Brexit and Aviation
Following the ‘advisory’ referendum held on 23 June 2016, it is currently expected that the UK government (‘HMG’) will activate Article 50 of the Lisbon Treaty to commence negotiation on leaving the European Union (EU) in February or March 2017. As the Chancellor‘s Autumn Statement approaches on 23 November 2016, we look at a joint industry/government announcement on the implications of Brexit for aviation. The government are challenging a recent high court ruling that they need parliamentary agreement prior to that action, which in turn may result in extra conditions being imposed on the negotiations or even require other legislation first. The Supreme Court hearing is expected to last four days, starting 5 December 2016, with the decision expected in the new year. Article 50 sets a time limit of 2 years for those negotiations, something that can only be extended if all other 27 EU members agree. In his Times column this morning, Philip Collins suggests that the Prime Minister, the Rt Hon Theresa May MP, should openly acknowledge that full ‘Brexit’ of the UK from the EU can’t be achieved before the 2020 UK general election. Its also been observed that the prospect of President Trump makes the context for Brexit more challenging:
Britain is caught between a retrograde American administration with which it no longer shares a world view and a frustrated Europe it is trying to divorce. This is not a recipe for international influence.
There remains strong opposition to leaving the EU and of the associated ‘European single market’, that might result in a proposal for a second referendum on independence in Scotland for example, or even a different status for Scotland. Scotland’s senior law officer, the Lord Advocate, has been invited to address the Supreme Court the relevance of points of Scottish law in the coming hearing.
The Single Market & Aviation
The European single market “refers to the EU as one territory without any internal borders or other regulatory obstacles to the free movement of goods and services”. These freedoms of movement also extend to workers and capital and provide significant economic opportunities and benefits to industry. This is especially true for the European aviation and aerospace industries that over the last generation has also been on a journey of regulatory harmonisation and standardisation for a generation (first through the Joint Aviation Authorities [JAA] and later the European Aviation Safety Agency [EASA]), as well as through Eurocontrol in the air traffic domain and the European Defence Agency (EDA) in relation to the new European Military Airworthiness Requirements (EMARs). Additionally there is the European Common Aviation Area (ECAA), that aims to allow “gradual market opening between the EU and its neighbours linked with regulatory convergence through the gradual implementation of EU aviation rules to offer new opportunities for operators and wider choice for consumers”.
Additionally for manufacturers there are a web of EU trade agreements around the world. Immediately after the referendum vote dire consequences of Brexit have been forecast for aviation and the International Air Transport Association (IATA) commenting:
Preliminary estimates suggest that the number of UK air passengers could be 3-5% lower by 2020, driven by the expected downturn in economic activity and the fall in the sterling exchange rate. The near-term impact on the UK air freight market is less certain, but freight will be affected by lower international trade in the longer term.
Aviation is crucial to the UK’s economy – contributing around £20 billion per annum. The UK has the largest aviation network in Europe and the third largest in the world, handling over 250 million passengers and 2.3 million tonnes of cargo last year. The freedom of movement of workers, and by definition immigration, however became a controversial point in the UK referendum campaign. As Gary Gibbon of Channel 4 News comments today also:
From the moment Mrs May committed to taking back control of immigration, full membership of the Single Market was ruled out. The EU won’t allow a waiver on that central principle and Mrs May made it even more implausible when she ruled out the UK being subject to the jurisdiction of the European Court of Justice (ECJ) Britain in her party conference speech. The kernel of the “plan,” such as it is, is to retain as many of the benefits of the Single Market for as many sectors of the UK economy as possible while regaining something that can be sold as “control” over immigration. That covers a multitude of possibilities, it might completely founder, but for now it is the government’s direction of travel on Brexit and we might discover precious little more on detail for some months.
“Brexit means Brexit”, making “a success of it” and getting “the best deal” for Britain are some of her stump phrases. But a closer look at her speeches suggests her position on key aspects of Brexit has evolved since she took office in the aftermath of the June 23 vote to leave. Together with public comments by ministers in her Conservative government, the changes appear to suggest May has shifted from favoring a “hard Brexit” – a clean break with the EU’s single market of 500 million consumers – to supporting continued membership of that market if possible. May has declined to say whether she wants Britain to remain in the single market. Her aides say she is considering all options.
