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European airlines seek to reassure investors on Brexit

Tuesday, June 28, 2016 - 23:27

[BRUSSELS] Airline bosses sought to reassure investors on Tuesday, saying the industry's fundamentals remained strong and the effects on demand from Britain's vote to leave the European Union would be short-lived.

Shares in European airlines such as IAG, Ryanair , Lufthansa, Wizz Air and easyJet have tumbled since Britons voted in favour of "Brexit"on Thursday, but recovered some ground on Tuesday.

"We are going through a little bit of turbulence because of a seismic political decision," easyJet Chief Executive Carolyn McCall said at a meeting of industry group Airlines For Europe (A4E) in Brussels on Tuesday. "The demand environment is strong. It hasn't changed because of the vote," she said, adding that pressure on pricing was mainly as a result of easyJet and low-cost rival Ryanair adding capacity to the market.

"Does anyone seriously believe people in Europe will stop flying? I don't think so," Willie Walsh, boss of British Airways parent IAG said.

He said air traffic control strikes, which A4E said cost the European economy 9.5 billion euros (S$14.25 billion) over the last six years, were more problematic because they stopped the group from flying its customers to their destinations.

EasyJet said repeated strikes this year were also the main reason behind its profit warning on Monday.

Meanwhile the chief executive of Norwegian Air Shuttle , Bjoern Kjos, said the Brexit vote hadn't affected bookings, and that the weakness of sterling could encourage more people to travel to Britain.

IAG cut its 2016 profit expectations on Friday as a result of the vote. Walsh said corporate customers had been cautious ahead of the vote and that uncertainty would mean that caution continues a bit longer.

"Our expectation was, had it been a vote to remain we would have seen demand from corporates bounce back. But ultimately, people will understand what it means and then the world will get on again, so it's short term," he told Reuters.

Airlines and airports are now pushing for the UK government to negotiate to remain part of the single European aviation market. Should Britain not be able to agree that easyJet will set up an aircraft operator's licence in an EU country and Irish carrier Ryanair will establish a UK one, their CEOs said.

On a lighter note, Michael O'Leary, one of the most vocal campaigners for a 'remain' vote in the referendum, said Ryanair would play on both Brexit and England's exit on Monday night from the Euro 2016 soccer tournament with a new marketing campaign featuring the faces of leading 'Leave' advocate Boris Johnson and the now former England soccer coach Roy Hodgson.

"The ads will say ... 'Get another cheap flight to Europe for inspiration or to learn how to play football'," he said.

REUTERS

 

For more coverage of the EU referendum, visit bt.sg/BrexiT