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Brexit: A challenge for UK aviation?

In the lead up to GAD world, Chairman of the European Aviation Club Rigas Doganis shares his thoughts on the challenges that UK aviation faces following Brexit:

The Brexit negotiations have begun and European air transport is in the melting pot.

Negotiating a new aviation relationship between the UK and the EU will be difficult and complex. But the outcome will impact not only on most airports within the UK and the EU but also on many outside Europe.

Key areas for renegotiation

First a series of EU “liberalisation packages” have created an open skies market within which member state airlines can fly between any two points with no controls on fares or capacity. EU citizens or companies can set up and manage an airline in any of the member states, in addition to their own, provided over 50% of ownership is in EU hands. This ownership issue has already pushed EasyJet into setting up an Austrian based company in preparation

Second, in parallel to the “liberalisation packages” there are over 250 EU Regulations and Directives which take effect in UK laws. Some are very aviation specific, for instance, those dealing with passenger rights or airport charges. Others are more general but impact directly on aviation, such as those related to competition law including control of mergers.

Third, the UK benefits from a series of air transport agreements signed by the EU with third countries such as Morocco. Most significant is the EU-US “Open Skies” agreement.  There is a similar “Open Skies” agreement between the EU and Canada. Once outside the EU, the UK will no longer be party to such EU agreements. What happens to UK air services with such countries?

Finally, the UK is directly involved in several European aviation initiatives such as the European Aviation Safety Agency, the so-called “Single European Sky” or the European Investment Bank which, among other things, funds airport development.

No obvious solutions

What options are open for the UK if it wishes to maximise the benefits of access to the large European aviation market?

The UK could become a member of the European Economic Area, as Norway and Iceland are without being members of the European Union. This would give the UK access to the European free trade area but also full access to the European aviation market. The UK government has expressed a reluctance to join the EEA especially if it must pay a substantial annual fee to the EU like Norway does. It would also be required to accept both free movement of people and decisions of the European Court of Justice (ECJ).

An alternative might be the “Swiss model”, a bilateral agreement with the EU covering aviation. In 2002 Switzerland, adopted and applied all the then existing EU aviation rules or “acquis” on market access, pricing etc. and thereby joined the European common aviation area. But unlike Norway, Switzerland was not obliged to adopt any subsequent EU aviation Directives or decisions of the European Court of Justice, though it tends do so. Like Norway it accepted free movement of people though a 2014 referendum vote rejected further free movement.

Since the UK government wants to impose controls on immigration and intends to withdraw from the jurisdiction of the ECJ, both the Norwegian and Swiss models are non-starters.

A third and simpler option would be for the UK to apply to join the European Common Aviation Area as several non-EU and even non-European countries have done including Morocco and Jordan. As the UK, has already accepted all the EU liberalisation rules it should be able to gain full access to the ECAA. Free movement of people may not be a requirement. But the UK would become a minor player with little influence on future European aviation policies.

The last,and least attractive option would be to negotiate separate bilateral air services agreements with each of the EU member states, a very slow process. Or one could revert to the pre-existing bilateral agreements but many were rather restrictive.

Aviation news GAD

A Way Out

Currently UK government policy appears to preclude any these options. So, the solution could be a bespoke bilateral agreement between the UK and the EU like the EU-US “open skies” agreement. This would ensure "open skies" with Europe continue.

The European Union (Withdrawal) Bill, published in July, will ensure that EU laws and regulations made over the last 40 years will continue to apply.  But this will only be a short-term measure. Ministers will have powers to amend, repeal and improve these laws as necessary.  Inevitably the rules governing aviation on both sides of the Channel will diverge. And decisions of the   European Court of Justice. will continue to affect UK airlines and passengers when flying to Europe!

The EU’s agreements with third countries create another negotiating nightmare. When the UK leaves the EU, the latter’s agreements with countries such as Morocco, or the United States would no longer cover the operation of air services between them and the UK. Does the UK government start negotiating new bilateral agreements or does it , at least in the short term, revert to the pre- EU  bilateral  with these countries ? The old US-UK bilateral air services agreement,  contains many restrictive  rules . For instance, under this pre-existing bilateral  Delta Airlines would  not have access to Heathrow!

The final challenge will be to agree on the UK’s future role in the European Aviation Safety Agency, in the European Investment Bank and in the many other EU institutions in which the UK is a partner.

Uncertainty for some time

In any aviation negotiations, it is unclear whether objectives on both sides of the channel coincide. For UK consumers and airlines access to Europe’s “open skies” is a priority. Do the airlines of the 27 EU member states share this view?

Unfortunately, progress in aviation is dependent on resolving other key issues notably those involving trade relations and the free movement of people. But the European Commission will not start negotiations on these issues until after the "separation” matters are agreed on.

The UK Government in a recent position paper suggested that may well favor visa free travel for EU nationals while maintaining restrictions on inward migration for work. But will the EU and member states be prepared to accept any such restrictions to keep Britain within the European internal aviation market?

Negotiations on so many air transport issues will be complex and very time consuming. They will impact not only on British and European airlines and airports but on many others, too.  Impossible to believe that all these issues can be sorted out and agreed within two years. Transitional arrangement seems inevitable.

Airport finance news GAD

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