UK: Brexit And The Aviation Industry: Up In The Air?

Last Updated: 6 April 2017
Article by Richard Barham and Rebecca Owen-Howes

The aviation sector is crucial to the UK economy. The UK government has said it wants to work with industry to ensure the sector remains "prosperous and open for business" post-Brexit. It seems likely that there will be some trade-off between national sovereignty and access to the EU single aviation market, but the extent of this remains to be seen. We discuss some of the key high-level issues and raise questions that policymakers in the UK will need to address in reaching any agreement with the EU.

Competition between airlines

Traffic rights within and outside the EU

Within the EU:

  • Retaining membership of the European Common Aviation Area (ECAA) would ensure continued unrestricted access to all EU destinations. It is not clear at this stage, however, what form UK membership would take, as the ECAA Agreement does not make provision for a change of status of an EU Member State party.
  • Leaving the ECAA behind would require the UK to enter into a new bilateral deal with the EU (in theory the UK could enter agreements with individual Member States, although this is unlikely). Switzerland is not a member of the ECAA, but has a separate bilateral agreement with the EU, which gives it access to the EU aviation market. Whether a new bilateral agreement would include the right to fly domestically within an EU Member State is not certain.

Outside the EU:

  • If the UK retains membership of the ECAA, the UK may be able to retain access to 17 non-European countries with which the EU already has agreements, including the US. ECAA members Norway and Iceland are both parties to the EU-US Open Skies Agreement, despite not being EU Member States.
  • Leaving the ECAA would entail signing new bilateral deals, including open skies agreements, with third (i.e. non-EU) countries, or relying on historic agree-ments which may no longer be suitable. Transitional arrangements may be put in place due to time constraints (also for any EU-UK agreement).

Key government considerations:

  • Less "hard Brexit": whether the UK government is willing to accept some, or all, of the EU aviation rules in exchange for entering into an agreement with the EU. Relevant considerations will include: free movement of people, non-discrimination, market access, air traffic management, aviation safety, and rules on competition and state aid.
  • Political considerations: whether the UK will be held to ransom by any parties to the ECAA Agreement. In order to join the ECAA, the UK requires the consent of the current signatories. Political considerations may come into play here – for instance, some European countries may use this opportunity to seek to promote their low-cost airlines at the expense of UK-based ones.
  • Timing: whether there is sufficient time for the UK to reach agreement on a new bilateral agreement, including with the US. Agreeing new bilateral deals, including open skies agreements, will be contentious and time-consuming. The Swiss bilateral agreement, for example, took seven years to be negotiated, as did the EU-US Open Skies Agreement (stage one took more than four years to be negotiated, while the second stage took a further two years of negotiations).
  • Protectionism: whether third countries will try to take a protectionist approach, for example limiting flying rights to certain national carriers. The UK government may consider preventing EU carriers from operating intra-UK flights.
  • Heathrow: whether Heathrow will prove to be a jewel in the crown. In the EU-US Open Skies negotiations, Heathrow access rights were heavily negotiated with accusations by British Airways that the US required maximum access to Heathrow, but fought to restrict access to US airports by EU airlines. Will this remain the case for UK bilateral negotiations? It may be that in the context of agreeing a new trade deal, third countries seek to obtain additional airport slots.

Airline ownership

  • EU nationality airline ownership rules require airlines to be majority owned and controlled by EU nationals so they can offer flights within the EU.
  • If the UK signs up to the ECAA, it must continue to comply with the EU ownership and control arrangements.
  • If the UK decides to adopt different ownership rules, it could take this opportunity to relax the current ownership rules to allow foreign non-EU investment into the UK aviation market. Alternatively, the UK may decide to legislate for UK ownership and control, although this seems unlikely at this stage.

Key government considerations:

  • Foreign investment: whether the UK government will use this opportunity to make the domestic aviation market more competitive by allowing foreign investment, or adopt a more protectionist approach. The latter may push EU-owned airlines to establish UK subsidiaries. Conversely, UK-owned airlines operating in the EU may move to alternative headquarters outside the UK, or expand in the EU post-Brexit by setting up subsidiaries with an EU air operator's certificate (AOC).
  • Discrimination: whether the UK government will impose different requirements for non-UK companies operating in the UK.
  • Airline restructuring: whether airlines will need to restructure as a result of any changes that are proposed by the UK government and whether any weight will be given to lobbying by airlines. Airlines may consider, for example, changes to their AOC, articles of association and/or headquarters. Operational restructuring may lead to job losses in the UK.

EU slot rules

  • Current EU slot rules state that 50 per cent of new slots are to be allocated to new competitors at a particular airport.
  • If the UK signs up to the ECAA it will have to abide by EU slot rules, unless negotiated otherwise.
  • If the UK forgoes the ECAA, it could introduce a UK-based slot regime whereby slots are auctioned by either the airport operator or the government.

