No-Deal Brexit May Have Negative Effect on European Airline Companies - Moody's

MOSCOW (Sputnik) - A failure by London and Brussels to agree on the terms of UK withdrawal from the European Union can have a negative effect on European airline companies, the Moody's Investors Service said in a report on Thursday.

"A no-deal Brexit could be significantly credit negative for European airlines… It could compound an airline's ability to increase yields, raise load factors and generate cost efficiencies in what is still a competitive market environment in Europe. Ultimately it could lead to cash flow and liquidity pressures," Moody's Vice President Jeanine Arnold, the author of the report, said.

Moody's believes that the United Kingdom and the European Union will reach a deal on "substantially" replicating the existing aviation agreements after Brexit. which means that the impact on the EU airlines' business profiles and financial metrics will be minimized, as well as the risks that the airlines may face.

"If risks materialise, financial implications could be severe in the short term, but modest in the long term because more time should allow comprehensive agreements to be reached and airlines to adjust their operations," Moody's posted on its website.

In June 2016, the United Kingdom voted in a referendum to leave the European Union and is expected to do so by March 29, 2019. However, both London and Brussels are concerned over a possible no-deal Brexit scenario, as talks on post-Brexit arrangements are hindered by a number of thorny issues, including the customs arrangements.