Aviation and the European Common Aviation Area (ECAA)

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The aviation sector is a vital part of the UK economy, contributing £52bn to UK 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)?

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

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 1992-2015.

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.

What happens to the existing aviation agreements after Brexit?

Britain will automatically leave the ECAA, along with all EU-negotiated horizontal agreements, as a result of Brexit. This was confirmed by David Davis in a select committee hearing. Additionally, British airlines will no longer be under the jurisdiction of the ECJ or EASA.

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.

Other bilateral agreements the UK has with third countries may need renegotiation as many refer to EU law and institutions.

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

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 Hercegovina to re-join the ECAA as a non-EU member. All nine freedoms would continue to be enjoyed by UK airlines. However, this would require unanimous support from each member state. This is highly unlikely as the Spanish have indicated that they will veto any deal that includes Gibraltar’s international airport. Membership of the ECAA is subject to ECJ and EASA jurisdiction, which conflicts with one of Theresa May’s Brexit negotiation ‘red lines’.

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 issues as membership of the ECAA: the continuing influence of the ECJ and the conflict over Gibraltar.

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, this would likely be a long and difficult negotiation.

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 reaching 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 Britain to avoid some EU regulation and even the jurisdiction of the ECJ. 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.

What would happen to aviation regulation in the UK after 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 they 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.

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 IAG (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 as 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.

Update date: 
Monday, August 14, 2017