Working to make government more effective

Explainer

UK–EU future relationship: aviation

UK airlines currently have access to the world’s most liberalised aviation market – the European Common Aviation Area (ECAA) – through its membership

Heathrow

For detail on what was agreed on aviation in the UK–EU Trade and Cooperation Agreement, please read our analysis of the deal.

The aviation sector is a vital part of the UK economy contributing £52 billion to UK gross domestic product (GDP) in 2016 and supporting close to a million jobs. Flights to or from Europe accounted for 63% of all passengers who passed through UK airports in 2016.

What is the European Common Aviation Area (ECAA)?

As a member of the EU, UK airlines currently had access to the world’s most liberalised aviation market – the European Common Aviation Area (ECAA). They will continue to have access to the ECAA during the transition period, which is due to end on 31 December 2020.

The ECAA was created in 2006 as an extension of the Single Aviation Market and is overseen by the European Aviation Safety Agency (EASA), with its legislation enforced by the European Court of Justice (ECJ). During the transition period, the UK will continue to be represented at the EASA by the Civil Aviation Authority (CAA), the national aviation regulator – but will no longer play a formal role in any of the decision-making.

The EU has also negotiated horizontal agreements with 17 other non-ECAA countries. Horizontal agreements (including the EU–USA Open Skies Agreement and the EU–Canada Air Transport Agreement) cover areas such as access rights for airlines, passenger rights and investment.

Through these and the ECAA, the UK flights have access to 44 countries, accounting for about 85% of all of Britain’s international air traffic.

What do EU aviation agreements achieve in practice?

UK airlines operate within the ECAA under all nine freedoms of the air:

Freedoms of the air

The right to

First freedom Flying over a foreign country without landing.
Second freedom Refuel or carry out maintenance in a foreign country without embarking or disembarking passengers or cargo.
Third freedom Fly from the home country and land in a foreign country.
Fourth freedom Fly from a foreign country and land in the home country.
Fifth freedom Fly from the home country to a foreign country, stopping in another foreign country on the way.
Sixth freedom Fly from a foreign country to another foreign country, stopping in the home country on the way.
Seventh freedom Fly from a foreign country to another foreign country, without stopping in the home country.
Eighth freedom Fly from the home country to a foreign country, then on to another destination within the same foreign country.
Ninth freedom Fly internally within a foreign country.

The success of the ECAA is shown in the number of intra-EU routes available to consumers, which increased by 303% from 1992–15.

The liberal nature of the market has also encouraged the growth of low-cost carriers (LCCs), such as easyJet and Ryanair. The increase in competition led to lower prices for consumers: average leisure fares from the UK to Europe have fallen by a third since 1993.

As a result of the ECAA and the horizontal agreements, EU airlines can fly from the UK to 17 other non-ECAA countries like the USA, Australia and New Zealand with reduced restrictions. This has greatly increased the number of routes and carriers available to consumers.

However, the horizontal agreements do not provide same the level of freedom as within the ECAA. For example, the USA–EU open skies agreement omits the eighth and ninth freedoms for EU airlines.

What will happen to existing aviation agreements after Brexit if there’s no agreement in the future relationship negotiations?

Britain will automatically leave the ECAA, along with all EU-negotiated horizontal agreements at the end of transition period. This also means British airlines will no longer be under the jurisdiction of the ECJ or supervision of the EASA.

If no deal is reached on the UK–EU future relationship, UK operating licences will no longer be valid in the EU. UK-based air operators will have to move their principal place of business to an EU member state and be EU majority-owned to continue operating in the EU. All certificates, licences and registrations issued by the CAA on behalf of EASA for both pilots and aircrafts and aircraft parts will also become invalid and would need to be validated again in an EU member state.

Likewise, the UK is unlikely to allow EU carriers to operate intra-UK flights without reciprocation from the EU.

In addition, the EU’s agreements with third countries would cease to apply once the UK is outside the ECAA. The UK has already renegotiated its own bilateral agreement with the US, Albania, Georgia, Iceland, Israel, Kosovo, Montenegro, Morocco and Switzerland while the negotiations with Canada are at an advanced stage.

What are the five options for an aviation deal with the EU?

Future UK–EU aviation co-operation will be a matter for negotiations. The UK government has said that it is hoping to conclude some technical agreements with the EU covering areas such as aviation or civil nuclear co-operation.

Meanwhile, the EU’s mandate for negotiations makes clear that a more comprehensive arrangement on aviation would be conditional on the UK meeting certain level playing field provisions.

There are several potential options for the UK in pursuing a future relationship with the EU on aviation:

1. Gain access to the market as a new member of the ECAA

Britain could negotiate a similar agreement to Bosnia and Herzegovina to re-join the ECAA as a non-EU member. UK airlines would continue to enjoy all nine freedoms of the air. However, this would require unanimous support from each member state. This is highly unlikely as Spain has indicated that it will veto any deal that includes Gibraltar’s international airport.

