Brexit: A cloud looming over aviation


Brexit: A cloud looming over aviation

An in depth look at what Brexit means for the aviation industry

P. St John (CPL/IR/FI) has 30 years’ experience in the aviation industry.

With thanks to J. J. Patrick and HG.

INTRODUCTION
Brexit has raised a lot of questions regarding the aviation sector and the consequences of the UK leaving the European Aviation Safety Agency (EASA). EASA provides a single regulatory and certification process among Member States and should the UK leave EASA without a negotiated “deal”:

“Certificates issued before the withdrawal date by the competent authorities of the United Kingdom on the basis of the provisions of the Basic Regulation and its implementing rules will no longer be valid as of the withdrawal date in the EU”. (EC 2018b).

This has generated a lot of misunderstanding about what is possible post-Brexit, the aim here is to clarify some of the misinformation and examine some of the challenges Brexit presents to aviation.

LEGISLATION AND REGULATION
In relation to regulation, the post-Brexit the UK will need to strike a balance between having continued access to the European Single Aviation Market (SAM) and having the freedom to establish its own regulations (IATA 2016). The European Common Aviation Area (ECAA) is the basis to the single market in aviation services. Since 1992 the Single Aviation Market has brought “unprecedented regional integration” founded on wide-ranging and common legislation (Geil 2006). Such regional arrangements are one of the International Civil Aviation Organisation’s (ICAO) long term goals.

The regulatory environment created has liberalised the market enabling non-discriminatory air carrier licensing throughout Europe, market access with no capacity restrictions and since 1997 full cabotage, meaning that an EU carrier can operate any intra-EU route (Geil 2006; European Commission 2017). Additionally the Single Aviation Market has brought common licensing requirements, enhanced air passenger rights, connectivity and, through greater competition, lower fares for consumers (Geil 2006; European Commission 2017; Elliott 2016).

LEGISLATION and ICAO
Many have stated that if the UK leaves EASA aviation can continue to operate under the auspices of ICAO, making a false equivalence with trade falling back onto World Trade Organisation rules. This section firstly addresses why this is a misconception and not possible. ICAO is a UN agency established in 1944 to manage the administration and governance of the Convention on International Civil Aviation; this meeting led to the Chicago Convention. The organisation works with 192 Member States and industry groups to reach consensus on international civil aviation Standards and Recommended Practices (SARPs) and policies. These are designed to provide a “safe, efficient, secure, economically sustainable and environmentally responsible civil aviation sector” (ICAO 2018). In a nutshell ICAO gives guidance as to desirable common practices and sets forth minimum safety standards.

The SARPs and policies are then used by ICAO Member States to ensure that their local operations and regulations conform to global norms. Here then is the first point to note: ICAO cannot make legislation. ICAO recommendations are not legally binding and, whilst everyone strives for standardisation, a country wishing to deviate from one of the SARPs in their laws and regulations need only file and publish a “difference”. For example, for many years the UK used “millibars” to measure atmospheric pressure notifying a difference from the standard unit, the “hectopascal”.

For the EU, since 2003 EASA has been the regulatory body, the institution that drafts legislation which is then enacted into law via the European Commission. This has meant that all passengers benefit from the same, high level of safety wherever they fly in the EU and that national rules have been replaced by common binding rules at EU level (Thomas 2018). If the UK leaves EASA then it leaves the legal framework under which all civil aviation operates the “Basic Regulation” referred to above.

ICAO Freedoms of the Air
The Five Freedoms have been touted as an alternative to the EU Single Aviation Market/EU Open Skies. There are actually nine ICAO freedoms, but only the first five are usually referred to being the most important as these have been recognised by international treaty. One thing to keep in mind: the Five Freedoms are not guaranteed, they must be granted and agreed by the airlines and the governments within whose airspace an aircraft intends to fly. The freedoms are the right or privilege, in respect of scheduled (note not private or charter flights) international air services, granted by one State to another State or States. Briefly, the freedoms provide for the right to:

First freedom – fly across its territory without landing

Second Freedom – land in its territory for non-traffic purposes

Third Freedom – put down, in the territory of the first State, traffic coming from the home State of the carrier.

Fourth Freedom – take on, in the territory of the first State, traffic destined for the home State of the carrier; and the

Fifth Freedom – put down and to take on, in the territory of the first State, traffic coming from or destined to a third State (ICAO 2018).

