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Uncertainty prevails in air cargo following Brexit vote

Jun 27 2016
The medium- to long-term impact of the historic “Brexit” vote held yesterday is still unclear, with industry insiders confident that little will change in the immediate future. As the news of the U.K.’s referendum on leaving the EU came in late on Thursday night, British and European trade groups underlined the importance of a pragmatic reassessment of trade relations and urged pro-trade choices despite the rancorous international atmosphere.

Corporations, meanwhile, rushed to assure nervous stakeholders that business could grow despite the challenges ahead and the resulting turmoil in the world’s markets today.

The International Air Transport Association (IATA) underscored the uncertain long-term impact the vote will have on the transportation market. According to its analysis, released on Friday morning, “it could be two years or more before these issues are fully resolved; prolonged uncertainty will influence both the magnitude and persistence of the economic impacts.” IATA’s analysis also anticipates lower international trade for the U.K. in the longer term, which will exert a negative impact on freight. IATA’s response also cited an especially concerning assessment by the U.S. Organization for Economic Co-operation and Development (OECD), which anticipates U.K. trade volumes falling by as much as 20 percent, depending on the scenario.

Heathrow Airport, on the other hand, said it hopes to harness Brexit momentum to finally push through its long-stalled expansion plans, arguing that a larger airport is central to the U.K.’s new positon in the world – one in which international trade will be even more important. “With today’s result, the case for expansion at Heathrow is stronger than ever before,” the airport posted on its website. “Only Heathrow can help Britain be the great trading nation, connecting all regions of the U.K. to the world. It is the keystone that connects businesses of every size to markets across the world as the U.K.’s only global hub airport.”

While the proposed third runway remains contentious in London itself, especially from residents living near the congested airport, the EU also had reservations, according to The Guardian. With the recent vote, planners said they are eager to move forward.

In the airfreight community, the mood was guarded as well, as it is too early to say how regulations and tariffs will evolve in the new political reality. International Airlines Group (IAG) – owner of British Airways, Aer Lingus, Iberia and Vueling – posted that its business would not experience, “a long-term material impact.” In the run up to the U.K. referendum, however, IAG noted that it had experienced a weaker-than-expected trading environment. “Following the outcome of the referendum, and given current market volatility,” the company noted, “IAG continues to expect a significant increase in operating profit this year, [but] it no longer expects to generate an absolute operating profit increase similar to 2015.”

The Freight Transport Association (FTA), one of the largest transportation groups in the country, warned that leaving the European Union would add to costs, restrictions and bureaucratic requirements imposed on moving goods in and out of Europe. The freight organization stressed the need for timely configuration of rules to reflect the new reality – with only two years to accomplish it. FTA Chief Executive David Wells stressed that Europe, “remains our biggest export market and the supplier of a high proportion of our imports. We cannot allow new bureaucratic burdens to hamper the efficient movement of exports heading for customers and imported goods destined for British consumers.”

Olivier Jankovec, director general of the Airports Council International (ACI)-Europe commented that “The EU and the U.K. are faced with the challenge of establishing a new relationship. While there is, for now, much uncertainty as to what will be the model, structure and modus operandi for this new relationship, it will be essential that it allows for the U.K. and EU aviation markets to remain fully integrated and based on totally aligned – if not common – rules.”

Jankovec concluded that, “We simply cannot afford to go backwards on what is now one of the backbones of our economies.”

By Lewis King, via Air Cargo World

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