Home Business American, Delta, United Approach UK Travel Differently After Brexit Vote

American, Delta, United Approach UK Travel Differently After Brexit Vote

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The big three U.S. airlines are taking dramatically different approaches to U.K. service following the June 23 Brexit vote.

Delta said on July 14th that it will slash U.K. flying by 6% in its winter schedule. United said last week that it will make incremental cuts, including suspension of Dulles-Manchester, a cutback to Newark-Birmingham and the use of smaller aircraft on some Dulles-Heathrow flights.

On Friday’s American Airlines earnings call, President Scott Kirby declined to say what steps the world’s biggest airline will take in the U.K. “I don’t think we said anything about what we are going to do in the U.K.,” he said. “We haven’t said anything,” he reiterated.

The airlines’ levels of revenue from the U.K. do not seem to differ all that much. American gets about 6.3% of revenue from the region, United gets about 5.4% and Delta gets about 2.8%, according to analyst research. But Delta also owns 49% of Virgin Atlantic.

On the Delta call, President Glen Hauenstein said U.S.-London routes represent about 35% of all the traffic between the U.S. and Europe, and “London has a very, very high business component.”

All three carriers have trans-Atlantic joint ventures with European partners. However, Star Alliance, headed by United and Lufthansa, does not include a British partner.

Conceivably, Kirby declined to comment because British Airways and American still have not fully determined the exact nature of their combined response to Brexit.

For all of the big three U.S. carriers, a factor in the evaluation is that the U.K. has become more affordable for U.S. passengers, while the U.S. is less affordable for U.K. passengers. As Jim Compton, chief revenue officer,  said on the United call, “What we’re focused on is dollar strength relative to the pound.”

In U.K. markets outside of London, Hauenstein said, Delta will reduce off-peak frequencies and use smaller aircraft.  He cited Manchester as “a perfect example of a much higher U.K. point-of-origin market” with a lot of leisure departures. “Those would be the types of markets that we would look at to reduce,” he said.

Delta CEO Ed Bastian cited Florida and Las Vegas as destinations favored by U.K. leisure travelers.

Kirby said that about 4% of American revenue is derived from sales in British pounds, so “currency decline is negative.” However, over the next two years, while the U.K. is trying to figure out exactly how to separate from the U.K., Brexit could benefit American.

“There are a lot more consultants, lawyers, bankers that are likely to be flying back and forth {over the North Atlantic}, figuring out what the heck this means and what are we going to do,” Kirby said.

“Longer term, the issue is going to be obviously what happens with the U.K. economy, what happens with the banking industry in particular because that is a big component of revenue across the trans-Atlantic and what happens from a regulatory framework,” he said. “But near-term, I don’t anticipate an awful lot of issues.”

 

This article was written by Ted Reed from Forbes and was legally licensed through the NewsCred publisher network.

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