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Lufthansa Warns Brexit Will Hurt U.K. Airlines as EU Gets Tough

Lufthansa Warns Brexit to Hit U.K. Airlines as EU Plays Tough

Lufthansa Warns Brexit Will Hurt U.K. Airlines as EU Gets Tough
Boeing Co. 747 jets and Airbus A380 aircraft, operated by Deutsche Lufthansa AG, sit on the tarmac outside terminal A-plus at Frankfurt Airport, operated by Fraport AG, in Frankfurt, Germany (Photographer: Martin Leissl/Bloomberg)

(Bloomberg) -- Deutsche Lufthansa AG Chief Executive Officer Carsten Spohr expects France and Germany to take a hard line in Brexit negotiations concerning U.K. aviation, threatening to disrupt flight connections across Europe before new agreements take hold.

“Brexit means Brexit -- our industry won’t be exempt,” said Spohr, who has accompanied Chancellor Angela Merkel on state visits and discussed the matter with German, French and European Union officials. “The basic approach is for every industry to say ‘hey, let’s pretend that nothing has happened.’ That’s something the governments, and also the EU Commission, won’t go along with. You can be sure about that, from what I hear.’’

Lufthansa Warns Brexit Will Hurt U.K. Airlines as EU Gets Tough

Carsten Spohr

Photographer: Alex Kraus/Bloomberg

Services between the U.K. and EU nations could require new bilateral agreements once it leaves. In addition, British carriers that fly from one European state to another -- a right enshrined in the bloc’s founding principles, later developed into the so-called Common Aviation Area -- will probably require an operating license based somewhere on the continent. The U.K. is set to exit the single market two years after the divorce process is officially triggered on Wednesday.

It’ll be “virtually impossible” for governments to reach a comprehensive agreement in the time available for talks, said Spohr, who has led Germany’s largest airline since May 2014. That means there’ll be a transition period with likely disruptions as the sector adjusts to new rules, he said.

A German transport ministry representative recently told a group of lawmakers at a closed meeting in Berlin that Britain will probably have to forgo the status quo in some aviation arenas, and that new deals will need to be negotiated, according to a person who attended the discussion and asked not to be identified because the gathering wasn’t open to the public.

That could include the EU’s Single European Sky air-navigation initiative to unify the region’s airspace -- even though Eurocontrol, which is leading the drive and of which Britain is a member, is not an EU institution.

The U.K. will by definition be leaving the EU’s single air-travel market when it exits the bloc, the German Aviation Association BDL said in an emailed statement. The country’s air relationship with Britain would revert to an agreement struck in 1955, the group said.

‘Foreign’ Licenses

U.K. airlines including EasyJet Plc and British Airways owner IAG SA have called for measures to secure their existing free access. While IAG already has several European air operating certificates or licenses via continental arms such as Spain’s Iberia, Luton, England-based EasyJet is still in the process of establishing an AOC in an EU state.

The Airports Council International trade body indicated last week it would need an agreement as many as 18 months ahead of Brexit to avoid network disruption during a switch to new regulations.

A change could cut both ways. As an EU carrier, Dublin-based Ryanair Holdings Plc would require a license to carry on operating a handful of U.K. domestic flights. The company, which draws about 40 percent of its customers from Britain, says it might need to exit the routes entirely and needs a 12-month window to adjust timetables and ticket sales.

EasyJet shares closed down 1.3 percent at 998.50 pence in London, while Ryanair slid 1.6 percent to 14.27 euros.

Spohr is expecting Merkel and French President Francois Hollande to oppose special treatment for the industry, in spite of calls from the likes of British Transport Minister Chris Grayling to prioritize the airline sector in Brexit negotiations.

“The U.K. airlines say they want a shortcut,” said Spohr, who accompanied Merkel on a trip to China in June. “But that’s something Mr. Hollande and Mrs. Merkel won’t do.”

To contact the reporters on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net, Benjamin Katz in London at bkatz38@bloomberg.net, Birgit Jennen in Berlin at bjennen1@bloomberg.net.

To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Dalia Fahmy, Christopher Jasper