That being said, the first two freedoms, those of overflight and the ability to make technical stops, should be ensured through the International Air Services Transit Agreement, which was also signed at Chicago, on 7 December 1944 by the UK and many other European States (although it is to be borne in mind that at the time some current States did not exist). However, transit rights are significantly different from traffic rights which allow commercial international services. From another EC preparedness notice for Air Transport: “Air carriers of the United Kingdom will no longer enjoy traffic rights under any air transport agreement to which the Union is a party, be it to or from the territory of the United Kingdom, be it to or from the territory of any of the EU Member States” (EC 2018a).

Realistically in a “no deal Brexit” scenario there is no reason to believe that the EU would deny any of these traffic rights to the UK. The problem is though, as we have previously noted, the freedoms must be granted and agreed by the airlines as well as governmental bodies. It is reasonable to assume that those with a vested interest in gaining a commercial advantage may not wish to endorse action which would benefit the likes of BA, Virgin or other UK carriers.

The EU Open Skies agreement creating the European Common Aviation Area (ECAA), which the UK is electing to leave, is effectively all ICAO Nine Freedoms “plus, plus, plus”; it allows a single market of unrestricted airline operations amongst the 27 member states. Here is another problem: every prior treaty and bilateral agreement was superseded by the ECAA in 1997. Additionally, the UK cannot negotiate individually with countries in the EU Single Aviation Market, it must deal with the EASA, and that means accepting that the European Court of Justice holds jurisdiction, a notorious “Red Line” for Mrs. May’s government.

Not only will the UK lose access to the Single Aviation Market, it will also lose the ability to access agreements with third countries which have been negotiated by the EU. Significantly this includes the US-Canada open skies agreement, withdrawal from which will dramatically restrict trans-Atlantic traffic to the UK and impact on fares. Again, from the EC preparedness notice for Air Transport: “Air carriers of the United Kingdom will no longer have access to designation/traffic rights so far available under the bilateral air transport agreements between EU Member States and a third country on account of the principle of EU designation accepted by the third country concerned” (EC 2018a). In all the UK would lose the negotiated rights of access it currently enjoys through the EU to 44 countries.

With the protectionist approach the Trump administration is taking in the US it has to be asked just how good for the UK any replacement agreement will be. A report published by Professor Hussein Kassim includes a description of possible problems:

“Recent reports of an attempt by London to negotiate a post-Brexit air service agreements with Washington illustrate some of the challenges that the UK is likely to confront. Despite initial UK optimism, the talks reportedly broke up due an unwillingness on the part of the US government to offer the UK better terms than the current EU-US agreement – an indication that the UK will have less leverage in negotiating with third countries individually than collectively as part of the EU”. (Kassim 2018)

PERSONNEL LICENSING
To repeat: “Certificates issued before the withdrawal date by the competent authorities of the United Kingdom on the basis of the provisions of the Basic Regulation and its implementing rules will no longer be valid as of the withdrawal date in the EU” (EC 2018b). This includes:

  • Pilot licences, pilot medical certificates, certificates for pilot training organisations, certificates for aero-medical centres, certificates for flight simulation training devices, certificates for persons responsible for providing flight training, flight simulation training or assessing pilots’ skill, and certificates for aero medical examiners, issued pursuant to Article 7 of the Basic Regulation.
  • Certificates for air operators and attestations for the cabin crew, issued pursuant to Article 8 of the Basic Regulation
  • Certificates for aerodromes, certificates for ATM/ANS providers, licences and medical certificates for air traffic controllers, certificates for air traffic controller training organisations, certificates for aero medical centres and aero medical examiners responsible for air traffic controllers, certificates for persons responsible for providing practical training or assessing the skills of air traffic controllers, issued pursuant to Articles 8a, 8b and 8c of the Basic Regulation. (EC 2018b)

Turning first to pilot licences. The CAA’s response to this issue was: “Both commercial and private UK pilot licences would remain valid for use on UK-registered aircraft as the United Kingdom is a signatory to the International Civil Aviation Organisation (ICAO) Chicago Convention. Our licences are internationally recognised – including by the European Aviation Safety Agency (EASA) – both now and after 29 March 2019” (CAA 2018c). Absolutely true, however, from the CAA’s own statistics for 2016, the last year published, pilots holding EASA licences numbered 13,354 Airline Transport Pilot Licences (ATPL) and 4,811 Commercial Pilot Licences (CPL), those holding UK National licences number 629 ATPLs and 212 CPLs (CAA 2016a). So, without an agreement 841 commercial pilots could continue to fly G- registered (i.e. UK registered) aircraft – but the EASA licences will be voided. Easyjet is already helping its pilots change their state of licence registration to Austrian licences to correspond with their new Brexit-inspired Austrian AOC, many individuals are choosing Ireland and Malta as a new state of issue.

