The Travel Adviser: Brexit revisited

The airfares are low, the tourism infrastructure first rate and the options for a memorable vacation, limitless.

By
July 10, 2016 01:59
Dawn breaks over London as votes are counted for the EU referendum

Dawn breaks over London as votes are counted for the EU referendum. (photo credit: REUTERS/TOBY MELVILLE)

 
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It was Henny Penny, and contrary to my British friends he is not, nor ever was, a member of the British Labour Party, whose wild rantings “The sky is falling, the sky is falling!” were first chronicled by the Grimm brothers in a famous folk tale. There has now been a decent interlude since a majority of citizens of the United Kingdom chose in a referendum to opt out of the European Union. Leaving aside the political ramifications, it’s the travel element that elicits many enquiries.

First and foremost, as the financial markets learned, the process to exiting the EU is both lengthy and clouded in uncertainty regarding how long it will take. What is known is that nothing will be done before 2018, so in the short and medium term, cries of woe should be shelved.

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The naysayers are emanating from some of the leading travel organizations, concerned that Britain leaving the EU will be disastrous for the tourism industry. Monarch Group, a large British consortium, asserts that the Brexit (British exit from the EU) will be negative for UK travel, believing it will inevitably lead to increased costs for the consumer.

Poppycock! The exact process for the UK’s withdrawal is uncertain under EU law, although it is generally expected to take longer than two years. Article 50, which governs the withdrawal, has never been used before. The timing of leaving under the article is a strict two years, although extensions are possible, once Britain gives an official notice – but no official notice seems forthcoming until after a new British prime minister is selected later this year.

The reality is the Brexiteers have won. They are leaving the EU. Will those much-derided warnings prove justified, or will the arguments for Brexit be vindicated? The biggest long-term effect on travelers will be a financial one. If Britain prospers, as the leaders of the Brexit movement promised, then they will be richer, the pound is likely to strengthen and while more Brits will be able to afford holidays, the price for tourists will increase. If the economy stutters, taxes rise, jobs become less secure and the pound falls, then the tourist benefits from the better exchange rate and travel will be much more affordable.

Astute readers will point out that the euro and dollar exchange rate with the pound has shifted historically based on dozens of factors. Exchange rates float freely against one another, which means they are in constant fluctuation. Currency valuations are determined by the flows of currency in and out of a country. A high demand for a particular currency usually means that the value of that currency will increase. Exchange rates are determined by basic supply-and-demand factors. The demand for a currency is influenced by factors, such as interest rates, economic growth and inflation. While the initial reaction to Brexit had the pound hitting 30-year lows, sanity was returned quite rapidly as the pound rose in strength against the world’s currencies.

So anyone trying to predict what the currency exchange rate will be when Britain has exited the EU should politely be told “Bollocks.”

The future of borderless travel It seems certain that once they have completed the leaving arrangements, British citizens will not need visas to travel into the EU on holiday, though they will, like now, have to pass through passport control when they first enter. Nor will the UK demand visas from EU members or Israeli or US passport holders. A greater unknown brought about by Brexit, a factor that only recently is being discussed, is the impact it will have on the rest of the EU.

If Brexit leads to a more radical disintegration of the union; and it may, then the present arrangement, under which controls for those crossing borders between most of the member states have been removed, will presumably end and border checks might be re-introduced. It may take a few years, but it is certainly a possibility. Terrorist bombings and shootings at both Brussels and Istanbul airports will lead to revised security procedures. The reason Brexit passed, albeit by only 52% of the voting public was primarily in opposition to the liberal immigration laws promulgated within the EU.

The glaring hole in airport security renders them soft targets for anyone entering. Sadly, most airports have avoided basic tenets of responsibility by providing only minimal security when one walks into an airport. This endangers one’s safety in dozens of airports throughout Europe and the US. In most instances, anyone can walk into an airport, avoiding any x-ray machines or police enquiries, and create havoc. As the British would say, it’s a real cock up.

Will UK or European borders change? No. Israelis, like Americans must still present a valid passport when entering European Union member countries as well as Britain. When the dust settles and Britain is extracted from the European Union, it is travelers from European and UK countries who may experience more hassles at foreign borders.

One area of uncertainty is Northern Ireland. A member of the UK, Northern Ireland shares a restriction- free border with the Republic of Ireland now.

No passports are required for transit between the two countries, which, though both were members of the European Union, use different currencies.


With Britain’s withdrawal from the European Union, the Ireland and Northern Ireland border will now represent a frontier between the UK and the European Union, though what form that would take is unknown.

Will the Brexit lead to higher airfares? The huge success of low-cost carriers and the impact they have made on reducing fares and opening up new routes was enabled by the EU’s removal of the old bilateral restrictions on air service agreements and the introduction of more open competition on routes between countries. Now that Britain is leaving the EU, arrangements will have to be made for new air service agreements if British airlines like EasyJet are to continue operate freely all over the EU, and Irish airlines, like Ryanair, or German airlines like German Wings, are to continue to fly in and out of the UK without restrictions. Supply and demand is what determines the prices of tickets regardless of what impediments local authorities try to apply. If the EU tries to punish British Airlines with increased taxes, it would quickly be characterized as a damp squib, as the UK would respond in kind.

EasyJet did release a warning on profits in response to the referendum, stating that while performance would not be damaged in the long run, the vote added to existing problems such as canceled flights. They asserted they would concentrate on cutting costs to support profits. Aviation veterans scoffed at their linking their decrease in profits to Brexit, pointing out that the terrorist attacks throughout Europe were the true cause for reduced air travel.

EasyJet says it has been preparing for the eventuality of a Brexit and that it expects the result to have no material impact on its strategy. The airline’s statement said, “EasyJet’s initial focus will be to accelerate discussions with UK and EU governments and regulators to ensure that the UK remains part of the single EU aviation market. This would enable EU airlines to fly freely within the UK and between the UK and EU, allow UK airlines to fly freely across Europe, and would ensure that consumers continue to benefit from low fares.” Staying in the single EU aviation market “would mean EasyJet and other airlines can continue to operate as they do now”.

Whether the wide choice of routes and historically low fares we now enjoy will continue will depend on the results of those negotiations, but if there were a dramatic change I’d be gobsmacked.

What about lower compensation for delayed or canceled flights? The remarkably high levels of compensation that passengers are entitled to under the EU directive on flight delays and cancellations are enshrined in UK law. No doubt British airlines will lobby hard to get the protection watered down after they have left.

Nevertheless, flights in and out of EU countries and on EU airlines will still be governed by the directive, though you could have a much harder time claiming compensation, and might have to go to court in another country to win your case. However, the dire prediction that passengers might end up with not only no compensation, but that they could also lose their entitlements to food and drink and overnight accommodation in the event of long delays, seems to be an unlikely outcome to me.

Whether you are traveling this summer to Europe or planning a fall trip to the UK, you’ll find that while there are many questions as to how Brexit will affect the EU and the UK, there are no clear answers. If the euro and pound drop, you’ll find your purchases go further. The majority of the continent will be clogged as usual this summer with festivals and fiestas, museums and music, tourists and transients all enjoying the bounty offered them.

The airfares are low, the tourism infrastructure first rate and the options for a memorable vacation, limitless.

In observing the overall tourism industry one has to deal with war, pandemics, terrorism and economic challenges. The one sure thing is that people will still travel. It is business as usual – or as the Prince of Wales might intone: It’s hunky-dory.

The writer is CEO of Ziontours, Jerusalem. For questions and comments email him at mark.

feldman@ziontours.co.il

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