This week, talking to business leaders in London, immigration did not figure in her speech at all. Instead, May has increasingly focused on business concerns.
That may have been prompted by the big fall in sterling since the referendum, according to sources close to the government.
So What is Happening for Aviation on Brexit?
Not only is the Government methodically working through the process of understanding and identifying its Brexit priorities, it’s actually telling us about some of its thinking.
Earlier this week, following a round-table meeting, the Department for Exiting the European Union (DExEU), the DExEU Secretary the Rt Hon David Davis MP, the Airport Operators Association (AOA) and Airlines UK (formerly BATA) issued a joint statement on aviation issues that sets out exactly what HMG is thinking on Brexit relating to aviation:
Market access remains a top priority, and we want to make sure we have liberal access to European aviation markets. We will also work closely to explore new opportunities for further liberalisation. We are clear that Brexit provides greater freedom to seek new agreements between the UK and some third countries. This includes looking at possible bilateral agreements to strengthen economic and cultural ties even further with countries such as the US and Canada. Other areas of critical importance to address during negotiations include aviation safety, security, air traffic management, passenger rights, customs, and the environment. We will continue to engage with the industry on these issues throughout.
ADS’ Chief Economist and Director of Policy Jeegar Kakkad has commented:
… this is a clear sign that HMG not only gets the issues, it is publicly setting out priorities.
For aerospace and defence companies, customs and safety certification issues are absolutely critical to their global competitiveness.
As the statement points out, these are fundamental market access issues that ADS are confident that HMG are taking very seriously.
There would be significant practical benefits in the UK remaining an EASA Member State (EASA MS) and a return to ‘British Civil Airworthiness Requirements’, for example, has been rejected by most policy makers as impractical. The proposed Great Repeal Act will, perversely, embed existing EU law into UK law. If, the UK were to remain an EASA MS, subsequent aviation legislation would also need to be enacted nationally as it is for example by EEA member Norway.
Aerossurance’s Andy Evans is a member of the ADS Airworthiness Board and former chair of the ADS Military Aviation Safety Group. This is a critical topic we will continue to follow with keen concerned interest.
We don’t share the naive optimism of some others:
UPDATE 20 November 2016: Amid suggestions that it will be in the interest of the other EU states to force a ‘Hard Brexit’ if the UK rejects the principle of free movement (and clear statements from countries such as Denmark), Flight International comments that: Hard Brexit carries risk for aviation:
For all the talk of opening up the world, the [Hard Brexit] would create a bureaucratic brain-ache for airlines at best. At worst, it would destroy the liberal aviation environment painstakingly created over recent decades, and – along with it – low fares and consumer choice.
They also note that while Irish airline Ryanair (the fourth largest operator in the UK domestic market, which have already stated they will reduce investment in the UK) are reportedly considering a UK AOC to protect its UK operations while UK based EasyJet is considering gaining an AOC in one of the other 27 EU states.
Virgin Atlantic CEO Craig Kreeger warned before the referendum that Virgin would consider ‘rebasing’ some of its fleet elsewhere in Europe. One side effect of this could be a funding criss for the UK Civil Aviation Authority (CAA), which is funded by industry and in particular large airline AOC and CofA fees.
Meanwhile British Airways‘ parent IAG is actually a Spanish registered company. This gives both opportunities and potential challenges. “The UK referendum decision to leave the European Union puts the airline industry firmly into uncharted territory,” said Gerald Khoo of Liberum.
UPDATE 21 November 2016: Speaking at the AOA’s annual conference, the Secretary of State for Transport, Rt Hon Chris Grayling MP, pledged the aviation industry will be prioritised in Brexit negotiations saying: “I can give that assurance…. The issue we have to address is the Open Skies arrangement within the EU where you have airlines like easyJet flying from Luton to Alicante to Germany to Italy back to Alicante then Luton in the same day.”
But Olivier Jankovec, the director general of Airports Council International (ACI) Europe, said he’d heard a different tune coming from Brussels. He sees a weaker UK position in Brussels that could also undermine the EU’s liberal aviation strategy. “EU states will listen politely to what the UK has to say,” he said, but added that the UK will no longer be a driver in setting the agenda.
