Britain gets cheaper, but doomsday gloom is popular

It could be up to two years before the impact on air travel of Britain’s decision to quit the European Community is known, but doomsday scenarios have got off to a bad start with a five to seven per cent fall in the value of the British pound against major currencies increasing the appeal and reducing the cost of travel to the UK.

Gloomy predictions, however, are being talked up by the airline industry’s peak body, the International Air Transport Association, in a new report overnight, quoting British Treasury modelling before the so-called Brexit referendum projecting a permanent loss of UK economic activity of 2.5-3.5 per cent a year.

According to IATA, that would depress travel to and from the UK by three to five per cent a year, since Britons provide two-thirds of the bums on seats travelling to and from the country and international visitors comprise just a third.

That hasn’t been helped by the two airlines that have benefited most from the past two decades’ liberal EU aviation market, Ryanair and EasyJet, talking up a return to protectionism they postulated in the days before the referendum  would artificially reduce competition and increase fares under the new air rights treaty the UK will now be obliged to negotiate with the EU.

Through their bases at London’s Stansted airport, IATA’s figures show Ryanair and EasyJet are by far the biggest operators between the UK and the EU, with the most to lose under a worst-case scenario of a UK-EU aviation trade war resulting in restrictions on flights.

However, with an outsider’s eye on the future, the Australia-based Centre for Asia-Pacific Aviation thinks it “very likely” the current status quo would be effectively maintained with the UK agreeing on “unlimited open skies-style access for its own airlines and those of the other countries on routes between the UK and each of these countries, for example between the UK and France or Italy”.

In addition, none of the aviation trade organisations has raised the one factor which would guarantee higher fares – higher airline operating costs – following Brexit.

In fact, one of the cornerstones of the Leave campaign was to eliminate costly compliance with the EU’s bureaucratic standards.

However, as with most periods of economic turbulence, the uncertainty caused by Brexit has become a self-fulfilling prophecy, with one of Europe’s biggest airline groups IAG, which runs British Airways, Ireland’s Aer Lingus and Spain’s Iberia and Vueling airlines  on Friday issuing a profit warning because of doubts about the economic outlook caused by Brexit.

The one bright spot is that the depreciation of the pound has made the UK cheaper to visit, with long-haul travellers from Australia for instance now having to fork out “only” $A135 to enter the UK, compared with about $A143 before Friday’s currency devaluation.

However, the cash-hungry government that came up with the world’s biggest travel tax is also more likely than not to gouge future visitors with new visa fees.