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American Adds to Glum Europe Travel Forecast

Following recent announcements from Delta and United that they would cut back on flights  between the U.S. and U.K., American has hinted that it, too, is expecting diminished demand to Europe over the coming months.

American president Scott Kirby said he expects double-digit revenue declines in the third quarter following a 6% decline in revenue in April, May, and June.

Mind you, this is to Europe, not just the UK. According to USA Today, Kirby “pointed to broader factors for European demand beyond Brexit, saying terror incidents, the overall economy and more competition from rival airlines each contribute to the decline.”

“We do expect Europe to get worse,” Kirby told USA Today. “There’s a lot of things that could be driving it.”

As far as the UK is concerned, Kirby said the Brexit had brought about three primary issues, specifically: “currency, [a] direct impact on flights, and general confidence in the economy.” Currency is of particular concern to the airlines—Kirby noted American gets approximately 4% of its revenue in pounds, so a substantial and prolonged depression of the pound is meaningful. (Delta cited similar concerns when it dialed back its U.K. flights.)

Still, American seems to believe that while Brexit presents challenges, it’s not a major concern. Yet. Kirby actually called the direct impact of the Brexit “positive” and suggested it could boost flights in the short-term as bankers, businessmen, and consultants fly more while sorting out the Brexit itself.

“I think for the next few year at least, there is not going to be much impact from Brexit,” Kirby said. “Hard to see any evidence that it’s a big problem.”

This seems to be the emerging narrative surrounding Brexit: A near-term squeeze on revenue and capacity, but not enough to cause any real panic. The truth is, no one really knows how the Brexit will impact travel beyond the next 1-2 years, while the actual “exit” part is being finalized. If we’re lucky, economic conditions will stabilize and this will be the worst of it.

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