Also today, ADS CEO Paul Everitt emphasised that the aerospace sector provides 128,000 high-value jobs in the UK, saying:
The UK’s decision to leave the European Union has created significant uncertainty and this will continue until our new relationship with the EU has been determined. In the meantime it is essential that industry plays a pragmatic and productive role in helping government secure the best possible deal for our future prosperity. It is also important that the work the Aerospace Growth Partnership has done is continued and that government uses every opportunity to signal long term commitment to ensuring the UK remains a leading global aerospace player. The Chancellor’s upcoming Autumn Statement will be a key opportunity to set out positive measures to encourage companies to invest now and maintain momentum across the economy. Targeted reforms aimed at encouraging investment in new innovation and technology – such as raising investment allowances and R&D tax credits – are measures that will help sustain UK competitiveness.
It is hoped the Autumn Statement will deliver a boost to funding for a key AGP initiative, the Aerospace Technology Institute (ATI). The ATI is helping to encourage private sector investment in valuable R&D programmes. It is currently receiving far more high quality bids than it can resource. Extra Government funding would bring a major boost to UK capability and help UK businesses prepare for major new aerospace opportunities. In the longer term, industry needs to help and support government in achieving the best deal from Brexit negotiations. We need a relationship with Europe that retains access to the customers, suppliers, skills, R&D and influence that underpins the ability of aerospace to win in tough global markets.
A leading priority for aerospace is ensuring that the UK remains an influential part of the European Aviation Safety Agency (EASA), which certifies the safety of aircraft products for sale.
Remaining a member of EASA is a far easier and less costly route than relying on the Civil Aviation Authority to develop the required certification. For aerospace, eliminating or minimising non-tariff barriers after Brexit is essential to maintaining global competitiveness. Quickly resolving the EU and UK’s schedules at the World Trade Organisation (WTO) will be critical to ensuring that aerospace is covered by the WTO agreement which removes tariffs on most aerospace goods. Whatever shape Brexit takes, on exiting the EU, UK industry will need a transition period to manage the inevitable commercial consequences.
The harder the Brexit, the greater the commercial risk, and so the longer that transition should be.
Later in the day the Prime Minister set out her vision for UK business at the CBI Annual Conference. https://youtu.be/XdHlCDelmFc There is to be an additional £2bn per year for R&D by the end of this Parliament and an Industrial Strategy Green Paper will be published before the end of the year. ADS’ Elizabeth Gwilt, summarises the announcements.
UPDATE 22 November 2016: UK will be ‘screwed into the floor’ in EU withdrawal talks, warned Ryanair boss Michael O’Leary at the ACI conference.
Willie Walsh, chief executive of IAG — which owns British Airways, Aer Lingus and the Spanish airline Iberia — said: “I struggle to disagree with Michael. I fear Europe will see this as an opportunity to damage the UK. But John Holland-Kaye, chief executive of Heathrow [recently granted permission for a along awaited runway expansion], said: “We do have a strong negotiating position. The Government has to pay its cards close to its chest.”
Michael O’Leary however said it was a “plausible risk” that no bilateral deal for the airline industry would be forthcoming in time.
Everyone is underestimating in the UK the political situation in Europe. The European airports have seen this an opportunity to win more business away from the UK. Unless there’s some significant change the UK is going to walk itself off a cliff. I need to know by March next year what’s going to happen in Britain in summer 2019. There isn’t a politician who knows that.
Michael O’Leary then went on to make another of his famous MOLisms:
When asked for his long-term ambition for Ryanair, the airline’s chief executive said: “World domination followed by intergalactic domination.”
Willie Walsh did however comment:
Brexit could present the UK with the opportunity to develop a “simpler, vanilla” open skies agreement with the USA, without the need for the “complexity” embodied in the EU-US open skies agreement.
UPDATE 23 November 2016: During his Autumn Statement the Chancellor says:
While the OBR is clear that it cannot predict the deal the UK will strike with the EU, its current view is that the referendum decision means that potential [UK economic] growth over the forecast period is 2.4 percentage points lower than would otherwise have been the case.
Hammond had to deliver bad news for the economy. Greater uncertainty and the low value of the pound post-Brexit mean that growth will be lower next year than expected, according to the Office of Budget Responsibility, and consequently the government’s finances are in even more of a mess.
