With the Brexit negotiations between the United Kingdom and the European Union at a standstill, airline industry leaders are voicing their frustration at the uncertainty of how they should proceed when Britain formally leaves the EU.
After a four-day round of unproductive talks between British negotiator David Davis and his counterpart Michael Barnier, the EU believes that no progress will be made between now and the end of the year. The current impasse is due to differences of opinion as to how payment of the Brexit “divorce bill” of $50 billion should be handled by the UK and how certain immigration policies should be implemented.
The problem as it relates to airlines is that many of them are not sure if they would be allowed to operate flights between European and British airports after March 2019. In the meantime, airlines will continue to sell tickets and book reservations as early as 300 days in advance, but they need some reassurance as to what the industry will look like after Brexit.
At a global airline summit in London taking place at the same time the Brexit talks were being conducted, a former FAA official explained that the Open Skies agreement between the UK, the EU and the United States needs to be brought to the negotiating table. UK Chancellor Phillip Hammond has stated that his government and the EU bloc are aware that there are no other accords to could quickly replace the Open Skies agreement, and thus there is the possibility of a complete grounding of flights between the UK and the EU after March 19. For U.S. airlines, this would mean scheduling flights directly to the UK without stopping in the EU; however, preference would be given to Europe because it would be a more lucrative and flexible market.
In the event the UK ends up exiting the Open Skies agreement, it would have to dust off bilateral deals formulated under World Trade Organization rules, but these agreements would have to be updated. Virgin Atlantic executives are already preparing for this scenario and are urging aviation officials to focus on British and American passengers first.
For the time being, the airline industry is trying to stay optimistic, although some analysts are warning executives that some losses will be inevitable. Naturally, things will have to be worked out eventually, but the process of adjustment will not be painless.