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.
UK airlines currently have access to the world’s most liberalised aviation market – the European Common Aviation Area (ECAA) – through the UK’s membership of the EU.
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). The UK is currently represented at the EASA by the Civil Aviation Authority (CAA), the national aviation regulator.
The EU has also negotiated horizontal agreements with 17 other non-ECAA countries. Through these and the ECAA, the EU governs the UK’s flight access to 44 countries, accounting for about 85% of all of Britain’s international air traffic.
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 1992-2015.
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.
Outside of the ECAA, 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.
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 and 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.
Britain will automatically leave the ECAA, along with all EU-negotiated horizontal agreements, when it leaves the EU. This was confirmed by the then Secretary of State for Exiting the EU David Davis in a select committee hearing. In the absence of a deal, British airlines will no longer be under the jurisdiction of the ECJ or EASA.
Consequently, according to the European Commission’s preparedness notices on air transport (January 2018) and aviation safety (April 2018), 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.
In addition to having to renegotiate the EU’s agreements with third countries such as Canada and the US, as they would cease to apply once we are outside the ECAA, the UK may also need to renegotiate its own bilateral agreements with third countries, since most refer to EU law and institutions.
Michael O’Leary, the CEO of Ryanair, has been vocal in highlighting the potential impacts of this. He claims that, as airlines submit their flight plans six months in advance, flights in the period immediately after Brexit between the UK and the 44 countries to which the EU controls British access could be cancelled if no deal is reached by September 2018.
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.
Membership of the ECAA is subject to ECJ and EASA jurisdiction, but since Theresa May agreed in her Mansion House speech that the UK would have to accept these terms in order to secure EASA associate membership, this is no longer likely to be considered a ‘red line’ for the UK.
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 is another possibility. However, senior EU politicians such as Michel Barnier have stated that the UK cannot simply cherry pick the parts of the EU it likes. This means negotiating an agreement over the role of the ECJ and EASA will be troublesome.
It is likely that some of the nine freedoms currently enjoyed by the UK would have to be sacrificed to reach an agreement. Most likely these will be the seventh and ninth freedoms: the right to fly within a foreign country, and the right to fly from one foreign country to another, without stopping in the home country respectively.
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.
If the UK leaves the ECAA, British airlines will no longer be regulated by the EASA and instead the CAA 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.
Setting out CAA’s position in his September 2017 speech at UKTiE, Andrew Haines announced that the CAA has consciously decided not to do any work regarding planning for a new independent aviation safety system in the UK, “as it would be misleading to suggest that’s a viable option”. Arguing consensus in the sector is almost universal on the issue, he dismissed the possibility of recreating a national regulator in the short term and advocated for retaining EASA membership.
However, according to the National Audit Office, the Department for Transport's 28 Brexit projects 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 European Commission, on the other hand, has according to The Times, explicitly barred EASA from holding talks with the CAA on contingency plans for a no-deal scenario before March 2019, further increasing the pressure on the UK to reach an agreement. Industry representatives from both the EU and the UK, such as General Aviation Manufacturers Association and the UK aerospace group ADS, have warned against this approach, calling for the regulators to begin technical and contingency planning separate from the political negotiations, to prevent the severe disruptions in transport links and supply chains which would occur if a deal is not in place by March 2019.
The Government has since re-confirmed their preference for continued participation in EASA. The UK’s proposal for a “comprehensive agreement on air transport”, set out in both the June 2018 Framework for the UK-EU partnership on Transport slides, and the Government’s white paper on the future relationship between the UK and the EU, includes seeking EASA participation as a third country, for which there are legal precedencts, such as Switzerland, in order to minimise the regulatory burdens for businesses and to ensure continuity of services. In keeping with the position put forward in the Prime Ministers’s Mansion House speech on “associate membership” of EU agencies, the Government acknowledges this would require respecting the remit of the ECJ and making an appropriate financial contribution, as long as the UK retains the right to provide technical expertise to EASA committees.
Additionally, the UK’s proposed agreement seeks co-operation on air traffic management and security, as well as continued market access between the UK and EU under all nine freedoms of the air, specifying the framework would need to allow services to evolve, in order to support innovation in the sector and keep up with evolving regulations. This would allow co-operation to continue as is and would avoid disruptions, with the only difference being that the UK would have no formal say or right to vote on the development of future regulations, initiatives and partnerships with third countries.
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.
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.
Losing access to the European market would be particularly harmful to easyJet and Ryanair whose business models rely heavily on intra-EU flights.
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.
However, if Ryanair does alter its ownership structure to remain an EU carrier, it may lose access to the intra-UK market in the event of no deal - the UK is unlikely to allow EU carriers to operate intra-UK flights without reciprocation from the EU.