Similarly, there will be no Air Traffic Controllers licensed to issue clearances allowing aircraft to fly, no medical certificates and no attestation for cabin crew. That is aside from the validity for aerodrome certificates, Air Navigation Service Providers, air operators certificates (AOCs) and all aspects of aviation training.

The UK CAA is a very experienced and competent organisation with an understanding of aviation as a commercial undertaking. However, re-licensing and re-approving every aspect of aviation currently done by EASA represents a huge amount of work for the CAA which currently employs an average of 1,028 people (CAA 2018b), admittedly up from 927 for 2016/17. The last time the UK CAA was the full regulator for the whole of aviation they employed approximately 5,000 people. It is expected that some sort of interim fix will be required until there is time to re-issue national licences, certificates and approvals. For both pilots and air traffic control officers leaving EASA, and the loss of their EASA licences, represents the removal of their ability to work anywhere within the EU without the need to undertake any form of conversion.

AIRLINE OWNERSHIP
Airlines are constrained by ownership and control rules with their origin in the Chicago Convention and are contained in nearly all bilateral Air Services Agreements. These rules place exact numerical limits on foreign nationals’ ownership of airlines. To illustrate, the US places a limit of 25% on foreign ownership of its airlines, in Japan the limit is 33% and the European Union limits non-EU ownership to 49%. In other words, airlines operating routes within the EU are required to be at least 50% owned and controlled by EU nationals.

As an example of the consequences of the above, easyJet now has an Austrian AoC and its principle place of business is Vienna, thus it can remain an EU airline and safeguard its route network. Ryanair have applied for a UK AoC in order to continue domestic UK routes, although these only represent 1% of their current capacity and the company is willing to simply cancel these routes (Ryanair 2018: 61). With regard to ownership Ryanair also state: “… it is likely that our UK shareholders will be treated as non-EU and in line with our Articles of Association, we plan to restrict the voting rights of all non-EU shareholders in the event of a hard Brexit” (Ryanair 2018: 8).

AVIATION SECURITY
As of the withdrawal date, the EU aviation security rules and standards will cease to apply with regard to passengers, baggage, and freight; particularly problematic will be transferring onto a connecting flight having started travel in the United Kingdom. In other words the UK will be treated as a third country. The EC preparedness notice concerning aviation and maritime security makes particular reference to transit passengers: “passengers of a flight originating from the United Kingdom will have to undergo another set of security screening procedure when transferring onto a connecting flight” (EC 2018c). European airports have already warned that a “no-deal” Brexit would cause “major disruption and heightened safety risks” (Islam 2018). For affected EU airports significant investment would be required in additional security equipment, new security checkpoints, extra security and service staff.

Ultimately the result would be increased costs for airlines and airports which will, of course, be passed on to passengers. This would be in addition to delays for UK originating passengers and the likelihood of missed connections. Mr Islam’s article (2018) cites the example Schiphol which has 2.5 million UK transit passengers per year; the airport estimates £88 million in infrastructure changes would be required and three years to effect such changes.

The smooth transfer of cargo and mail would inevitably be disrupted with the re-introduction of customs and security checks between the UK and the EU. Additionally, UK carriers may face challenges and reduced competitiveness compared to EU carriers, with the loss of ACC3 designations (IATA 2018). The ACC3 system relates to “Air Cargo or Mail Carrier operating into the Union from a Third Country Airport”, the designation is required in order for carriers to fly cargo into or through the European Union. The process involves assessment of the carrier’s security program in a non-EU country to ensure its relevance and completeness and is achieved via an on-sight inspection every five years. The system is extended to include Regulated Agents (RA3) and Known Consignors (KC3) which are also assessed to ensure they are compliant with the EU Regulations by Independent Validators. The EC preparedness notice concerning the field of aviation security (2018c) makes it clear that the UK will cease to be part of this system, meaning UK carriers, operators and any agencies that form part of their supply chain. Thus, if a company in India has cargo to move to the EU, they will use an ACC3 EU carrier over a UK one.

Airfreight is seen by those involved in this aspect of aviation to be of supreme importance to the global aspirations of the UK economy post-Brexit. The Manchester Airports Group, owner and operator of London Stansted, Manchester, East Midlands and Bournemouth airports, stated that “The Government can now provide a strong boost to the U.K. economy by making the best possible use of existing capacity at airports like Manchester and Stansted over the next 10 to 15 years” (Livingston 2017). How the economic situation of the UK evolves post-Brexit will determine what balance can be achieved between greater air freight operations on the one hand, and environmental and noise concerns on the other.

