [advanced training aircraft], nearly all British aircraft and components made are as a result of a cooperative European industrial co-production pact, which sadly may be recalled and put to an end.”
Mr Morris said the regulation of the UK-EU market will be “a tangled mess to unweave”, given that the UK civil aviation authority has been involved in shaping central aspects of EU policy and agreements for more than two decades.
“To the casual observer the whole process has been a poorly planned political coup, which will rock the UK economy and certainly produce long-term damage to UK aviation and its customers,” Mr Morris said.
One thing that will not need to change is the UAE’s air accord with Britain. That is because the accord is with the UK directly rather than with the European Union, Mr Al Suwaidi said.
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Updated: June 27, 2016 04:00 AM