Brexit Starts Hitting Airlines

A few short weeks ago, the United Kingdom voted to leave the European Union. While I personally feel that this was a bad move, it was the will of the voters and is going forward. What seemed to be a simple vote for many people has begun to impact England and the UK very hard. Immediately following the vote, stocks dropped. Over the next few days the markets quickly recovered, but the one thing that did not, was the value of the British Pound.

England's currency has taken a huge hit, falling below values it has not seen since the 80's and is continuing to decline. Some analysts have even predicted that by the end of 2016, we could see the dollar at parity with the pound. While I think this probably unlikely, I do think that the pound will not recover anytime soon from this vote.

As the value of the pound falls off, airlines are starting to see some impact from the reduced buying power. Under that scope, Delta has just announced that it will be reducing capacity of its flights to and from the UK on 6 different routes. Delta is directly blaming this on the fall of the Pound and the Brexit vote. If the trend continues going forward, we may see more flights be cut from not only Delta, but many other carriers. Delta has a fairly small share of UK flights, American and United have much larger shares with the potential to see larger impacts on their routes.

UK based airlines lost an incredible amount of value after the vote, and in some cases CEO's have said that this exit has cost them expansion opportunities and subsequently reduced the number of jobs that companies are bringing to England.

The choice to leave the EU has undoubtedly had a massive impact on the economy of the UK in a wide ranging way that many people did not foresee. We can only watch now and see as all of the little unexpected changes come to pass. Only time will tell if the pound regains its former glory. For now though, the US Dollar has far more buying power in England than it has in a long long time, might be a good chance to take advantage of that.