Planning for an uncertain outcome.
There is significant uncertainty around the way in which Brexit will affect the airline industry. However, we believe there are many reasons why a drastic change to the UK aviation market would neither be in Europe or global stakeholders' best interests. This is not to say individual airlines and countries will not seek to maximize their own benefits in any negotiation: they clearly will. But, the bigger picture is that the global airline market has an interest in making the post-Brexit transition as seamless as possible.
It is important to remember the liberalisation of the European aviation market in the early 1990s revolutionised air travel across the continent. Since then, the number of journeys within the EU has soared: scheduled passengers carried between the UK and EU increased from 69 million passengers in 1996 to over 130 million in 2015. More strikingly, the passengers carried by UK based airlines to Europe increased eight-fold between 1993 and 2014: from 9.9 to 78 million and analysis by the transport team at KPMG indicates the top eight UK based airlines generated over £10.5 billion of revenues from travel between the UK and EU. Agreements between the EU and major markets like the US have further driven choice outside EU borders.
As we set out in the first chapter of this document, the Brexit announcement hit global airline share prices significantly. Internationally, this is likely to be driven by general economic uncertainty. But airlines took a disproportionally high value reduction compared to other industries.
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