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Phew! UK and US finalise flight deal to keep planes flying after Brexit

Alanna Petroff
·Senior Economics Correspondent at Yahoo Finance UK
British Airways is one of the many carriers owned by <span>International Airlines Group</span>. Photo: Roberto Machado Noa/Getty Images
British Airways is one of the many carriers owned by International Airlines Group. Photo: Roberto Machado Noa/Getty Images

Frequent flyers and airline operators can breathe a deep sigh of relief after the UK’s Department for Transport announced it sealed a new ‘open skies’ deal with the US to keep transatlantic flights in the air after Brexit.

The UK government said it agreed a new bilateral flight deal with the US, alongside deals with eight other countries, including Israel, Iceland and Morocco, as it prepares for life outside the European Union.

Currently, Britain relies on EU flight agreements to keep planes flying throughout Europe and 17 other non-EU nations, which includes the US. But EU and UK officials acknowledged the risk that countless flights could be grounded after Brexit unless the UK signed new, independent aviation agreements. It’s still working on a deal with Canada and seven other nations.

“It’s critical that Britain maintains full access to international aviation markets so it can continue to develop its global trading links,” said Willie Walsh, the CEO of International Airlines Group (IAG.L), which owns British Airways and Iberia. “This agreement is a significant positive development which we welcome.”

The agreement indicates UK authorities are working quickly to avert the disaster scenario of grounded and delayed flights after Brexit.

“From the passenger perspective nothing has really changed and the UK has effectively negotiated an agreement that is no better than what it had previously, but importantly it does remove doubt and safeguard flights between the UK and US after Brexit,” said Richard Maslen, director at Maslen Aviation Consultancy.

American Airlines (AAL) and Delta (DAL) are just two of the many carriers that rely on lucrative UK-US routes to boost their profitability.

“With so much uncertainty and mixed messages over the likely impact Brexit will have on air services, this does provide a little clarity for business [and] leisure travellers planning to head across the US after March 2019,” Maslen said.

But a deal to keep tens of thousands of flights moving between the UK and EU each month is not yet in place.

“There is a willingness on both sides to find a solution. Whilst that’s been a sentiment put forward by various authorities, there is still nothing concrete on that front,” Mark Simpson, an airline analyst at Goodbody Stockbrokers, told Yahoo Finance UK.

Even still, Brits and UK-based airlines such as Jet2 and EasyJet (EZJ.L) should still expect higher costs and additional risks after Brexit, warned Simpson.

“When it comes down to it, the Brexit risk is there,” he said, noting that a lower UK pound means higher costs for airlines that have to buy their fuel and aircraft in US dollars. That could mean lower airline profits and higher ticket prices for passengers.

The UK pound (GBPUSD=X) is down about 15% against the US dollar since the Brexit referendum in mid-2016. It was slipping again on Thursday to below $1.28.