Will Brexit be a Benefit to International Travelers?

Amusingly, “British” Airways is no longer sufficiently British as to qualify as a permitted airline to fly between the UK and US under leaked terms of a new open-skies agreement being negotiated between the UK and US.

Currently air travel between the US and UK/EU is governed by what has been described as the most liberal open-skies deal ever agreed by Washington.

But ‘liberal’ deals are not synonymous with consumer-advantageous deals.  The EU/US open-skies agreement has encouraged a collapse in airline choices across the Atlantic.  Apart from financially struggling Norwegian and other outliers such as the two Icelandic airlines, pretty much any/every airline crossing the Atlantic these days reduces down to part of one of the three major airline-blocs – Oneworld, Skyteam, and Star, generally enjoying very generous exemptions from regular anti-trust price-fixing scrutiny.

Even high-profile and formerly friendless Virgin Atlantic is now being largely sold to a couple of Skyteam members – Air France/KLM (itself an example of two airlines now made into one) and Delta, leaving only 20% to outspoken figurehead Sir Richard Branson.

Anticipating the outcome and implications of Brexit is very difficult for at least two reasons.  The first is that currently, in the throes of contentious negotiation, and still at least a year away from its actual enactment, there is no clear understanding of what final form Brexit may take.  The second is that Brexit is a very divisive issue, primarily on hard-to-quantify philosophical grounds, and both supporters and opponents of Brexit have been prone to enormously exaggerate their claims about the benefits or harms that may follow.  An equally real consideration is that until the final Brexit agreement has been fully signed and ratified, there remain credible doubts as to if it will indeed ever ultimately occur.

Although Brexit is still a year or more away, it is becoming an increasing point of concern to airlines, because they typically plan their schedules two years in advance.  Groups can book flights up to two years in advance, and the regular traveling public can usually access schedules up to 11 months in advance, and so the uncertainties of what may be possible after Brexit are becoming more relevant.

Due to the many hidden agendas and lack of certain knowledge, we have tended to discount most of the steady flow of articles about the impact of Brexit on air travel as being speculative pieces of political polemic, but the last week has seen some alleged leaks of confidential talks between the UK and US governments and the negotiations between them for an open skies agreement for when Britain is no longer covered as part of the EU umbrella agreement.

However, even when sourced by such seemingly high quality sources as Britain’s Financial Times, some curious claims are made.  It is claimed that Britain’s ‘three main transatlantic carriers’ would all be excluded by the terms of a new open-skies agreement, which is also being hinted at as being unduly harsh and unusually unfair.

This is interesting because it points to a sad fact.  Britain essentially no longer has any long-haul international airlines of note that are actually British.  The closest to a full service long-haul carrier these days is leisure/charter/seasonal airline, Thomas Cook Airlines.

We understand that (no longer very)British Airways may be excluded, because its holding company (IAG – International Airlines Group) is no longer a British entity but a European one (its registered office is in Madrid).  It is entirely likely that these days less than 50% of the ownership and control of IAG is British or American (indeed Qatar Airlines holds a 20% share in the company, making it the largest shareholder, the second largest being American based Capital Research and Management Company, which holds 10%).  Although EU rules require majority European ownership of European airlines, it is quite likely that the British and American elements owning and controlling the group have dropped below 50%.  In other words, British Airways is no longer British.

The second cited airline as being affected would be Norwegian, and that’s unsurprising.  Norwegian contentiously created multiple operating companies within Europe so as to spread its cost base far and wide, and its Gatwick based operations make no claim to being British owned.  The loss of these flights would be of little impact (to Americans), because Norwegian could simply shift the traffic to its other hubs within Europe and continue to be covered by the current US-EU agreement.

Curiously, the third airline it is claimed would be affected (both by the Financial Times and Business Insider) is Virgin Atlantic Airways.  This claim appears to lack factual support, and is contested by the airline itself which this same last week claimed it would have no problems continuing to operation its UK/US routes at all.  This should come as no surprise, because it was earlier outlined back in July last year.  But in its qualifying form, Virgin Atlantic would qualify more by virtue of being more American than British.

The FT and BI articles also imply that a new UK/US open skies agreement would be unusually restrictive, and that the EU/US agreement was unusually liberal.  This is also a specious claim.  The main element of liberality in the EU agreement was the happy fact that the EU was able to negotiate a single agreement covering all its member nations, which are treated as a single qualifying alternate entity.  This is of course the essence of the EU, and to do otherwise would be similar to requiring open-skies agreements to be individually negotiated by every separate US state – or of requiring an agreement with the UK to be separately negotiated by England, Wales, Scotland and Northern Ireland.

So what can we expect from a separate UK/US open-skies agreement?  In theory, it might be good for US travelers by requiring airline alliances to re-apply for anti-trust exemptions for travel between the UK and US instead of grandfathering the already in place entire-EU agreements and exemptions.  This would be good for us, but only if the US government “grew a pair” and refused to roll over and do the airlines’ bidding; if it stopped its conniving with the airlines and pretending that anti-competitive alliances are beneficial to us, the people who travel.

Maybe a new open-skies agreement, freed from the additional layers of European bureaucracy, might make it quicker and easier for new airlines to spring up and for existing domestic US carriers to establish a foothold on routes to Britain without fear of being summarily squashed by the giant alliances.

Could this create an opportunity for airlines such as Alaska Airlines, Jetblue, Southwest, even Spirit, Frontier and Allegiant, and (ignore the name implications) Hawaiian Airlines to start offering service between the US and UK?  Yes, it could.

An additional complication could be what is called the “Fifth Freedom” (as part of the nine enumerated Freedoms of the Air).  This, sometimes also termed “Beyond Rights” allows an airline to fly from one country to a second country where it would drop off and pick up passengers and then fly on to another third country.  An example would be if a US airline had a hub in Britain, with flights on from there to Europe as well as to/from the US – it would need beyond rights to operate the hub, and this requires Britain in turn to secure such rights from the EU.

This is not impossible, of course; indeed, beyond rights are these days fairly common, and the EU and its airlines probably have as much interest in having mutual beyond rights as do the British and American airlines.  But it is another detail to be ironed out and reduced to an executed treaty document in an ever-shorter amount of remaining time.

There is one more challenge, particularly if a direct UK/US open-skies agreement were to encourage additional airlines and flights between the two countries.  Where would the airlines fly to in the UK?  With the country’s moratorium on new airport development and new runway construction, overlaid by uniquely punitive taxes on flights, Britain continues to broadcast its hostility to the world’s airlines and to show itself as closed to air service expansion.  Appallingly, while the US side of flights across the Atlantic has an enormous amount of expansion capabilities, the British side has almost none.

The poster child of this – Heathrow Airport – continues to struggle to operate reliably due to being on the continual knife-edge of dysfunctional overload (it is at 98% of capacity) and 15+ years of endlessly repeating proposals and plans and reviews for expansion at Heathrow have yet to result in any agreement or approval for its desperately needed third runway, and there remains little expectation this will be resolved any time soon, Brexit or not.

Brexit is only one part of Britain’s ongoing aviation dysfunctionality.  Brexit might indeed prove to be a boon, forcing Britain to face its ever-more desperate need to improve its aviation infrastructure, and that would certainly be a benefit for us, too.

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