THE FUTURE
The options for the UK, ruling out remaining a full EU member, are now considered. Continued membership of the European Common Aviation Area (ECAA) would provide the UK with sustained access to the Single Aviation Market. However, EU legislation would have to be accepted and adhered to with little influence over policy and third party arrangements would need to be confirmed (IATA 2016). A bespoke agreement, similar to that established between the EU and the US would allow some policy freedom; whilst this limits the requirement to adhere to all EU legislation it also gives no input into policy development (IATA 2016). Finally, there is no formal agreement, this would allow the UK maximum policy freedom but will limit access to the SAM and may mean exclusion from European initiatives, for example the Single European Sky project (IATA 2016). All of the options are inferior in some respect to full EASA membership.

Possible Future Relationship EU-UK

Access to SAM Validity of EU Agreements Influence on EU Policy Policy Freedom
Continued EU Membership Full Full High Very Limited
ECAA Membership Full Possible Very Limited Limited
UK-EU Bespoke Agreement Access Negotiation None Limited
No Formal Agreement Negotiation Negotiation None High

Source: IATA 2016

The “Single European Skies” is an initiative to improve the way European airspace is managed to reduce inefficiencies, which lead to increased fuel burn and CO2 emissions, whilst reducing the cost of air traffic service provision and increasing Europe’s capacity to meet forecast growth in demand for air traffic (NATS 2018). Little, if nothing, has been said as to the status/fate of the Functional Airspace Block we have with Ireland which has enabled a 10% increase in traffic, a 20% reduction in prices and improvements in CO2 emissions and fuel burn (NATS 2018). This will clearly be a loss of aviation capacity and environmental progress. On the other hand there is the possibility that the demand for flights to and from the UK will decrease naturally as business travel and commercial activity is adversely affected by Brexit.

CONCLUSION
UK aviation faces many challenges in the event of a “no deal” Brexit and the consequent withdrawal from EASA, and here the surface has just been scratched. If the UK CAA is forced to become the full regulator to the industry it will represent a dramatic increase to its workload and budgetary requirements. The UK will also lose traffic rights within the EU and with those countries the EU has negotiated bilateral rights. As a consequence, there will be fewer routes, less competition on those routes and increased fares for passengers.

For personnel, the worst case is that their licenses will be invalidated hindering their ability to earn. Obviously, their options will be curtailed without the right to live and work anywhere in the EU. Without a negotiated agreement the loss of EASA pilot licences will mean UK pilots are limited to flying UK registered aircraft operated by UK carriers to and from specific permitted destinations. Airlines are already taking steps to mitigate the effects, easyJet have a new Austrian AOC to add to their Swiss and UK ones, they are helping pilots change their state of licence registration and are re-registering 110 of their aircraft to Austria. Although easyJet plc. will remain listed on the UK stock exchange it does bring into question what effect this may have on staff numbers in the UK and tax paid in the UK.

In general, airlines are at risk of losing competitiveness against their EU counterparts. There could be action by vested interests to hamper traffic rights and the loss of ACC3 accreditation may hinder UK carriers from bidding on third country into EU business.

UK passengers will undoubtedly face fare increases and delays. Not only will there be longer queues at passport control, but transit passengers will need extra security checks. Although a separate issue, inbound to the UK the Border Force will need to scrutinize passengers from the European Economic Area countries. Over the last five to six years the Border Force has been subject to annual funding cuts of 10% whist dealing with an almost 30% increase in passenger numbers (Spero 2018).

As things stand, a “no deal” Brexit will result in many losses for the UK, but arguably the worst is losing influence in shaping the future of aviation.

ADENDUM 25th September 2018
Yesterday the UK CAA launched a “microsite” to serve as “a central source of information for the aviation and aerospace industries about the actions they would need to take to be prepared for a no deal withdrawal from the EU and no continued mutual recognition”. In essence they have confirmed that EASA licences will not be valid and recommend:
“Pilots with UK licences who want to fly EU-registered aircraft post-Brexit would need to transfer their licence to another EASA member state before Brexit, or seek a second licence from an EASA member state” (UK CAA 2018d). The CAA do not say what the fee will be, how long it will take nor in the short (14 slide) summary do they mention that a medical from that new state will also be needed. Hopefully a pilot’s employers would help with the cost of this, but the inconvenience and disruption to the individual cannot be denied.
The UK CAA has also unilaterally decided that “we would recognise EASA certificates, approvals and licences for use in the UK aviation system and on UK-registered aircraft at least for a period of two years following Brexit” (UK CAA 2018d). It is unclear whether the two year period mentioned is an invented number or dependent on any wider negotiated transition period.

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