The Chancellor did announce a of a £23 billion National Productivity Investment Fund, but this will be spent on housing and transport infrastructure as well as R&D. It will include a New Industrial Strategy Challenge Fund: Paul Everitt of ADS Group, said:
The Chancellor’s Autumn Statement announced important measures to encourage investment and sustain business confidence. The additional £4.7bn in funding for innovation and new technology is particularly important for high skill, high value industries like aerospace, defence, space and security. The focus on improving productivity and supporting innovation sends a strong signal about the government’s commitment to industrial strategy.
All the Autumn Statement documents are here.
UPDATE 1 December 2016: In a speech the Chief Executive of the CAA, Andrew Haines, argued that it was in the UK’s best interests to remain an active member of EASA and that it would mean a massive increase in the regulatory burden if the UK sought to establish its own regime. He also said that post-Brexit the UK can “continue to play a very active role in ICAO – indeed strengthening but it is not a substitute for European engagement”.
UPDATE 3 December 2016: The Economist writes There is a case for staying in the customs union (Turkey, Andorra, Monaco and San Marino are outside the EEA but in the EU customs union)
…there may be political advantages to being in the customs union and not the single market. In particular, it does not require acceptance of free movement of people, budget contributions or being subject to the ECJ (though dispute settlement with Turkey is a controversial issue). It also avoids rules-of-origin checks on exports to ensure that they do not include parts from third countries. These impose heavy costs on Norway and other EEA members, which are not in the customs union. One trade lawyer says rules of origin can be so burdensome that sometimes companies prefer to pay export tariffs. The customs union offers trade benefits as well. Remaining in it might allow Britain to stay in the EU’s free-trade agreements with 53 third countries, which it will otherwise have to renegotiate. It would avoid the risk of a hard border and customs controls with Ireland, which Mrs May is keen not to impose. Blocking separate free-trade deals would certainly annoy Dr Fox, because it would largely do him out of a job. Yet in today’s political climate, free-trade deals are increasingly hard to strike and even harder to ratify. And Dr Fox is widely seen as the most dispensable of Mrs May’s Brexiteer ministers.
UPDATE 4 December 2016: A four day Supreme court hearing that will determine if Article 50 can be triggered under the Government’s ‘Royal Prerogative’ powers without a debate in Parliament starts today.
UPDATE 11 December 2016: UK firms ‘face more, not less, red tape if Britain exits customs union’
UPDATE 12 December 2016: Chancellor urges Brexit interim deal and the House of Lords EU Committee publishes its report on Brexit & UK-Ireland relations: Brexit: NI Assembly ‘should have power over freedom of movement’ The evidence they received is here.
UPDATE 14 December 2016: Norton Rose Fulbright discuss Airline regulation – what you need to know with Brexit approaching? Its noticeable how sustained the airline share price drops have been. The Institute for Government publishes: Whitehall’s preparation for the UK’s exit from the EU
UPDATE 21 December 2016: Business faces ‘confusion’ over post-Brexit regulation, CBI warns report the FT:
ADS…has put an estimate of up to £400m over a decade just to copy the European Aviation Safety Agency, which regulates the industry. The aerospace and aviation sectors, which contributed £52bn to UK GDP last year, are deeply concerned at the prospect that Britain will pull out of the EASA, which sets rules for certification of everything from aircraft and their components to flight training schools. Recreating a domestic regulatory system in the UK would be expensive and take years, say executives. “The [UK’s] Civil Aviation Authority has been run down considerably because many of the staff have gone to work at EASA,” said Simon Whalley, external affairs director at the Royal Aeronautical Society. “That’s where competence has been transferred.” As the aviation and aerospace industries have to fund their own regulation, reversing that process would be “a considerable burden”, he said.
UPDATE 7 January 2017: How Article 127 of the EEA Agreement could keep the UK in the single market
UPDATE 12 January 2017: ADS’ Jeegar Kakkad explains that future trade arrangements are not necessarily binary.
ADS will continue to support Government as it seeks to secure an ambitious agreement with our EU partners that delivers barrier-free access to trade, skills and simplified regulatory regimes. Securing the best deal for the UK and our EU partners will take time and it is essential that there are transitional arrangements in place to avoid disrupting closely integrated supply chains and damaging the UK’s global competitiveness.
ADS’ Brexit priorities are:
- Access to and influence in the regulatory regime operated by the European Aviation Safety Agency
- Access to the EU single market without burdensome customs administration or rules of origin
- Access to and influence in the collaborative R&D programmes run by the EU.
