EFFORTS to return Prestwick Airport to profit have been dealt a blow by Brexit, according to aviation experts who warned that the taxpayer-owned base is "doubly exposed" by its reliance on Ryanair and outbound leisure passengers.
Industry watchers said Prestwick Airport faced a "perfect storm" which could threaten its recovery, three years after the Scottish Government purchased the airport for a £1 to save it from closure.
Among the key factors working against the Ayrshire base is its dependence on the outbound holiday market between Scotland and sunshine resorts in the Eurozone.
The UK's aviation market is dominated by outbound travel. For every three airline seats in and out of the UK, around two are occupied by Brits travelling abroad compared to one by a foreigner visiting the UK. However, Prestwick's passenger traffic is mainly outbound, and with the collapse in the value of Sterling - down 25 per cent since the EU referendum - that is a problem.
The International Air Transport Association (IATA) predicted that a 12 per cent reduction in the value of Sterling would result in a 5.6 per cent decline in outbound travel from the UK over the next two years as Brits' spending power abroad eroded. However, it countered that a likely surge in foreign tourists attracted to Britain by a weak pound would help offset the fall in demand from outbound travellers.
Regional airports such as Prestwick, with much lower inbound traffic, are unlikely to have this cushion.
Iain Smith, a director at aviation consultancy RDC, said: "The routes which are most vulnerable are the ones which are into Europe where the vast majority of passengers are UK-originating; if it was the other way around it's all good. But of course, the vast majority using these leisure routes to and from Scotland will be from Scotland.
"Any airport which has a higher proportion of that will definitely be impacted more and that's definitely the case with Prestwick. It is virtually all Scotland to Spain and that is going to be Scottish outbound travellers for around 80 per cent of it.
"The other carriers flying from Glasgow and Edinburgh, they have domestic services and international non-EU services. Prestwick doesn't have any of that."
A long-standing weakness for Prestwick has been its reliance on Ryanair as its only passenger airline. Key aims of the airport's executives in 2016 - to attract at least one other airline and to bag a direct flight to London - have so far failed to transpire.
Meanwhile, Ryanair recently issued a profits warning - blamed on the slump in Sterling - and is looking to Europe, not the UK, to expand its business.
Although the Irish carrier has repeatedly insisted it has no plans to pull out of Prestwick, where it has a maintenance base, industry insiders suggest that continuing operations from Prestwick, Glsgow and Edinburgh airports is looking increasingly unsustainable.
John Strickland, an aviation consultant, said: "When Ryanair began at Prestwick, they were flying to places like Germany and Scandanavia which attracted a lot of inbound tourism and people spending money at the airport, especially Scandanavians buying duty-free to take back. Now they've switched far more to outbound holiday destinations and that's left Prestwick doubly exposed. One is the effect of people's lack of ability to spend on holidays, and second is the fall in the value of Sterling which means that - as a Euro-denominated company - the revenue Ryanair earns in pounds remit into fewer Euros than before."
Jochen Schnadt, chief commercial officer for bmi regional, said the airline had been approached by Prestwick bosses about establishing a new route, but remained unconvinced.
He said: "We have had a reputation in the past for setting up at an airport and then pulling out - that's not something we want to be doing. At the moment, we can't see that 18-36 months down the line we could be sure of the passenger demand to sustain it.
"For inbound leisure travellers, it's a harder sell - the flight might be £10 cheaper for example but that's not a big attraction when you have further to travel on to your destination.
"If a massive new business suddenly set up on Prestwick's doorstep and created demand from business travellers, that would be a different story."
However, Ron Smith, Chief Executive Officer at Glasgow Prestwick Airport said there was no sign of a negative fallout from Brexit so far.
He said: “Since the vote on Brexit, we haven’t seen any detrimental impact on our scheduled passenger traffic – in fact we have additional flights and are forecasting an increase in passenger numbers for the next financial year.
“The negotiations on Brexit are yet to commence and the potential ramifications of these negotiations for the aviation industry are not entirely clear.
"We are working closely with trade bodies including the Airport Operators Authority (AOA) and the Regional and Business Airport Group (RABA) to ensure that the industry gets the best deal possible post Brexit.
“I believe that as well as risks there will be opportunities – especially for an airport like Glasgow Prestwick, which offers a broad base of aviation services. For example, the changes to the value of the pound will make goods manufactured in the UK more affordable and attractive in a global market. This could help to bolster the aerospace industry in and around the airport, which could generate an increase in rental income for us and create more highly skilled jobs for Ayrshire.
"It could also lead to an increase in exports, which we can help to transport through our air cargo division.
Mr Smith added: “Although the negotiations on Brexit will be taking place at a UK Government level, there are things that the Scottish Government could do to support Scotland’s airports to maintain and improve our connectivity with the rest of the world – namely reducing Air Passenger Duty.
“The Scottish Government could also use this reduction to provide connectivity and economic stimulus where it is needed most – at regional airports with fewer than three million passengers.
"This is what happens in New Zealand – a country that is similar to Scotland in terms of population size yet produces almost double the number of aircraft movements, providing vital domestic and international connectivity.”
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