With the aviation industry completely consumed with the fallout from the Covid-19 pandemic, preparations for the end of the transition phase for the UK's departure from the European Union (EU) have been put on the back burner even though there are potentially serious consequences for not being prepared. The crisis has disrupted negotiations between the UK and the EU covering future arrangements, including the regulation of aviation and market access. It is far from clear that agreement will be reached before the transition period ends at midnight on Dec. 31, 2020, leaving open the possibility of a so-called "no-deal" scenario that could be highly disruptive.
The two sides have until June 30 to determine whether or not to extend the transition period by between 12 and 24 months to give more time for agreement to be reached. However, Britain's Conservative government has steadfastly ruled out a request for an extension, even though talks are well behind schedule.
Areas such as traffic rights, ownership and control, VAT and customs duty, and the future relationship with the European Union Aviation Safety Agency (EASA)—which oversees the European Common Aviation Area (ECAA)—all have to be decided well before Dec. 31, 2020. The EU has been part of negotiated horizontal agreements with 17 other non-ECAA countries, including the U.S. and Canada. These cover areas such as access rights for airlines, passenger rights, and investment.
According to the Centre for Aviation (CAPA), “Through these and the ECAA, the UK flights have access to 44 countries, accounting for about 85 percent of all of Britain’s international air traffic.” This is a lot of ground for the UK to make up.
In its 2018 paper on Brexit, which is still useful as all that has happened is further delay since it was published, the European Business Aviation Association (EBAA) outlined six possible scenarios: Maintenance of the status quo; the UK joins the European Economic Area (EEA); negotiation of UK-EU bilateral aviation agreement (Swiss model); the UK joins the ECAA; no “aviation deal,” with reversion to previously agreed on bilateral air services agreements (BASAs); and negotiation of a new BASA with EU and/or the individual member states. EBAA’s report then lays out the various complexities of each scenario—which is why it’s important to know which one will apply, as the industry needs time to prepare.
The current situation is that EU/UK negotiations have started based on the Political Declaration agreed in October 2019, which itself followed the UK’s EU (Withdrawal) Act 2018 and the public vote to leave the EU back in 2016. The former ensured that all existing EU law was effectively incorporated into UK law on Feb. 1, 2020. The EU states that the UK withdrew from the union at that date and has become a “third country,” with EU law applying “in its entirety,” though the UK will after the transition period have the power to repeal it.
On March 7, the UK government confirmed that it will withdraw from EASA on December 31, provoking widespread concern in the aviation industry about the disruption this could cause. It argued that membership of EASA is incompatible with the UK's independent status, even though other non-EU states, including Switzerland, have remained long-standing members of the agency.
Whether a new relationship, including in aviation, can be negotiated in time remains to be seen. The EU recently stated: “It is not certain whether such an agreement will be concluded and will enter into force at the end of the transition period. In any event, such an agreement would create a relationship which in terms of market access conditions will be very different from the UK’s participation in the internal market.”
It further warned: “Therefore, all interested parties, and especially economic operators, are reminded of legal repercussions that need to be considered when the transition period ends. As of the end of the transition period, the EU rules in the field of civil aviation safety will no longer apply to the UK.”
The UK Civil Aviation Authority (CAA) says the UK government’s position is, “to ensure continued transport connectivity in support of successful economic and social ties, and as part of a deep and special future relationship.” However, its recent guidance added: “Different outcomes are possible, but the respective positions outlined in the EU and UK negotiating mandates make clear that the UK will no longer participate in EASA systems after the end of the transition period on 31 December 2020.” Some observers believe this apparent hardline position by the UK is a negotiating tactic, but time is now running out for concessions to be made.
The CAA has been preparing for all scenarios, including “implementing contingency plans for the regulation of aviation in the event of the Brexit transition period ending in December 2020 with no UK-EU aviation safety agreements in place.”
At the moment, the EU has agreed the UK will be treated as an EU member state for the purposes of international agreements, including the EU-level BASA. The UK Department for Transport (DfT) and CAA are working with their counterparties in the U.S., Canada, and Brazil to create bilateral agreements for when it ceases to be able to rely on the EU ones. The CAA says that it and the UK DfT are taking “all reasonable steps within their control to reduce disruption to the aviation industry if a mutual recognition arrangement is not agreed.”
