Iberia is one of many airlines that may lose out after Brexit. Picture: REUTERS/RAFAEL MARCHANTE
Iberia is one of many airlines that may lose out after Brexit. Picture: REUTERS/RAFAEL MARCHANTE

Dubai — Measures to allow flights to continue between the EU and Britain in the event of a disorderly Brexit are unlikely to be enough to avoid some disruptions and cancellations, the head of the world’s leading air transport group warned on Thursday.

Britain is set to leave the EU on March 29 but, with less than three months to go, UK Prime Minister Theresa May has failed to gain support at home for an exit agreement, increasing the prospects of a “no-deal break” in relations.

“We are a bit worried because the first guidelines have been issued and, I think, represent a constraint on traffic,” said International Air Transport Association’s (IATA) director-general and CEO Alexandre de Juniac. He said the measures were based on traffic between the EU and Britain in 2018, and so did not account for planned increases in flights this year.

This would mean, in the event of a no-deal Brexit, flights would have to start being adjusted or even cancelled once traffic reached the 2018 ceiling on which the measures were based, he said. “I hope we will be able to convince UK and European authorities to be more flexible,” he told reporters in Dubai.

De Juniac also said he did not believe flights would be immediately grounded if the EU and Britain failed to reach a deal before March 29.

Spain in the spotlight

Brexit blues also threaten British Airways (BA) parent IAG. Half of Spain’s domestic passengers and a quarter of the total could be grounded if IAG cannot show that its Iberia and Vueling arms are owned by EU investors.

One of the licensing conditions for operations by EU carriers is that they be controlled by nationals of member states, or the states themselves, something London-based IAG has said it complies with via its own Spanish registration and the vesting of Iberia and Vueling voting rights in local holding companies.

The EU has said IAG needs to verify that the structure is compliant with requirements before Britain quits the bloc on March 29 or risk seeing its right to operate some services terminated. With the group itself headquartered at Heathrow airport and 21% owned by Qatar Airways with extensive UK and US shareholdings, that may not be straightforward.

IAG reiterated on Wednesday that it remains confident it “will comply with the EU and the UK ownership-and-control rules post-Brexit”, following extensive engagement with all relevant regulators and governments.

Vueling, Iberia and Iberia Express together had a 47% share of Spain’s domestic passengers in March, according to the latest report from the ministry of public works. Combined with BA and Irish unit Aer Lingus, the overall market share was about 25%.

Tourist economy

This gives IAG leverage, with Spain relying on Iberia for global business links and Barcelona-based discounter Vueling vital to the Catalan economy. Spain is also more dependent on aviation than most countries since tourism accounts for in excess of 10%  of GDP and close to 13% of employment.

The Spanish Aviation Safety and Security Agency (AESA), which reports to government, may find itself in the unenviable position of having to rule on whether Iberia and Vueling flights be grounded, since competence for evaluating compliance rests with national authorities, the European Commission said in an e-mail to Bloomberg.

Even if AESA rules that Iberia and Vueling are sufficiently Spanish to keep their licences, competitors such as the Air France-KLM Group and Deutsche Lufthansa could object and the commission itself could intervene.

Spain’s public works ministry remains in talks with the EU and transport companies in the run-up to Brexit, it said in an e-mail, without commenting directly on the situation regarding IAG.

The airline has been warned that its plans to continue flying in and around Europe after Brexit do not work, the Financial Times reported earlier, citing a senior EU official it did not name. Spain’s El País said last week that IAG’s defence that Iberia is controlled by department store operator El Corte Inglés is under close scrutiny.

Reuters, Bloomberg