The United Kingdom's vote to leave the European Union leaves
its aviation industry facing "prolonged uncertainty" regarding
regulatory and economic impacts, according to analysis from the International
Air Transport Association.
Over the long term, IATA projects that a downturn in
economic activity and weaker British pound could cut the number of U.K. air
passengers by 3 to 5 percent by 2020. Its air market largely comes from U.K.
passengers traveling abroad, which in 2015 more than doubled the number of non-U.K.
residents flying to the nation.
On the regulatory side, "there will be little or no
immediate change," although uncertainty around regulations could amplify
the economic impacts, according to IATA.
The United Kingdom's departure from the EU will remove it
from the EU's Open Skies agreement with the United States. While it's likely
the United Kingdom will form interim agreements, its ultimate new agreements
might not mirror the existing ones, Wolfe Research analyst Hunter Keay said in
a research note prior to the vote. "We believe U.K. regulators have been
tough negotiators in the past, so it would be premature to say there'd be no
incremental risks to the status quo, particularly if U.K. politics migrate to a
more nationalistic, protectionist bend. Issues like foreign-ownership
restrictions could arise again, too."
The Gulf carriers, whose growth already has drawn
the ire of some U.S. and European airlines, could face particular growth
restrictions should the United Kingdom reopen all its Open Skies agreements,
Keay added.
Those agreements also maintained antitrust
immunity, enabling joint-venture agreements between British Airways and
American Airlines and between Virgin Atlantic and Delta Air Lines, according to
Keay. Delta said in a statement that while it's too early to know long-term
effects, "it's business as usual for the foreseeable future for Delta's
flights between the U.S. and Britain; Delta remains committed to the U.K. market."