Key government considerations:

  • "Use-it-or-lose-it": whether, if the UK introduces a UK-based regime, the government considers imposing "use-it-or-lose-it" rules, or sanctions for slot misuse.
  • Slot trading: whether the UK government addresses the secondary market for the trading of slots.
  • Negotiating tool: whether the UK government will be able to use slots at UK airports to gain traction in its negotiations with third countries.

Safety and security

European Aviation Safety Agency (EASA)

  • EASA is tasked with aviation safety regulation within the EU, of which the UK is currently an influential member (on the Membership Board). As with consumer protection (see below), if the UK remains in the ECAA, the EU will require compliance with EASA regulations, unless negotiated otherwise. Iceland, Liechtenstein, Switzerland and Norway are non-EU members of EASA, although they do not have voting rights.
  • In the event the UK forgoes this membership option, it would be for the Civil Aviation Authority to seek to develop a new international aviation safety system and/or to exert influence via the International Civil Aviation Organisation (ICAO).

Key government considerations:

  • Free movement: whether the UK will accept full or partial free movement of people.
  • Limited influence: whether the UK government will be able to negotiate different EASA membership terms. Historically, non-EU members have had to accept restrictions on voting rights and influence.

Consumer and environmental protection

Consumer protection

  • EU consumer protection rules give passengers rights to compensation, refund and care in the event of delayed or cancelled flights. If the UK remains in the ECAA, the EU will require compliance with these rules, unless negotiated otherwise.
  • Alternatively, the UK could develop a new set of national standards, although it is unlikely that these would be substantially different from the current rules.

Key government considerations:

  • Limiting liability: whether the UK will limit the liability of airlines where delay or cancellation is due to extraordinary circumstances beyond the control of an airline.

Environment

  • The current EU laws cover noise emissions and air quality standards.
  • If the UK remains in the ECAA, it must continue to comply with certain EU environmental provisions, including on noise emissions, unless negotiated otherwise.
  • The alternative would be for the UK to comply with the environmental protection measures enshrined in national legislation. It is unlikely that domestic legislation would differ markedly from the current position under EU law, but it is possible that the UK may introduce further protection, for example as a condition of developing the proposed new runway at Heathrow.
  • In relation to emissions, ICAO recently passed an assembly resolution introducing the first global market based measure for CO2 emissions. Whilst the EU has questioned how effective the measure will be in combating climate change, it would be open to the UK post-Brexit to adopt the ICAO measure.

Key government considerations:

  • Emissions trading: whether the UK adopts the Global Market Based Measure independent of the EU.

Further considerations

  • The future of Heathrow: under the EU-US Open Skies Agreement, any US airline may compete for access to Heathrow. This has led to Heathrow becoming more specialised in the US-Europe market. While a new bilateral agreement is negotiated, would the UK and US revert to their previous agreement restricting US-Heathrow access to four airlines? Or is Heathrow's role as one of the world's best-connected hub airports less significant now than it was previously, given the expansion of other hubs, the delay on the proposed third runway at Heathrow and, possibly, changes in passenger numbers?
  • Political considerations: It is not clear at this early stage whether any future EU-UK agreement granting the UK access to the EU's single aviation market would apply to the airport of Gibraltar, given that both the UK and Spain claim legal rights to the territory. This has the potential to give rise to difficulties where unanimous support of all the EU Member States is required for such an agreement.
  • State aid: the UK will no longer be bound, or protected, by EU restrictions on state aid to national air industries. However, EU Regulation 868/2004, which has not to date been relied on by Member States, allows an action to be brought against a third country that unfairly subsidises its airlines. In addition, WTO limitations on subsidies will continue to apply.
  • UK Great Repeal Bill: there is uncertainty over whether all EU law will be transposed into UK national law, ready for the day when the UK leaves the EU. It is also not clear what, if any, changes will be made by the UK government to EU aviation legislation before, or after, the Bill is passed by Parliament – this will depend on the progress and extent of the UK's negotiations with the EU.
  • EU's Aviation Strategy for Europe: Brexit has already disrupted discussions on future legislation under the EU Aviation Strategy. But what will be its long-term effects?
  • An all-encompassing free trade agreement: any EU-UK aviation agreement may form part of a suite of free trade arrangements and therefore be the subject of wider negotiation.

Download this alert here

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
6 Sep 2018, Business Breakfast, Glasgow, UK

Decarbonising our heat is a key component of The Scottish Energy Strategy and an essential piece of the complex matrix we must tackle if we are to meet our climate change obligations.

11 Sep 2018, Business Breakfast, Milton Keynes, UK

Join us for our next development breakfast round table event reflecting on the on-going planning discussion regarding the Oxford-Cambridge corridor and helping you consider how best to cash in on the exciting opportunities by considering the benefits of promotion and option agreements.

20 Sep 2018, Seminar, London, UK

Environmental regulation and liability have risen up the boardroom agenda over the past decade. Recent changes to environmental sentencing have brought this area of risk even more into focus.

Similar Articles
Relevancy Powered by MondaqAI
Clyde & Co
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Clyde & Co
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions