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IATA, the International Air Transport Association, has lowered its forecast for the number of UK passengers after the unfolding of the Brexit-scenario. The IATA foresees a 3-5% shrink in the number of UK passengers by 2020.

brexit
IATA Brexit forecast

IATA foresees a 3%-5% by 2020 in the Brexit-scenario versus the earlier forecast that did not include the Brexit.

The traffic forecasts are influenced by 2 factors:

  • 1. Economic activity
  • 2. Exchange rate of the sterling

 

UK GDP is expected to decline by 2.5%-3.5% by 2020. The exchange rate of the sterling pound is expected to result in a price elasticity of -0.7, which is expected to result in a net change of -2.9% in UK traffic. Another scenario expects a net impact of -1.7%. The remainder of the expected shrink can likely be attributed to GDP decline.

The direct economic impact is likely to see the UK air passenger market be 3-5% lower by 2020 than the no Brexit baseline.

The impact of the weaker sterling is expected to be small.

It is noteworthy that IATA expects the GDP decline as a structural one, rather than a temporary one. This means that  airlines such as a British Airways might be operating in a market that shows structurually lower growth figures.