Why the spectre of a hard Brexit has European airlines worried

Why the spectre of a hard Brexit has European airlines worried

PILOTS are taught that a too-hard landing is better than a too-soft one. A plane can absorb more shocks than one might think, but a runway is only so long. When it comes to Brexit, airlines think the opposite it is true. As the deadline for Britain’s secession from the European Union approaches, the spectre of a hard Brexit has some airlines scrambling. For carriers with big operations in Britain, the terms of Brexit cannot be cushioned enough.

Of most concern is that a hard Brexit will involve Britain leaving the European Common Aviation Area. Europe’s open skies fall under the jurisdiction of the European Court of Justice, whose yoke the country must be free from, insists Theresa May, Britain’s prime minister. That in turn would bring into question the right of British carriers to fly routes within the EU. The most pessimistic within the industry, including Michael O’Leary, the boss of Ryanair, say that unless a new bilateral agreement is agreed, there is a real prospect that flights between Britain and the continent will be halted altogether in March 2019.

No wonder British carriers are worried. Under European law, airlines can only fly routes within the EU if they are majority EU-owned. But airlines that are partly in British hands may cease to be “EU-owned” after Britain leaves the club. That makes life complicated for operators such as IAG, which owns several European carriers including Iberia (as well as a soon-to-be ex-EU one, British Airways). Willie Walsh, IAG’s boss, has asked the EU to relax its ownership rules, which the firm calls “arcane”. Otherwise IAG might face a choice between buying back shares from non-EU shareholders (including British ones), or breaking up the group. Some insiders suggest that the continent’s other big long-haul airlines, Air-France/KLM and Lufthansa, are quietly lobbying for the EU to retain a tough stance, and so nobble the competition.

EasyJet, another British airline, is not prepared to sit around hoping. Europe’s second-biggest budget airline is so worried about the prospect of Brexit without an aviation deal that it is to set up a subsidiary in Austria, it revealed on July 14th. The carrier is planning to re-register 110 of its planes in the country. Ryanair thinks it is less exposed. A significant proportion of the Irish carrier’s shares are owned by Britons, though probably not enough to put its EU status at risk. And although London Stansted is by far Ryanair’s biggest base, it flies few domestic routes in Britain, meaning setting up a British subsidiary is not so pressing. Mr O’Leary says he is on standby to shift operations from Britain to Europe if need be.