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Brexit options explained

by Captain Martin Chalk BALPA Member

A quick glance at newspaper headlines shows we are becoming increasingly aware of the consequences of uncertainty over Brexit. Cabinet Minister Phillip Hammond has talked about the possibility of flights being suspended on the first day of Brexit and the papers picked that up with headlines warning of stranded families, grounded planes and crippled airlines and airports.

So, what are the possible scenarios after the UK leaves the EU in March 2019? The government has outlined three potential options for a future UK-EU relationship:

1. Membership of the European Economic Area (EEA), which is the model followed by Norway and that ensures full access to the Single Market
2. Bespoke bilateral arrangements, akin to the agreements between the EU and Switzerland
3. WTO relationship – in other words, no special arrangement with the EU

Each of these has an aviation equivalent, described by the International Air Transport Association (IATA), a global-level trade body for most of the world’s airlines, as:

• Membership of the European Common Aviation Area (ECAA), which includes the EU states plus some neighbouring countries, such as Morocco, Norway and the Western Balkan states
• UK-EU Comprehensive Agreement, such as the EU-Canada or EU-USA agreements
• No formal agreement

Scenario 1: remain within the ECAA

What does this mean?

If all other signatories agree, membership of the ECAA after the UK leaves the EU would largely mean no change for the industry. There would be questions about the validity of UK airlines’ access to agreements with some third countries – such as the USA – but these would have political weight behind their resolution from both the UK and the rest of the EU. The UK would move from being a full voting to a non-voting member of the European aviation community. We would be subject to EU aviation law, including EASA regulation, but would no longer be able to help frame that law.

Questions about ownership and control of airlines, market access, and regulation of airline activity would be answered by remaining part of the EU set-up. Slot regulation, as well as application of the single European sky, accident investigation and incident reporting, airworthiness and licensing, security, inspections, and environmental, consumer and working-time legislation would all still apply without change.

However, as Chris Chalk of the British Aviation Group has written: “The elephant in the room is the European Court of Justice (ECJ), which underpins EU structures and legislation. Getting away from the civil law-based ECJ to a common-law based UK structure is a key issue for Brexit. The ECAA is structured under the ECJ.”

What changes will we notice?

Very few. Over time, a Franco-German-led EU, without the more liberal voice of the UK over the past couple of decades, may become more conservative and less liberal in its outlook.
What are the risks?

Despite this being the preferred outcome of virtually all the major commentators and participants in the aviation sector, the UK Government has to be ready to compromise on its ideological aversion to the jurisdiction of the ECJ if the UK is to join the ECAA when we leave the EU. It is hard to see how full access to the EU air-transport market can be negotiated without acceptance of the rules of that market and the jurisdiction of its court.

Scenario 2: bespoke EU-UK deal

What does this mean?

Uncertainty, which will persist for as long as it takes to negotiate the deal. As a guide, the deals with Switzerland and Canada took more than seven years, and the one with the USA took more than 10 years. It will also be a very odd and different negotiation. Normally, negotiators on both sides are aiming for a win/win scenario. All trade deals in recent decades have been liberalising agreements, where negotiators can point to clauses that win useful new rights for their constituents. However, this will be a ‘damage limitation’ negotiation, moving the UK away from the full freedoms of market membership to some lesser freedoms of market access – inherently, a more difficult scenario to negotiate and sell.

What changes will we notice?

The answer seems to be that it depends. If transitional arrangements smooth the way to a future deal that is not substantially different, then it might be gradual and not so noticeable. However, refer to the final scenario if there are no transitional arrangements and negotiations are not completed quickly enough.

What are the risks?

The major one is uncertainty. This scenario implies change, but to what extent it will be cosmetic, ‘face-saving’ change for the political negotiators, or fundamental alterations to market access, ownership and control– or to the regulatory rules under which we operate – is left wide open, breeding great uncertainty.
Leaving the EU will inevitably involve some restrictions on immigration and the free movement of people to and from the UK; PwC estimates that the ‘similar to Canada free-trade agreement’ would result in 3.9 per cent fewer passengers to UK airports.

Scenario 3: no deal

What does this mean?

This is the most uncertain outcome of them all. The online legal resource Lexology states: “If the UK leaves the EU without any alternative arrangements having been put in place, there will be major adverse practical consequences for UK-based airlines, passengers and others involved in the industry.”

Nick Calio, Chief Executive of Airlines for America, said: “If there is no agreement between the UK and EU by March 2019, other sectors fall back on World Trade Organization rules, but we have no legal framework under which to fly.”

PwC estimates that the loss of traffic through UK airports under this scenario would be more than seven per cent.

What changes will we notice?

Under the most dramatic scenario, other countries will not recognise the legal right of overflight or landing for UK airlines, and large numbers of flights could be cancelled. Even before the deadline of March 2019, airlines might choose to prioritise flights to those destinations where political cooperation may seem more likely, while not selling flights to less friendly destinations.

Larger airlines may choose to move capacity to other parts of their operation, causing pressure on UK-based employment and denying connectivity to UK business.

What are the risks?

If aviation regulators in other countries believe that, in leaving the EU, the UK has failed to recreate the coherent licensing, operational and maintenance regime required by ICAO, they may refuse landing rights. The safety of the industry is built on adherence to ICAO standards and recommended practices; demonstrating that each state adopts and enforces these is fundamental to the air-transport agreement provisions to allow landing and overflight rights.

The majority of informed comment in our industry is optimistic that the UK Government can be persuaded that the only sensible option after we leave the EU is to have continued membership of the ECAA. This would largely answer all market-access, ownership and control, and regulatory questions, without the need for fundamental changes to the industry. But it requires acceptance of the jurisdiction of the ECJ for enforcement of the market’s rules across 35 countries with a combined population of more than 500 million people – something described as a ‘red line’ for the UK.

If this is not possible, there will be uncertainty, breeding lower levels of investment, and challenges with continuity of regulation. The policy planes are in the air. Where they will land is an enormous question for the future of the UK aviation industry.

In the corridors of power Brexit negotiations continue. BALPA will maintain its calls for decisive action and will keep you updated on any progress.

You can read the full version of this article in the autumn edition of The Log.