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The Airline Industry Is An Important Part of Brexit Negotiations

 5 min read / 

The airline industry plays a central role in the economies of the UK and the rest of the EU. It is, as with other leading sectors, exposed by the current uncertainties in Brexit negotiations, thus it remains anxious to state why its case should receive priority treatment.

It is not only Ryanair’s Michael O’Leary, the CEO of Europe’s biggest budget airline who constantly warns of potential flight cancellations if Brexit negotiations don’t achieve a swift and acceptable deal with Brussels.

Warnings come also from America’s biggest aviation trade body (A4A) representing American Airlines, Southwest and United Airlines which has called for the negotiating parties to give consultations a priority saying it is “absolutely essential” that new deals are struck with Europe and the United States.

Nicholas Calio, President and CEO of Airlines for America (A4A) has expressed fears that : “If there is no agreement between the UK and EU by March 2019, other sectors (manufacturing  and commerce) fall back on WTO rules but we have no legal framework under which to fly,” He is not alone among CEOs eager to lobby their sectoral interests with EU decision makers and the UK government.

For the US which counts the UK its biggest trading partner within the EU, a deal, is essential for it to maintain and develop Heathrow as its main hub for entry to the EU hinterland. For the UK, a smooth transition is vital with any transitional arrangements being, at best, a temporary measure.

‘Time Is of the Essence’

Michael O’Leary expressing urgency sees March 2019 date as far too late. He told the EU Parliament’s Transport and Tourism Committee on the 10th July 2017 – because of the structure of selling tickets well in advance the deadline for the airlines is September – October 2018. Without progress the message he gave in other interviews was that… “We will start cancelling flights from six months before Brexit.”

O’Leary’s pessimistic views on the Referendum outcome are well-known. Voicing his criticism on countless occasions he has stated … “ I think Brexit is going to be one of the great economic suicide notes in history …”

What Is at Stake?

The continuation of an Open Skies Agreement – allowing EU airlines including those registered in the UK to operate in each other’s countries – is vital for the future of aviation between the UK and the EU. The importance of this applies equally to airlines of other countries such as those in United States Asia and the Middle East. Under the US-EU Open Skies agreement of 2007, US and European air carriers are free to operate flights from any point in the European Union to any point in the United States and vice versa.

Professing Britain’s cherished belief in global trade, it is inconceivable for the (UK) government to support anything but an open and deregulated aviation market. But negotiating with Brussels will be complicated as decisions on all aspects of future economic relations with Britain require the approval of both the EU27 and the EU Parliament. Politicians on all sides of the political spectrum need to be constantly reminded of this and aim to inform their constituents of the difficulties that lie ahead. Doing this may help to damper the unrealistic aspirations of hardened euro-sceptics indulging in the belief that the rest of the world is queueing up to sign off trade deals.

What Are the Options for the UK?

The best option would be for the UK to remain part of the European Common Aviation Area. This would provide continued access to the European Single Aviation Market but entails accepting all EU aviation law plus the direct jurisdiction of the European Court of Justice (ECJ) . Even negotiating a customized/bespoke arrangement/deal (option 2) similar to the Open Skies agreement – between the EU and the US – would require accepting the ECJ which has vigorously championed airline passengers’ consumer protection and compensation rights.

Legal experts have begun to express serious doubts that the UK can have a deal which escapes European court supervision. Any new domestic court would have to mirror EU rules and so be tied to the ECJ in all but name.

What Makes Aviation a Special Case?

Depending on the outcome of negotiations, there may be issues for the UK as not being a member of the EU it would need an Air Operating Licence (AOC) across Europe – required by UK airlines to operate in the EU if there was a hard Brexit. Added to this is the fact that “a UK airline having an AOC may simply be not enough” as the real issue relates to ownership. Non-European entities are not allowed to own a majority share in European airlines and vice versa. Representations to have this rule softened have been advanced but with no immediate results.

Easyjet has taken no chances. As a UK registered airline it has more to lose than Ryanair (based in Dublin). This has prompted EasyJet to establish an EU AOC choosing Vienna as its European headquarters.

Conclusion

UK airlines seem unanimous in the opinion that a hard Brexit will lead to reduced competition, reduced routes and higher travel prices. This concern is shared by UK consumers, with many convinced that Brexit will lead to more expensive holidays made worse by the weak sterling/euro exchange rate.

The airline industry agrees that it is absolutely essential that an Open Skies Agreement is put in place between the UK and the EU – as well as between the United States and the UK, with each being operational immediately after the UK’s departure from the EU (March 2019).

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