Generic airplane AdobeStock Mariusz Blach

Brexit to impact on airline industry

Financial Services company Moody’s has published its outlook on fundamental business conditions in the global passenger airline industry over the next 12 to 18 months. 

Among the main conclusions are a forecast for passenger demand exceeding capacity again, despite an ongoing slowdown in passenger demand. However, the report authors added that the growth differential between demand and capacity is likely to narrow as economic growth slows.

Across different regions, the business challenges faced by the passenger airline industry vary, the report found, with European carriers likely to experience pressure on their margins, although “significant Brexit-related disruption” is not reflected in the report’s base case. 

To plan for the event of a no-deal Brexit, the European Commission published provisional measures to ensure basic air connectivity and safety are maintained between the UK and the EU. The report authors anticipate the UK government would make reciprocal provisions, which are a condition of the EU's measures becoming effective. If post-Brexit air services between the UK and Europe are significantly curtailed, operating margins of European airlines will sustain significant hits, as will euro area GDP growth, if not on a wider scale.

Motivated in part by Brexit, Ryanair and easyjet will likely continue to increase intra-European services, particularly to and from Germany, France, Italy and Spain. Norwegian Air Shuttle ASA will also see continued growth, though reportedly at a slower pace as it seeks to improve its financial performance.

A weaker pound against the US dollar and euro would strain demand for international travel from the UK, while a weakening of the euro against the dollar would have a similar effect on European long-haul demand.

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