Usefully, the CAA has listed the assumptions it has made as to what is likely to happen “to help organizations with their own planning” so that they can prepare for no aviation safety agreements being in place at the end of the transition period.
First, through the EU (Withdrawal) Act 2018, all European aviation laws are likely to be adopted at the end of the transition period. The UK, “withdraws completely from the EASA system on Jan. 1, 2021, meaning that the CAA will need to fulfill regulatory functions without having EASA as a technical agent and without having access to EASA and EU-level capabilities.”
From the end of the transition period, the UK will no longer be included in EU-level BASAs so that new UK agreements will come into effect. There will be no mutual recognition agreement between the EU and the UK for aviation licenses, approvals, and certificates. The EU will treat UK airlines as third-country operators. All licenses issued by the CAA under EU legislation, and all type approval certificates and third country approvals issued by EASA under EU legislation, will continue to have validity under UK law, provided they were effective immediately before Jan.1, 2021.
According to a report by CAPA, “Flights could potentially be grounded” if there is no comprehensive EU-UK air transport agreement in place by the end of 2020. “More likely, however, is a ‘bare bones’ deal on traffic rights and safety regulation.” The two sides have provisionally agreed to this already, stating it would last for a period of up to 12 months. However, the agreement would not include access to each party’s internal/domestic market, noted CAPA. “In this respect, it would mean a reduction in the current level of liberalized access.”
The EU also proposed regulations to extend by nine months after a no-deal Brexit the validity of aviation safety certificates issued by EASA to UK businesses for certain aeronautical products, parts, and appliances. It would also allow further extensions if necessary.
For its part, the CAA said that EASA certificates, approvals, and licenses will be recognized for use in the UK on UK aircraft for up to two years after the Brexit date.
In its report of October 2018 (compiled by consultancy Taylor Airey), the International Air Transport Association predicted that “The most likely outcome” of negotiations, based on a comprehensive EU-UK BASA being negotiated to be in force after the transition period, “is that the UK will seek to become a third country member of EASA and remain a management board member state but lose voting rights—adopting a similar position to Switzerland, Norway, Lichtenstein, and Iceland.”
In terms of trade, not reaching an agreement by the end of 2020 leaves the fallback position where goods are traded under World Trade Organisation rules, but there is no similar default for aviation. Therefore, the so-called bare bones approach “would most likely be further extended by mutual agreement,” believes CAPA. “Nevertheless,” it added, “Brexit still leaves some uncertainties related to aviation market access and safety regulation.”
The London-based Institute for Government has also analyzed the effect of Brexit on aviation, noting it contributed £52 billion ($65 billion) to the UK economy in 2016, while flights to or from Europe from the UK accounted for 63 percent of all passengers who passed through UK airports in 2016.
The UK has several objections that will hold it back from mirroring what other countries have negotiated. For example, it could gain full access to the ECAA (all nine freedoms of the air) but every EU member state would have to agree—and two things could scupper this. First, Spain is likely to block it because of its objections to sovereignty arrangements for Gibraltar and, second, the UK does not want to submit to the jurisdiction of the European Court of Justice and EASA. A Swiss-type deal provides an off-the-shelf framework but, again, Spain could block the deal.
The UK could instead negotiate a new Open Skies deal with the EU but it is likely to insist on some arrangement that “levels the playing field,” including standards on the environment, state aid, labor laws, and competition—all of which the UK is likely to resist.
The fallback option is creating a separate agreement with each EU member state, which the Institute for Government points out “would be an immensely complex and time-consuming exercise.” Falling back on old aviation agreements that used to be part of the Chicago Convention would only give the first five freedoms of the air and would still leave licensing of pilots and aircraft parts to deal with.
For business aviation, issues are slightly less complex than for scheduled air transport. Both airlines and business aviation operators have been making contingency plans and hedging their bets, some by creating mainland European bases. Now all they can do is grapple with recovering from the Covid-19 emergency and hope the politicians reach some meaningful agreement and give them sufficient time to prepare.
At its annual conference in March, the British Business and General Aviation Association and the group's chair Aoife O'Sullivan expressed dismay at the lack of progress and what Brexit could mean to the UK industry.