Brexit Does Impact the Global Aviation Market, but to What Extent?
Well, it happened. Great Britain went through with the somewhat-unexpected and voted to exit the European Union (EU), coining the term 'BREXIT’ along the way. Obviously, this move will have impacts throughout the European market, ripples of which we have yet to even see the long-term effects of. Aviation and airlines represent a market that, although relatively small in terms of percentage of GDP, have an enormous impact on the future viability of Britain’s economy.
U.S., and presumptively all North American airlines saw immediate impacts on stock values upon commencement of BREXIT in June. This is largely due to the Great Britain Pound being weakened as it will no longer fall under the protective umbrella of the EU.
The major U.S. airlines all took hits right off the bat, which is not in dispute. But the pundits perhaps were writing off the cuff and in the heat of the moment about an epidemic that maybe just…isn’t. Taking a quick glance at the NASDAQ for American Airlines (AAL), who took the worst beating of the U.S. brands, you can clearly see their low point in the last twelve months struck on June 27th, a scant four days post referendum vote. But in spite of all the hype, American’s stock has rebounded steadily since then. Competitor Delta Airlines showed a similar recovery.
Of course, there is another market strategy which has been employed with some degree of success: just don’t fly to England! That has been the mantra of Hawaiian Airlines, and it largely has worked. This strategy is fairly inclusive to Hawaiian Airlines though, as their lion’s share of the market is the Pacific, not that the Atlantic. This same strategy will not suffice for the majors, particularly the goliath from Texas, American Airlines, who holds an alliance partnership with British Airways.
Outside of the transportation market, there is another very notable player with large stakes in the game: Airbus. Airbus Group is an absolute giant in the aerospace and defence market, encompassing three distinct divisions. Headquartered in the Netherlands with a main office in France, Airbus is truly a multinational corporation, employing manufacturers all over western Europe. One such plant happens to lie in Broughton, Whales, where the wings for the gargantuan A380 are built. Airbus has been a company that has traditionally leveraged the EU very well as the EU cleared the way for burdensome mounds of paperwork, as well as protective tariffs between countries. In this way, the independent nations could all cash in on the collective value of Airbus despite geographic boundaries. BREXIT will undoubtedly reinstate tariffing and slow down the flow of international commerce through the close quarters of Western Europe.
What the resulting impacts are on the global aviation industry from BREXIT is anybody’s guess right now. The American airline companies that service Europe dipped but have steadily climbed away from their positions in June and July. Airbus Group appears to be on the rise as well. However, notable airlines from the United Kingdom, such as easyJet, have tanked and are not showing much success now. This could be a case where the major international carriers adapt and work around the UK, but those in the UK might be on an untenable pathway for future success. Only time will tell.
This will be a topic which undoubtedly will be looked at again just out of the shear enormity of the decision, and to what degree aviation truly does effect global commerce. It will be particularly interesting to see just how Airbus decides to manage manufacturing that currently resides in the UK. This will likely get very interesting in the next year or so as their medium- and long-term plans take shape.
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