The Brexit Effect: What you need to know

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June 23, 2016, and Britain wakes up to the reality that 52 percent of the population have decided to turn their back on a union they have been an active part of for several decades. Despite stark warnings from academics, economists and business leaders the vote was cast to leave the EU – throwing the country, Europe and the world into turmoil. 

Three months since the vote and the impact has been relatively light. Contributing factors could be said to be apathy or a bit of regression, with no apparent signs of the forecasted financial and social apocalypse. Public disheartenment for those keen to remain aside, it may even be the case that a fresh hope has taken hold across the UK, with many previously glum pro-Europeans accepting the fate with measured optimism.

The airline industry as a whole has reported little in the way of negative repercussions. The most recent International Air Transportation Association (IATA) publication acknowledges uncertainty, but suggests that the industry has not panicked, as such.

Finnair Cargo News caught up with John Ward from Air Liaison, Finnair Cargo’s General Sales & Services Agent (GSSA) responsible for the sale of cargo capacity for a select group of commercial airlines in the UK and Ireland. We asked Ward about both the impact of Brexit on the industry as well as contingency plans in place. His outlook was encouragingly optimistic:

“We have not seen an obvious reaction in the industry to the Brexit decision. My personal view is that whether total cargo volumes from the UK increase or decline, it’s possible that increased border controls will result in a modal shift from road transport to air transport, which would be positive for the airline industry in general, and specifically for Finnair Cargo due to the (trucking) road transport links between London and Helsinki.” 

Confidence like this from an industry insider only bolsters the case put forward by select academic figures in the UK, who collectively predict a change of how people and goods may travel, but cannot commit to either a positive or negative slant on it. However, addressing the current economic impact, Ward’s response was a little less encouraging:

“The IATA has not yet released its latest figures regarding UK flown export data. What we do know is that total tonnage for June and July 2016 has fallen by 8 percent versus the same period last year. The per-kilogram yields have fallen by 19 percent over the same period, which has resulted in a year-on-year revenue decline of 25 percent (in euros). This downward trend was already evident prior to the Brexit vote (January thru May -5 percent tonnage, and -19 percent revenue) but has been sharper since June.”

Ward is quick to reassure:

“Passengers are still traveling and goods continue to be purchased from overseas, so aircraft still need to fly. There is no need to panic.”

Going on to highlight a contingency plan should the worst-case-scenario happen, Ward runs through how cargo and carriers in general should prepare:

“Economic downturns could have an impact on passenger numbers, and cargo volumes may also be affected, but one expects that if exports fall, then imports would increase. There could also be a shift in the countries that we export to and import from as a result of new or expiring free-trade deals. I expect the sum of all parts (imports and exports) to be fairly stable and at similar levels.”

Encouraging indeed. Yet reflective of the agility of the air cargo business and its ability to continually evolve to accommodate global traffic flows. Assuming Britain exits the single market due to the inability to get a deal on freedom of movement, it raises the question of whether cargo providers can protect the interests of their shareholders, and more crucially the future of their operations, through planning. 

“Changes that may affect the industry, such as the origin and destination of passenger and cargo flows brought about by freedom (or otherwise) of movement, will occur slowly. Professional, flexible and forward-thinking organizations will be well-placed to enjoy success during what will be challenging times,” notes Ward.

That being said, uncertainty still hangs over the industry – as quick to respond as it may be – and many have questioned whether the government will even be able to trigger the now infamous Article 50, Ward’s parting shot warns those at the helm to acknowledge their responsibilities: 

“I do think Article 50 will be triggered. I hope that the UK government and the European Commission will first take necessary measures to maintain stable economic situation before this happens.

”Long periods of global recession and subsequent austerity have already forced the industry to optimize costs, with steps to streamline workforces and workflows. The key seems to lie in investment in IT solutions that maximize operating capacity. The lesson to take home here is to ensure that a company’s cargo operation is ready and able to scale upward when required to do so, and at short notice."

Text By Daniel Coll
Illustration by iStock 

Published September 22, 2016

Category: Market updates, Economy

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