DESPITE predicting that a Brexit vote would not “have a material impact on our business”, shares in International Airlines Group (IAG), the parent company of British Airways, have plummeted by one-third since Friday. Shares in easyJet, the London-based low-cost carrier that relies heavily on open skies across Europe, have crashed just as dramatically. Even airlines at the heart of the European project are suffering: Lufthansa, Germany’s flag-carrier, is worth 17% less than it was before the referendum (see chart). Traders seem convinced that Britain’s divorce from Europe is bad news for the entire industry, whether due to the gloomy economic outlook, currency volatility, resurgent travel restrictions or the prospect of a full-blown EU breakup.

Their paranoia is understandable. Europe’s liberal aviation framework has benefited airlines and passengers immensely since the 1990s, boosting competition,...Continue reading