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Southend calling: Ryanair admits Brexit hasn't soured it on Britain

Southend calling: Ryanair admits Brexit hasn't soured it on Britain

Author: Martin Rivers

Published by
Forbes

4m read

14 June 4.51pm

Hargreaves Lansdown is not responsible for this article's content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest. Article originally published by Forbes.

Ryanair, Europe’s largest low-cost carrier, has sounded a resounding note of optimism about the UK aviation market by opening a new base at London Southend Airport - just one year after warning that Brexit would spell the end of cheap flights for Brits.

The airline says it will base three aircraft at the Essex airport in April 2019, just days after the UK formally withdraws from the European Union.

Its expansion marks a dramatic climb-down by Michael O’Leary, Ryanair’s chief executive, who campaigned heavily against Brexit before the referendum and then threatened to ground flights when the vote didn’t go his way. “I think it’s in our interests… that the aircraft are grounded,” he said in March, predicting that UK travelers will “re-think the whole Brexit debate” once they realize they are “no longer going to have cheap holidays in Portugal or Spain or Italy”.

Eight of Ryanair’s 13 new Southend routes are bound for Portugal, Spain or Italy. They will join the roughly 5,400 flights per month that the airline operates from the UK to the three countries.

O’Leary’s efforts to sway voters against Brexit had been, from a self-interested perspective, perfectly logical. Brexit is an administrative nightmare for airlines, just as it is for banks, manufacturers and most other UK companies. The break-up is forcing Britain to re-negotiate an array of sector-specific trade agreements – including open-skies treaties that enshrine the rights of EU-registered airlines, like Ryanair, to base their aircraft at UK airports. National ownership restrictions are another concern.

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However, Ryanair’s continued expansion in Britain puts the lie to O’Leary’s scaremongering. And Southend is just one example.

The low-cost carrier has steadily grown its UK presence since the June 2016 referendum, even as its boss publicly threatened to abandon the market. According to Innovata, the flight data provider, Ryanair scheduled 11,400 flights from the UK in the month of the referendum - a figure that rose to 11,900 in June 2017, and 12,700 in June 2018. That reflects year-on-year growth of 4.4% and 6.7%.

In a clear face-saving exercise, David O’Brien, its chief commercial officer, insisted yesterday that the Southend base “shouldn’t be mistaken as some kind of reversal of opinion on the merits of Brexit”.

He cited comparisons with the German market, which he said will account for almost one-quarter of Ryanair’s new capacity this summer - far outstripping the pace of growth in Britain.

But this is again misleading. Ryanair is growing much faster in the German market because it is starting from a much lower base. This month, Germany will account for just 7.9% of the airline’s European flights, versus Britain’s 18.2% share. Ryanair’s failure to capture more of the German market reflects cultural antipathy towards low-cost carriers in the country - something O’Leary is now trying to overcome through his investment in Laudamotion. Growth in the German market has nothing to do with Brexit.

It is true that the UK has lost the top spot on Ryanair’s network podium since the Brexit vote. In June 2016, Britain was the airline’s single largest market, accounting for 19.2% of all its flights. That figure has since dipped by one single percentage point, placing the UK in third place narrowly behind Spain and Italy. This may be what O’Leary was referring to in April 2017 when he said Ryanair is “pivoting its growth away from the UK”.

However, these trends reflect untapped opportunities elsewhere on the continent - not deteriorating ones in the already-mature UK market.

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The simple truth is that Ryanair has no intention of relinquishing its lucrative footprint in Britain. Doing so would be a gift to rival low-cost carriers like Wizz Air, which set up a UK subsidiary - its first in Western Europe - at London Luton Airport last summer, and has since grown the base to eight aircraft serving 45 inbound and outbound routes.

In contrast to O’Leary’s forebodings of a “real crisis” when the UK leaves the EU, József Váradi, Wizz Air’s Hungarian boss, has predicted an “orderly” Brexit accompanied by further growth of his Luton base.

Wizz Air secured a UK Air Operator’s Certificate in May and Ryanair expects to obtain one by the end of 2018. The licenses will ensure that both airlines can continue flying to and from Britain next year, even if aero-political negotiations with the EU stall. Whatever O’Leary’s talents as a businessman, his stance on Brexit is proving to be crude and disingenuous.

This article was written by Martin Rivers from Forbes and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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Article originally published by Forbes. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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