Brexit business woes hit UK transatlantic connectivity

With as many as 305 flights a day scheduled between UK and USA this summer, the two nations remain well connected. However, there are growing signs that the UK’s referendum vote to leave the European Union in around two years is dampening business demand and creating an uncertainty that is forcing airlines on both sides of the Atlantic to reconsider their network plans.

United Airlines has already pulled its seasonal Newark – Newcastle route after just two summers of service and other US majors are reconsidering future growth into the US and planning stronger seasonal cuts than originally planned.

From the European perspective it emerged last week that British Airways was ending one of its two daily premium flights between London City and New York JFK from the end of October, while now, all-business class operator La Compagnie is to suspend its daily service between London Luton and New Newark from September 25, 2016.

The premium French carrier said that the decision “has been made in view of a new economic climate in Europe, fuelled by Brexit, and that has already affected various significant players within the airline industry”.

Despite receiving very positive feedback from both UK and US customers on the route and encouraging performance levels (a recent average load factor above 77 per cent since June 2016), La Compagnie said “route economics remained fragile”.

It will instead introduce a second daily service to its Paris-New York route from October as it instead focuses on growing in this longer-established market and one in which it better recognises the increasing market demand in both the corporate and leisure segments. However, it said its remains open “to reassessing the London landscape in the future”.

“We are the firmest believers of the UK’s unique market position, hence the decision to invest heavily in our London route for the past 16 months,” explained Frantz Yvelin, chief executive officer, La Compagnie.

“The result of the EU referendum has created an unprecedented level of legal and economic uncertainty for airlines that service Great Britain. Hence, our decision to accelerate development on our Paris – New York route where loads are already 80 per cent plus,” he added.

The closure of one of British Airways’ two weekday rotations between London City and New York will see its daily winter frequencies between the two cities fall from 13 to 12. The route, flown using Airbus A318 equipment via Shannon Airport in the Republic of Ireland (on westbound leg only), was popular with premium travellers, however this later departure did not enjoy the same US immigration pre-clearance approval to the day’s earlier departure and lost an important selling point for the flight.

British Airways confirmed that it “constantly evaluates the commercial performance of its entire global network and will increase or reduce our schedules as it feels appropriate,” but declined to outline the reason for the suspension. It does raise an operational question over the future of the A318 that serves the route as the two London City-based machines were specially acquired to serve this transatlantic market.

United Airlines said its decision to close its seasonal Newark – Newcastle link had been partly driven by the anticipated impact of the weaker pound on UK outbound travel post the Brexit referendum vote. Despite growing from five weekly rotations in summer 2015 to six this year, it said the route was “not profitable” and the changing operational landscape meant it could not be sustainable. The last of this year’s flights will depart Newcastle on September 6, 2016.

"This is disappointing news,” said Iain Malcolm, chairman of LA7, the combined authority of seven North East councils that part own Newcastle International Airport. “The region pulled together magnificently to secure a New York service and we have all worked extremely hard to make it work. But, while it is a blow to lose the service, especially given that numbers were up, the reasons are understandable."

Leg demand data from AirVision Market Intelligence from Sabre Airline Solutions shows that over 18.75 million two-way passengers flew on Transatlantic flights between the UK and US last year, up 6.1% on 2014 and the highest annual total in more than ten years since the 20 million threshold was almost surpassed in 2005.

This year’s preliminary data shows that Transatlantic demand between the UK and US was up 4.2% over the first six months of the year, a rate that would deliver annual numbers well beyond the 19.5 million passenger figure. This average growth rate was actually exceeded in July 2016 (the first full month since the Brexit vote) when traffic was up 5.0% versus the same month last year, but the airlines are obviously starting to see declines in longer-term booking patterns for the months ahead.

Flight inventory data from OAG Schedules Analyser shows that this summer’s timetable between the US and US is the biggest of the last ten years with over 61,000 flight departures, up a massive 11.6% on the summer 2015 offer. However, currently published schedules for winter 2016/2017 show a 1.5% decline in departures versus winter 2015/2016, with just under 34,000 flights.

Richard Maslen

Richard Maslen has travelled across the globe to report on developments in the aviation sector as airlines and airports have continued to evolve and…