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European airlines are facing a “precarious” transition as uncertainty surrounding Britain’s exit from the EU intensifies in the industry.
Kenny Jacobs, Ryanair’s chief marketing officer, said he feared “hardcore Brexiters” were putting in doubt a draft transition deal that would allow airlines to continue flying freely between the UK and EU.
UK Prime Minister Theresa May had agreed to the draft transition in March, but Mr Jacobs feared pressure from pro-Brexit MPs would lead to the deal not being signed. This would mean there was no UK-EU agreement in place after Britain’s exit.
If this happens, Ireland-based Ryanair would lose rights to fly freely into the UK and its few intra-UK routes could also be impaired.
From the UK’s perspective, Britain-based airlines including British Airways and Virgin Atlantic would also lose rights to fly freely into the EU and US.
Ryanair chief executive Michael O’Leary has previously warned about the threat to airlines from Brexit.
In the company’s full-year results for 2016-17, Mr O’Leary said: “Until we get clarity over the final terms of the UK’s future trading relationship with the EU, there must be significant uncertainty over flights between the UK and the EU for a period of time from March 2019 onwards.”
Mr Jacobs’ warning comes at a difficult time for European carriers. Air France-KLM is looking for a permanent chief executive after unions forced the resignation of Jean-Marc Janaillac this month (May). Strikes have cost it more than €300m.
In 2017, three mid-size European airlines went bankrupt: Alitalia, Air Berlin and Monarch, while BA, which took a 4.6 per cent stake in Norwegian Air, has had two proposals to buy the airline rejected by the board.
Mr Jacobs, speaking on the fringes of the CAPA Airline Leader Summit in Ireland, said he wished President Emmanuel Macron of France “godspeed” with his efforts to reform French institutions, including Air France-KLM, of which the state owns 14 per cent.
Ryanair could face ownership issues after Brexit too. EU regulations say that the bloc’s airlines should be majority-owned by EU nationals. According to the latest estimates, Ryanair is 60 per cent owned by EU nationals but that drops to 40 per cent once UK shareholders are excluded.
Mr Jacobs said this was not a “straightforward” problem given the airline’s significant UK shareholders, who were considering options including moving their holdings from London to Frankfurt and even selling them down.
In March, the Financial Times reported that UK-based airlines would suffer a similar problem. Under the terms of a post-Brexit bilateral deal, the US would expect British airlines to be majority-owned and controlled by British parties. British Airways, Virgin Atlantic and Norwegian UK have large foreign shareholders.
Willie Walsh, chief executive of IAG, owner of British Airways and Iberia, said the company would not face any ownership issues as a result of Brexit. But Mr Jacobs said Ryanair was “more realistic” than Mr Walsh.