- Access to vital space programmes initiated by the European Space Agency, but funded by specific EU programmes.
- Access to the pool of skilled labour required to maintain the UK’s global competitiveness
- Transitional arrangements that provide sufficient time for companies to adjust to the new relationship.
UPDATE 26 January 2017: Giving evidence to the parliamentary Treasury Committee Airbus chief operating officer Tom Williams warns the UK “should avoid imposing a “further burden” of certification approval upon withdrawal” and “the UK risks losing its “voice” in terms of rulemaking, if it does not preserve close regulatory ties [with EASA].” Establishing a UK certification infrastructure would be “impractical”, Williams told the committee.
If you’re outside the legislative and rulemaking part of it [EASA]…I think [that] would be a bad thing.
Clearly, in terms of setting up alternatives, it would be pointless.
Even if you were to establish it, you’d end up having to do EASA certification in any case”.
If I’m a small supplier…I’d want international recognition. If I’m to host an audit from EASA, why would I bother having a separate audit under the UK? It’s not worthwhile.
He also commented that the WTO had a poor history of resolving aviation disputes.
I do not have to go through a complex customs clearing arrangement. Customs can come in and inspect us at any time—and they do. It is a very clear and transparent process, with snap audits whenever they want. At the same time, if I have a problem in one of the final assembly lines in Germany or France today, I could call the plant in Chester, in Broughton, and get 20 mechanics sent to Toulouse first thing tomorrow morning, with their toolboxes, to fix the problem. I do not have to wait 90 days for visas or special immigration clearance. In Airbus today, we see a European business, but it is a European business 74% owned in the free market. It is a shareholder-driven company. Decisions in our company are made not for political reasons but for what is best in the longterm for our customers and company. At the moment, we are continuing to invest, because we take the view that Airbus in the UK is an integral part of the family of Airbus. We are still highly committed to the UK; however, clearly, if we see a macroeconomic climate or a blockage to the key operational points…and that starts to change, it would not change our decision day-by-day but it could in the longer term. As we come towards the end of this decade when there are perhaps bigger decisions about longer term product policy and mixed investments, it could become a deciding factor. I do not want to see a loss of any of the very good capability we have today.
UPDATE 2 February 2017: HMG publish The United Kingdom’s exit from and new partnership with the European Union White Paper. Within that they say:
8.32 In the transport sector, there is a substantial body of EU law covering four transport modes (aviation, roads, rail and maritime), which governs our current relationship with the EU, and which will need to be taken into consideration as we negotiate our future relationship. For example, in aviation, the standard international arrangement is that air services operate under rights granted through bilateral air services agreements between nation states. In the late 1980s and early 1990s the EU created an internal aviation market whereby any carrier licensed in the EU is entitled to operate any service in the EU, superseding the old bilateral arrangements. As we exit the EU, there will be a clear interest for all sides to seek arrangements that continue to support affordable and accessible air transport for all European citizens, as well as maintaining and developing connectivity. We will also seek to agree bilateral air services agreements with countries like the US, where our air services arrangements are currently covered by an agreement between the EU and the US.
8.42 There are a number of EU agencies, such as the European Medicines Agency (EMA), the European Chemicals Agency (ECHA), the European Aviation Safety Agency (EASA), the European Food Safety Authority (EFSA) and the European (Financial Services) Supervisory Authorities (ESAs), which have been established to support EU Member States and their citizens. These can be responsible for enforcing particular regulatory regimes, or for pooling knowledge and information sharing. As part of exit negotiations the Government will discuss with the EU and Member States our future status and arrangements with regard to these agencies.
What did we learn from the Brexit White Paper?: The verdict of the Institute for Government is:
If MPs had been asked whether the Government had shown itself ready to trigger Article 50, rather than whether to trigger Article 50 in principle, their verdict would have to have been “not yet proven”.
UPDATE 3 February 2017: Why Britain’s Brexit white paper could fail to please anyone. The White Paper:
…was clearly quite rushed. It contained several typos, including the hilarious assertion that Britons currently enjoy 14 weeks paid leave per year. The timestamp also indicates it was finished at 4.17am the morning of publication. But it’s worth having a look at one section of the document in particular. Part two makes it clear that one of the crucial aims of Brexit is to “bring an end to the jurisdiction in the UK of the Court of Justice of the European Union (CJEU)”. Even though the UK is now leaving the EU, the issue is far from resolved.
