Ratings agency Moody’s has predicted that UK air transport growth will slow significantly over the next two years due to the effects of Brexit.
From a previously forecast 6%, Moody’s estimates that passenger growth could fall to 3% through this year and next, as a weak pound hits demand for foreign travel.
EasyJet and IAG, parent of British Airways, have both identified Brexit as a headwind, though only the former carrier reports in sterling.
Nonetheless, sterling receipts account for most of both airlines’ sales so a weak pound would increase costs for dollar-denominated items such as aircraft leases, spare parts and certain maintenance.
That said, ratings agencies are unreliable forecasters and, thus far, there is little evidence of a currency effect on consumer demand.
Quite the opposite, in fact: In the third quarter of 2016 (after the Brexit referendum), British travelers made 8% more journeys abroad than the previous year and also spent an average of 8% more each visit.
Those figures sustained growth seen in the previous year, though it is possible that consumers will tighten their belts in 2017, especially if inflation – driven by costlier imported goods – begins to bite.
Moody’s also identifies a longer-term threat to demand should Britain leave the European Common Aviation Area, as this would create bureaucratic and operational hurdles for travelers and airlines.
Other Brexit-related disincentives for European travel might include steeper mobile phone charges and an end to subsidized medical treatment on the continent.
There are, for instance, more than 300,000 British people living in Spain. Often retired, these expats are based in the country mainly for its sun and cheap, excellent medical care.
Spanish citizens living in the UK benefit from a reciprocal arrangement, minus the good weather, but the future of such deals is now uncertain following Britain’s decision to leave the European Union.