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Lufthansa warns Brexit to hit UK airlines

Mar 28 2017 14:12
Bloomberg: Richard Weiss, Benjamin Katz and Birgit Jennen

London - Deutsche Lufthansa chief executive officer Carsten Spohr expects France and Germany to take a hard line against the UK aviation industry in Brexit negotiations, threatening to disrupt flight connections across Europe.

“Brexit means Brexit - our industry won’t be exempt,” said Spohr, who has accompanied Chancellor Angela Merkel on state visits and discussed the matter with German, French and EU officials.

“The basic approach is for every industry to say ‘hey, let’s pretend that nothing has happened.’ That’s something the governments, and also the EU Commission, won’t go along with. You can be sure about that from what I hear.’’

Flights between EU nations are regulated by the Single European Sky treaty and the U.K. will likely need a new agreement once it leaves the bloc.

In addition, British carriers that fly from one European state to another will probably require an operating license based somewhere on the continent. The UK is set to leave the common market two years after the divorce process is officially triggered on Wednesday.

It’ll be “virtually impossible” for governments to reach a comprehensive agreement in the time available for talks, said Spohr, the CEO of Germany’s largest airline. That means there’ll be a transition period with likely disruptions as the sector adjusts to new rules, he said.

A German transport ministry representative recently told a group of parliamentarians at a closed meeting that Britain would likely lose its membership in the Single European Sky agreement, and that a new deal would then need to be negotiated, according to a person who attended the discussion and asked not to be identified because the gathering wasn’t open to the public.

No shortcuts

UK airlines including EasyJet Plc and British Airways owner IAG SA have called for the Britain and the EU to secure existing free access. While IAG already has several European operating certificates via its continental arms such as Spain’s Iberia, Luton, England-based EasyJet is still in the process of establishing an air operating certificate in an EU state.

The Airports Council International trade body indicated last week it would need an agreement as many as 18 months ahead of the exit to avoid network disruption during a switch to new regulation. Ireland’s Ryanair is asking for a 12-month window to adjust its routes and ticket sales once the rules are decided.

A change could cut both ways. As an EU carrier, Dublin-based Ryanair would require a license to operate its handful of UK domestic flights. The company, which draws about 40% of its customers from Britain, has said it may have to forego its intra-UK routes after Brexit.

EasyJet shares fell as much as 1.5% to 997 pence in London trading, while IAG dropped 0.8% to 530 pence. Ryanair slid 1.3% to €14.32.

Spohr is expecting Merkel and French President Francois Hollande to oppose special treatment for the industry, in spite of calls from the likes of British Transport Minister Chris Grayling to prioritize the airline sector in Brexit negotiations.

“The UK airlines say they want a shortcut,” said Spohr, who accompanied Merkel on a trip to China in June. “But that’s something Mr. Hollande and Mrs. Merkel won’t do.”

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lufthansa  |  uk  |  travel and leisure  |  brexit
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