The true effects of Brexit on aviation revealed…

Since the controversial vote in 2016, many companies and industries have questioned their future in a post-Brexit world. The aviation industry is no different.

Brexit affects every corner of the aviation industry imaginable, from airlines and aircraft manufacturers, to small regional airports in the US! But it is only now that we are beginning to see the true effects of Brexit on aviation.

Brexit was a vote on whether or not the UK wanted to leave the EU or not. The result of the vote showed (by a slim majority) that the UK wanted to leave the EU.

This has had, and will continue to have an impact on industries all over the world, not just in Europe.

Since the vote, many people have begun to question whether Brexit is even worth the hassle as there has been so much disruption, not just in terms of travel, but just about everything else!

Alas, Brexit was not stopped, as many people had thought. On Friday 31st January 2020, Britain finally left the EU after three years of uncertainty… for better or for worse.

However, this is not about politics, this is about aviation.

Undoubtedly, Brexit has impacted the aviation industry, but what has it done specifically to the aviation industry?

Airlines post Brexit?

Since the infamous vote, many airlines have questioned how they will operate in the UK. Not just, new permits and possibly issues when expanding to more British airports, but also a legality issue. How will the airline be structured?

In the EU, a company incorporated in any of the 27 EU nations is able to operate in any other EU nation, without having to incorporate a subsidiary there.

This causes a special issue for airlines, as it will force them to make an important decision on the issue.

If they want to expand their business into more of the UK, and thus operating an office in one of those airports as a UK HQ, they will have to incorporate a British subsidiary.

This isn’t too bad, and some would argue that it would do both the aviation companies and the UK some good for this happening, as it would make the companies subject to British taxes.

Assuming that they don’t use the age old trick of tax havens of course….

This has led some people to fear that certain airlines (mainly those who operate on tight profit margins, or are LCCs) will pull out of the British market, as it may no longer become viable or profitable!

Traffic?

Some people have theorized that there will be one of three outcomes for aviation when the UK fully leaves the EU (for reference, we are currently in a transition period between leaving and fully leaving!)

Either, there will be a mass exodus or entry of people from the UK (mainly those from other EU nations), who will probably leave with scheduled flights and the Dover-Calais channel-crossing.

Or, there will be nothing that changes due to the fact that it won’t change much, and people will still fly regardless.

There is also a worry that if certain airlines pull out of the market, such as Ryanair, which is based in Southern Ireland, it will cause the British public to lose face with the aviation industry.

This may have the knock-on effect of causing more airlines to leave the British market out of fear more than anything else.

This would ultimately cause a rise in ticket price as there will be more demand, but less supply, which will lead to higher prices (which is just basic economics).

Manufacturers

Airbus is currently the world’s largest aircraft manufacturer, recently surpassing Boeing who held this title for many years.

Airbus isn’t just in one country, but several throughout Western and Central Europe- the UK included. This causes two issues: tariffs on parts and exporting the finished goods abroad.

Tariffs

The UK manufacturers certain parts of every single aircraft made by Airbus, whether it’s the A380, A321 or A350. The UK, in some form or another, produces parts of those aircraft.

However, in a post Brexit-Europe, these parts will be shipped back and forth between the UK and Europe.

Thus, unless a special amendment is made between the UK and EU regarding the Airbus consortium, those goods will be subject to tariffs.

This could mean one of two things:

• Higher aircraft price (and thus higher ticket price)
• The UK’s exit from the Airbus consortium

Both of which would have catastrophic consequences on both Europe and the rest of the world.

A businessman in Taiwan may pay a higher price for his ticket due to the A380 he’s flying on being more expensive to produce! (Yes, I understand that the Airbus A380 is due to be stopped in 2021, so may not see the tariffs that other aircraft might!)

Exporting the finished goods

Britain’s exit from the EU will also cause other issues, mainly the exportation of finished Airbus aircraft, as any aircraft that are delivered from Airbus to British airlines will be subject to import taxes.

This will also hurt the UK’s largest aircraft manufacturers- BAE Systems. BAE Systems is famous for its military aircraft, producing many aircraft used by the RAF, as well as other air forces, even if you don’t realize it.

One of the manufacturers that helps make the Eurofighter Typhoon is BAE Systems, which is used by air forces like the Italian and Germans. One day, BAE Systems will also export the BAE Tempest (the Typhoon’s replacement).

But how and why will air forces want to buy the Tempest if it is so expensive because of the tariffs? Short answer: They won’t. If they do, it’ll be less than the they would’ve otherwise.

Longer queues

Longer queues are the bane of the aviation industry. Sadly, Brexit will not help this. In fact, it will hinder it.

The EU has a handy rule, where there is a separate queue for EU citizens trying to enter another EU nation. Now, due to Brexit, there will be an issue on both sides of the scale.

There will be longer queues of EU-nationals trying to enter the UK and longer queues of UK-nationals trying to enter an EU nation, due to the fact that this rule will no longer apply to the UK.

The only way that we could get around this would be via a specific amendment in a trade deal between the EU and UK that would give the UK the right to enter through EU queues, just as Swiss nationals are able to.

However, the likelihood of this happening is minuscule due to Boris Johnson’s seeming insistence on a No Deal Brexit.

How else do you think the aviation industry will be affected by Brexit? Will it prosper? Will it fall? Tell me in the comments! Keep it civil!