The main problem is that the CJEU is vital for solving interstate disputes between EU members and interpreting EU law. It’s a vital part of any trade deal. To get round this, the white paper suggests a series of dispute resolution mechanisms to replace the functioning court system. It includes a proposal to replace binding decisions from the court with governmental discussions to “ensure that all parties share a single understanding of an agreement”. Rather than using courts, there would be agreed arbitration panels where issues are merely discussed in an attempt to reach a conclusion. The similarities between these suggestions and what was being proposed under the Transatlantic Trade and Investment Partnership, much maligned by the Leave side during the referendum, is an irony apparently lost on the government.
UPDATE 4 March 2017: Legal Experts Fear Major Brexit Disruption for Aviation
UPDATE 9 March 2017: Brexit, airlines’ worst fear, has become their preoccupation: Operators flying in and out of UK are pursuing a legal framework to replace EU-wide agreements currently in place.
UPDATE 16 March 2017: The UK’s position in the WT), its negotiations with the EU and its pursuit of trade deals around the world are crucial to UK prosperity post-Brexit. The Institute for Government, in partnership with the City of London Corporation, welcome Pascal Lamy, former Director General of the WTO and former European Commissioner for Trade io share his thoughts: https://youtu.be/8hfcbB8c3Cs
UPDATE 21 March 2017: Article 50 will be triggered Wednesday 29 March. Then what? UPDATE 22 March 2017: Article 50 + Section 30 = Indyref 2 and UK-based airlines told to move to Europe after Brexit or lose major routes
UPDATE 23 March 2017: Meanwhile on the eve of the 60th anniversary of the Treaty of Rome a number of industry associations are signatories to a declaration on standing up for European aviation. They note that aviation accounts for 4.1% of the EU’s GDP and supports 8.97 million jobs.
UPDATE 24 March 2017: What will the PM say to Donald Tusk when she invokes Article 50?
UPDATE 26 March 2017: The Observer view on triggering article 50: “As Britain hurtles towards the precipice, truth and democracy are in short supply”
UPDATE 28 March 2017: On the eve of the triggering of Article 50, IoD’s Director magazine considers: Brexit negotiations: what are the options for UK business?
UPDATE 29 March 2017: With the UK Government today having triggered Article 50 industry trade body ADS has reaffirmed its intention to continue working with Government and European colleagues, towards a new mutually beneficial trade relationship, providing the best possible outcomes for ADS’ industries and members. ADS pushing towards best Brexit outcome for its industries
UPDATE 30 March 2017: Scottish First Minister Nicola Sturgeon signs independence vote request, The Government’s White Paper on the Great Repeal Bill: Some Preliminary Thoughts and Brussels takes back control of Brexit. Meanwhile the SNP ask a parliamentary question about the UK and EASA.
UPDATE 3 April 2017: Confident EU coy on start date for Brexit trade talks
…the EU’s draft guidelines for negotiations state that talk of the future will only begin in earnest when good progress has been made on Britain’s exit deal. But when, and based on what criteria? The only thing we know for sure is that it is in the EU’s gift to make that judgement. Not the UK’s.
Institute for Government: How the Article 50 letter compares with the European Council draft guidelines Until the referendum, Britons were unbothered by European matters says the Economist: Brexit: a solution in search of a problem
UPDATE 4 April 2017: Brexit committee warns of impact of no deal being reached. A cross-party parliamentary committee says:
“The government has talked about walking away from a bad deal, but has not yet explained what terms would be demonstrably worse for the UK than ‘no deal’.” It called for a “thorough assessment of the economic, legal and other implications” to be published, along with evidence of the steps “being taken to mitigate what would be the damaging effect of such an outcome”. The MPs also said it said it was “essential” for Parliament to get a vote on whether to proceed if no deal was reached. The committee said it was possible that the current “convergence” between the UK and EU would mean talks could move more quickly than previous negotiations, but added: “It is not yet evident, however, that the two-year timetable for achieving this is realistic.”
UPDATE 11 April 2017: EU association agreements explained
UPDATE 12 April 2017: A series of papers that is described as “Parliament’s analysis of how leaving the EU will affect different policy areas in the UK” is available on the UK parliamentary website. One of the very few on transport is a Commons Library briefing paper.