In addition, membership of the ECAA is subject to ECJ and EASA jurisdiction. The government’s written ministerial statement on the future relationship is clear that the UK does not want to accept ECJ jurisdiction.

2. Strike a Switzerland-style bilateral deal

Switzerland has almost full access to the ECAA through a bilateral agreement. This has the advantage of being a ‘ready-made’ deal saving the UK valuable time and resources. However, this option has the same issue as membership of the ECAA: the disagreement over Gibraltar and continuing influence of the ECJ.

3. Negotiate a new ‘open skies’ bilateral deal with the EU

A new agreement between the UK and the EU that is similar to existing open skies agreements looks like it will be the most likely option.

The EU’s draft mandate states that the EU would be open to such an agreement, but “elements included in the Fifth Freedom of the Air may be considered if…they are balanced with corresponding obligations and in the interest of the Union.” The mention of obligations suggests the EU would link the inclusion of some aspects of the fifth freedom with the UK’s acceptance of level playing field arrangements to ensure that the current standards on environment, state aid, labour laws and competition are maintained. It also suggests that freedoms beyond the fifth will be off the table.

In contrast, the UK's ministerial statement only says that an air transport agreement would be in both sides’ interest but it doesn’t specify which freedoms it thinks this should cover.

To make matters even more complex, EU airlines are lobbying against a deal in an attempt to reduce competition.

4. Negotiate bilateral agreements with individual member states

Andrew Haines, chief executive of the Civil Aviation Authority (CAA) the UK’s aviation regulator, has suggested that the UK may be able to negotiate individually with ECAA member states if a deal with the EU as a whole cannot be reached. This may allow the UK to avoid some EU regulation and even ECJ jurisdiction. The Gibraltar issue could also be bypassed if no agreement was made with Spain. However, it is unclear whether this is consistent with EU law. Also, it would be an immensely complex and time-consuming exercise to reach agreements that provide all nine freedoms.

5. Fall back on old aviation agreements

If the UK fails to reach a deal with the EU, it will be forced to fall back to broadly outdated agreements that were initially set out in the 1944 Convention on International Civil Aviation, otherwise known as the Chicago Convention.

Under these rules, UK airlines would only enjoy the first five freedoms at most. This would have no bearing on licensing and registration of pilots and aircraft parts, which would still lose their validity post-Brexit.

What would happen to aviation regulation in the UK after Brexit?

Once the UK leaves the ECAA, British airlines will no longer be regulated by the EASA. The Civil Aviation Authority would take on the role of regulator for UK airlines.

This would have a dramatic impact on the workload of the CAA and its budgetary requirements, particularly in the short run as the void left by EASA regulations would need to be filled with new UK legislation. Therefore, a substantial increase in CAA staff numbers and resources would be needed to meet the demands of its new role.

However, there is no guarantee that international aviation regulators would accept the CAA’s regulatory standards, especially if it chose to diverge from the current EASA regulations. This creates a risk that UK airlines will be cut off from flying to some countries altogether.

The CAA has been clear since the EU referendum that it considers the most positive outcome for UK consumers and the aviation industry to be one where the UK has continued participation in the EASA system with existing systems of mutual recognition between the UK and EASA member states remaining in place.

However, according to the National Audit Office, the Department for Transport had been working on 28 Brexit projects in the run up to March 2019. These included developing and implementing “(if required)” contingency planning for bilateral air service agreements and contingency requirements for EASA, alongside legislation, borders and policy and negotiating strategies, as well as replacing third country air service agreements and safety agreements.

The CAA is also making contingency plans to take on new functions, some of which are currently delivered by EASA. As an example, the CAA has created the capability required for the UK to fulfil State of Design responsibilities independently of EASA should that be needed.

What could happen to ownership of UK airlines after Brexit?

European law states that airlines must be majority EU-owned to offer intra-EU flights. After Brexit, UK shareholders will not contribute to this requirement. If easyJet and International Airlines Group (and consequently British Airways) do not change their current ownership structure, they risk losing their rights to operate intra-EU flights if no comprehensive deal is reached. This would be particularly harmful to easyJet and Ryanair whose business models rely heavily on intra-EU flights.

Ryanair, despite being based in Dublin, is also at risk: only around 40% of its current ownership is based in the EU, if UK shareholders are excluded.

Airlines are already taking steps to prepare for Brexit: easyJet has applied to establish a new EU-based airline so it can continue its intra-EU operations after Brexit. Ryanair is evaluating the best way to alter its ownership composition in order to meet the ownership rules and may be forced to buy back shares from UK shareholders.

Topic
Brexit

Related content

24 MAY 2024 Explainer

Dissolution of parliament

Dissolution is the formal term for the end of a parliament. It occurs ahead of a general election for a new parliament.