Britain, which by not adopting the Euro and not participating in the Schengen travel zone, was the most independent member of the EU, has voted to invoke Article 50 of the Lisbon Treaty and leave the EU. This certainly provides some uncertainty in the near term, as Britain will now need to make arrangements for economic and trade relationships bi-laterally, as they once were. This certainly shouldn’t become a problem, and Britain may, like Switzerland, be able to reach a free trade agreement with the EU without becoming a member.
Of course, there may be some short-term panic regarding the potential implications of Brexit, driven by speculation and fear-mongering, in the near and long-term, there shouldn’t be a substantial impact on aviation. Rolls-Royce will still be the sole provider of engines for the A350 and A330neo, as there are simply no alternatives in the near-term, and it would be too costly to change vendors in the long-term. And why would Airbus want to anyway? The reason that vendor choices are made are primarily due to capability, quality, and price. Without those fundamentals, OEMs, whether Airbus, Boeing, Bombardier, Embraer, COMAC, or Irkut would choose someone else.
Does Britain have an aviation industry with multiple world-class vendors? Yes. Will they suddenly find themselves without applications? Of course not. There is no reason to panic. Will Airbus confine itself to EU vendors and exclude program participation from UK firms in the future? Not if it wants to sell aircraft to IAG and British Airways or Virgin Atlantic. Will Airbus confine itself to French and German companies? Unlikely. They have global markets and a global supply chain, in which the British aerospace industry has a firm foothold and world-class players.
In terms of airlines, we don’t expect London to shrink into a destination nobody wants to visit. While some financial activities for the EU may try to move from the London, it will be difficult to replace London as the financial center of Europe. And Britain, free of EU regulation, could optimize its financial regulations to attract leasing companies and other financial institutions to replace those who leave, and give Ireland a run for its money.
London Heathrow isn’t going to lose traffic, and will still need a third runway for expected traffic growth. London will remain a key economic center and the natural connection between English-speaking North America and Europe from a business perspective. Britain’s stature in the world is not dependent on EU membership, and airlines won’t stop flying to Heathrow.
The Bottom Line
The Brexit panic in the markets and media is overdone. Yes, a change in EU membership has occurred. But Britain retained its own currency and was only half-in anyway. Bilateral treaties will be formed, and life will go on. The only ones really impacted are the politicians in Brussels, whose empire is0going to shrink after a reality check by British citizens who said enough is enough. Aviation will be just fine, thank you.
Finally, some cool headed comments!
1. What happens when Scotland leaves?
2. What happens when Frankfurt or Paris become the financial center(s) of Europe?
3. What happens to airlines based in the UK that are primarily European (eg. Iberia)
4. RR is primarily UK. GE/Safran is US/French. If I were the EU, who would I choose on a 50/50 call?
All well and good if the nations and leaders involved behave in the calm, reasoned manner as does this article: BUT it is in the publically stated interested interest of the EU to make this exit as unpleasant as possible for the UK, if only to demonstrate to other —ITS that the pain is excessive. Specifically that means endless delay in agreeing to a new trade deal (Canada as an example is at the 10 year mark) and a deliberate placement of the UK at a low priority in negotiations. And then there is of course the whole issue of the Celtic fringe and its renewed ambitions for change.
But I will agree that the impact on aviation will be miniscule – this age finance and aviation are virtually the only British products desired by EU members and export licenses would naturally be provided for Broughton etc.
The EU doesnt decide Airbus purchasing. Italy isnt in Airbus consortium ( it is closer to Boeing) even thought it will be in EU and UK out. US supplier Spirit supplies Boeing and Airbus from factories in UK and USA .Rolls Royce is a worldwide company much as CFM is.
The EU is far more integrated in agriculture than in industry, so that sector will have bigger changes.