CAPA WORLD SUMMIT: Brexit: the best outcome is the status quo

28 November, 2018

The CAPA - Centre for Aviation World Aviation Outlook Summit on 27-Nov-2018 included a panel discussion on the outlook for the UK-Europe and UK-US aviation market access post Brexit.

The draft withdrawal agreement between the UK and the EU, approved by the European Council, barely mentions aviation in its more than 580 pages. It says that the two sides should conclude a comprehensive air transport agreement, but has no further details on this aim.

Moreover, if the withdrawal agreement is not approved by the UK Parliament on 11-Dec-2018 (and many political commentators do not expect approval), there is a risk of traffic rights ending under this no deal scenario when the UK leaves the EU on 29-Mar-2019.

Jim Callaghan of Croon Callaghan Aviation Consulting categorised airline bosses into two broad camps. There were those such as IAG's Willie Walsh that assumed all would be well and those such as Ryanair's Michael O'Leary that warned of grounded flights. The truth probably lies somewhere in the middle, but the problem is, even at this stage two and a half years after the referendum and only four months before the Brexit date, nobody knows.

"The UK government is just not dealing with practicalities", said Mr Callaghan, "there is no upside to Brexit, it's all about managing the downside. European Regions Airline Association director general Montserrat Barriga added that, in the event of a no deal Brexit, there would be no time to negotiate a comprehensive air transport agreement. "The EU has used time as a negotiating weapon", she said.

The UK's air traffic with the EU is not the only area affected by Brexit. It is seeking new air service agreements with other countries where right are currently covered by an EU-level agreement. The most important of these is the negotiation of a new UK-US agreement.

Veteran aviation consultant and former US State Department negotiator John Byerly said that the UK and the US had been working on a text for the past 18 months and an agreement was expected. Drafts of the text were similar to the standard US open skies template, with the standard nationality clause, meaning that only UK and US airlines would be able to operate between the two countries.

However, an annex to the agreement appears to grandfather existing traffic rights to incumbent UK registered airlines such as British Airways, Virgin Atlantic and Norwegian Air UK, subject to review if there were further changes of ownership of these airlines.

According to ALPA Regulatory Counsel and Senior Attorney Dave Semanchik, both sides have a commitment to the continuity of air services and to the incumbent operators, but it is uncertain how future ownership changes would affect this. This could be treated case by case on the basis of public interest, suggesting some flexibility to allow continued traffic rights, but ALPA would have concerns about a loosening of ownership and control restrictions.

In the wider context of open skies style air services agreements, the US administration under Donald Trump appears to be negotiating such deals still, but it is anomalous that the draft UK-US agreement does not represent further progress in the liberalisation trend. For ALPA's Mr Semanchik, the agreement is unlikely to have sufficiently strong clauses on labour standards.

The best hope for greater clarity is that the proposed transition period that would keep existing aviation relations between the UK and the EU (and between the UK and the US) unchanged until at least the end of Dec-2018 is extended further, or even that Brexit itself is postponed. Nevertheless, and although all concerned would like to preserve existing market access as far as possible, it seems inevitable that the UK's future aviation relationships with the EU and the US will be at least slightly less liberal

As Michael Whitaker, principal of Whitaker Air Space, said of the UK-US negotiations, but which also applies to the UK-EU Brexit talks more widely: "It's an unusual negotiation when the best outcome is the status quo".