The Impact of Brexit on the UK Aviation Industry

Estimated reading time: 5 minutes

Outlook

Frost & Sullivan believes the net effect of Brexit on the aviation market will be negative in the short- to medium-term as airlines deal with the effects of uncertainty and drops in premium and outbound traffic.  Over the long-term however, everything depends on the whether the UK successfully negotiates continuous membership in the European Common Aviation Area (ECAA). A possible exit from the ECAA will raise the costs of doing business for both UK and European carriers alike. Furthermore, there are concerns over the UK’s ability to negotiate beneficial trade agreements and Open Skies aviation bilateral agreements with the US and other important partners. Overall, we expect UK carriers to spend substantial time and resources on lobbying for a continuation in the (aviation) status quo in a post-Brexit world.

The Political situation

The first steps towards the start of negotiations have already been taken, with the resignation of PM David Cameron and the appointment of Theresa May as the new PM. She already has said she will not trigger Article 50 of the Lisbon Treaty, which would formally take Britain out of the EU after up to two years of negotiations, before the end of 2016 (Source: BBC 14 July 2016). The intermittent period will be used to set up her new “Brexit” Cabinet and initiate a long consultation period. As part of this process a new Transport Minister is expected to be appointed. Irrespective of who assumes the position, aviation will be at the top of the new Brexit Agenda and the Transport Minister will likely make changes at the top of the Department for Transport (DfT) and the UK Civil Aviation Authority (CAA).

The need for Brexit Champions

It is obvious that there will be a significant (Q3/Q4 of 2016) period of deliberation, during which time the inputs and opinions of the country’s top aviation stakeholders will be sought. It is essential that airlines, airports and aviation suppliers use this time to set up their Brexit task force and appoint special Brexit “Champions” that can effectively represent their (and their customers’) interests. For airlines, this will mean empowering the Government Affairs, International Affairs and Legal teams to lead the efforts, with support from almost every other airline department. The aim of the Brexit task force should be to persuade the Government of the need to remain in the ECAA and support the DfT’s negotiation team in the development of a clear business case to present to Brussels.

Your strategy is now obsolete

Furthermore, aviation businesses have to develop clear corporate and business strategy. These are no longer “contingency” plans, but rather long-term strategies in light of the new Brexit reality. Virtually every component of a company’s long-term strategy plan has now been made obsolete and needs to be reworked, incorporating alternative post-Brexit scenarios. This includes a redesign of long-term Network & Fleet Plans, Sales & Marketing Plans, Financial Plans, Operating Plans and R&D Plans.

Scenarios will need to be developed with data fed from an effective market intelligence function, incorporating market research and Voice-of-Customer (VOC) elements, assessing the impact of new regulations, future demand growth (or decline), customer requirements and competitor reactions.

Frost & Sullivan is ready to support all aviation businesses in these efforts, utilising its extensive European network and expert teams of Aviation consultants and market researchers.

About Frost & Sullivan

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