The UK’s vote to leave the EU has triggered enormous uncertainty. The shockwaves of Brexit instantaneously extended worldwide and the fallout will clearly affect the air transport industry, which plays a critical role connecting our world.
The most apparent effects on aviation are twofold: economic and regulatory. On the economic side, exchange rates and markets have already moved. This will undoubtedly change travel plans and shipping needs in both the short and long term. Experts have developed scenarios for how Brexit might unfold. Using these, our best estimate is that travel to and from the UK will grow more slowly — by up to 1.5 percentage points a year. Airlines are well placed to deal with that challenge. They are experienced and adept at adapting to economic shocks. Demand can fluctuate for many reasons.
By 2020, slower growth could mean that the UK’s aviation industry will be 3 to 5 per cent smaller than it would have been without Brexit. That is a significant and unfortunate gap that will have its own economic consequences. I would be remiss if I did not remind the government that some of this could be mitigated by eliminating air passenger duty. But even if growth is slower, the aviation sector will still be a vital part of the UK economy.
Today there are 1.3m UK jobs tied to aviation. And the industry contributes nearly $100bn annually to the UK’s economy. A small portion of UK aviation activity serves domestic markets, but the vast majority of the demands that they meet are for international connectivity to continental Europe and further flung places. Specific air services agreements — outside of normal trade arrangements — make this possible.
Last year saw about 160m air trips to and from the UK. About two-thirds of those were linked to the EU. Whatever political framework exists between the UK and Europe, the fundamental demand for travel between the two will remain.
And facilitating these links should be at the top of the priority list for the government’s negotiators.
There is a lot at stake on the regulatory side. The world-leading regulatory framework of the single EU aviation market has produced safe, efficient and economical air connectivity across Europe and beyond. As a result of growing air links, businesses are stronger, people are more prosperous, and the quality of life for Europe’s citizens has been enhanced.
Looking more broadly, the agreement between the EU and US is similarly important. Allowing carriers from either market unlimited access for international services has seen the web of connectivity between the continents expand with economic benefits accruing on both sides of the Atlantic.
What should aviation agreements look like in a post-Brexit world? Some suggest that the UK should remain part of the European Common Aviation Area, or negotiate a bespoke EU-UK agreement as Switzerland has. Whichever framework is chosen, the best outcome would be an essentially unchanged operating environment. We cannot step backwards. And in the face of potentially very difficult adjustments across the economy, any solution that compromises aviation’s contribution to social and economic development is simply not acceptable.
The task ahead is big and it is complicated. It should not be underestimated in any way, including the negotiating skills that will be required. That is particularly true for the UK which has little recent experience of negotiating air service agreements. Close co-ordination with industry will be critical to achieving a practical agreement.
People want to explore their world. Businesses need to work with global partners. Supply chains rely on worldwide access. And the best ideas are supported by real experiences. There are myriad reasons why aviation is a force for good in our world. Brexit changes none of them. It is paramount that, when the negotiations between the UK and Europe turn to air services, the focus is firmly on maintaining the benefits of connectivity.
Tony Tyler is the director-general and chief executive of the International Air Transport Association (Iata)