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The impact of BREXIT on UK air transport

​In June 2016 the people of the United Kingdom voted in a referendum to leave the European Union (so called ‘Brexit’). This decision has implications for UK air transport, particularly in terms of traffic to and from the EU27.
IATA’s economics team has conducted analysis on both the regulatory options facing the UK, and the possible impacts on demand for air travel.

Regulatory options

IATA’s initial analysis paper in June set out several regulatory options that might be adopted with regard to the UK’s aviation relationship with Europe. These included:

  • Membership of the European Economic Area (EEA), which is the model currently followed by Norway and which ensures full access to the Single Market
  • Bespoke bilateral arrangements, akin to the bilateral agreements between the EU and Switzerland; and
  • WTO relationship (i.e. no special arrangement with the EU)

These options all have varying degrees of risk and complexity. For more detailed analysis see the paper The Impact of Brexit on UK Air Transport (pdf) 

Economic impact

Regarding the economic impact, HM Treasury expects Brexit to deliver an economic shock to the UK including a weaker currency, and slower economic growth and investment.

Given the inherent uncertainty about how Brexit negotiations will proceed, IATA and Tourism Economics have modelled the impact of three different Brexit scenarios from “hard” to “soft”. Under all three scenarios, the biggest aviation impacts are expected to be on traffic between the UK and the EU. Further details can be found in the October 2016 update of the IATA 20-year Passenger Forecast.

 

The “hard” scenario sees a clean break with Europe in both economic and aviation terms and involves the greatest disruption in both the short and the long run. Under such a scenario, we would expect the UK passenger market to be around 6% smaller in 2035 than in the “soft” Brexit case (290 million passengers to, from and within the UK in 2035 compared to 309 million in the “soft” scenario).

However, even under the “hard” scenario, the UK passenger market is expected to be 45.5% larger in 2035 than it was in 2015. This is consistent with an additional 90.7 million passengers travelling in 2035 compared to the 2015 level.

UK passenger numbers (2015)*UK passenger numbers (2035)*change (2015-2035, levels)Change (2015-2035, %)Average annual growth rate (2015-2035, % CAGR**)
Soft199.9m309.3m+110.0m55.2​%2.2%
Moderate199.3m301.0m+101.7m​51.0%2.1%
Hard199.3m290.0m+90.7​45.5%1.9​%
* Total UK market (to, from and within, origin-destination basis)
**Compound average growth rate

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