Ryanair may be forced create a new subsidiary to operate UK domestic flights if a "hard Brexit" comes to pass, chief executive Michael O’Leary has indicated.

Speaking at a media briefing in London today, O'Leary suggested that under the "worst" outcome, the UK would be forced to leave the European open-skies system as it exits the EU, which would prevent Ryanair as a European carrier from continuing to operate routes from London to Belfast, Edinburgh and Glasgow.

The Irish carrier would then need to establish a separate UK company, of which Ryanair would be able to own a maximum of 49.9%, adds O'Leary.

He questions whether the UK would be able to reintroduce bilateral agreements. "It's almost impossible to restore bilaterals because bilaterals are based on flag carriers and most countries don't have flag carriers anymore," he says.

O'Leary speculates that in a hard-Brexit scenario EasyJet's exposure to the UK market would be "unsustainable" and require the airline to gain a European air operator's certificate.

He also sees a possibility that the IAG group could be broken up under European ownership rules.

"BA/IAG gets broken up because you can't have a British airline in the same ownership as three European airlines, because you have ownership restrictions as well as the AOCs," he says.

"So I think either British Airways gets sold out by IAG and becomes a majority UK-owned airline or, alternatively, Iberia, Aer Lingus and Vueling get sold out of British Airways and IAG."

If the UK remains part of the open-skies area, O'Leary foresees "no change" in the ownership structures of Ryanair or UK carriers.

Airlines have, he discloses, been invited to a "round table" discussion organised by the government department charged with negotiating the UK's exit from the EU to discuss the impact this will have on their sector.

In the meantime, Dublin-headquartered Ryanair has confirmed plans to cut its capacity growth in the UK next year from 12% to 5% as a result of the Brexit vote.

Commercial chief David O'Brien says Ryanair will focus growth on "UK regional to the sun" routes, with a "little more from London into the sun".

Growth this winter has been concentrated on Belfast, Glasgow, Manchester and Newcastle, whereas at its London Stansted base Ryanair has "trimmed 200,000 or 300,000 seats", due "in part to Brexit" but also to an inability to agree a new passenger growth agreement with the gateway's operator Manchester Airports Group, O'Leary adds.

He says Ryanair has taken the decision to hedge its sterling costs up until March 2017 because it "secures this year's [profit] guidance" and avoids "another profit warning" early next year.

Source: Cirium Dashboard