UPDATE 13 April 2017: Airlines grounded by Brexit. The aviation industry is having to plan for a range of different scenarios say the FT.
According to a study by Thomson Reuters, the number of new laws created fell by 29 per cent last year to 1,642, as ministers prepared for the referendum in June and then dealt with the political upheaval that followed.
UPDATE 18 April 2017: The Prime Minister announces she intends to call a General Election for 8 June 2017. The Institute for Government discuss: The Prime Minister’s decision to call a snap election
ADS say they will “be working hard to make sure parties and candidates are fully briefed on the key issues for our industries“.
We hope all political parties will commit to working with industry to deliver a stronger economy that builds on UK strengths in wealth-creating sectors including Aerospace, Defence, Security and Space.
UPDATE 19 April 2017: Brexit and bizav: why a status quo must remain
UPDATE 21 April 2017: As reminder: Just 6 things the EU has achieved, 60 years on from its founding treaty .
Speculation that June’s general election will deliver a more favourable Brexit outcome should not lull business into thinking it can take its foot off the gas in preparing for 2019, says KPMG’s Karen Briggs: The Brexit Column: Stay focused.
In the coming week Donald Tusk will chair the special European Council meeting to adopt the guidelines for Brexit negotiations.
UPDATE 25 April 2017: At an RAeS business aviation seminar Mark Swan of UK CAA said that Britain moving away from EASA would be “disastrous for regulations” adding he “can’t envisage it”.
Until it leaves the Union, the United Kingdom remains a full Member of the European Union, subject to all rights and obligations set out in the Treaties and under EU law, including the principle of sincere cooperation.
UPDATE 3 May 2017: Rising Brexit ‘bill’ raises negotiating stakes
UPDATE 11 May 2017: Brexit: Why a ‘wait and see’ strategy is not an option for business say Management Today:
Leadership is vital. In a changing landscape, businesses should not allow themselves to be passive ‘victims’ of external forces. New relationships need to be developed and nurtured in markets worldwide. Businesses that have sat back in established markets must become adaptive and flexible. New work must be created, with new people, in new markets.
A bad aviation deal for the U.K. is bad for Ireland.
UPDATE 19 May 2017: Simon McNamara, director general of the European Regions Airlines (ERA) association, said: “I’m very confident there will be an agreement [between UK and EU on aviation]. However, a leading industry tax lawyer warned of “a bit of a scramble” on legal issues around the Brexit process: Airline association ‘confident’ of Brexit deal. McNamara went on:
There is a lot of posturing going on at the moment, on both sides, and it needs to stop. This is not just a UK problem. It’s a European problem. Everyone in aviation wants to preserve the status quo.
UPDATE 22 May 2017: Less positively AW&ST say Brexit: What’s Likely to Emerge? Nobody Has a Clue! Meanwhile in Flight International Rigas Doganis, chairman of the European Aviation Club in Brussels and visiting professor at Cranfield University, explores the process ahead for the UK as it attempts to forge a new aviation relationship with the EU, concluding:
Negotiations on so many air transport issues will be complex and time-consuming. They will affect not only British and European airlines but many others too. It is impossible to believe that all these issues can be sorted out and agreed within two years. Transitional arrangements seem inevitable.
UPDATE 23 May 2017: Brexit and business aviation in Europe: Put emotions aside
UPDATE 30 May 2017: Brexit: the supply chain perspective
UPDATE 9 June 2017: After the snap general election left the Conservative party without a majority after losing 13 seats and needing to set up a deal with the Northern Ireland Democratic Unionist Party (DUP) to say in office analysts predict a ‘softer’ Brexit:
- UK General Election Result – What does it mean for Brexit? (DWF)
- What does the election result mean for Brexit? (Institute for Government)
UPDATE 10 June 2017: Merkel says EU is ‘ready to start Brexit negotiations’
Mrs Merkel added she hoped Britain would remain a good partner following the talks, due to begin on 19 June.
UPDATE 11 June 2017: In a discussion in the Sunday Times that mentions Airbus support 100,000 UK jobs, Airbus executives are quoted as follows:
UPDATE 12 June 2017: A new Commons Library briefing paper Brexit: how will it affect transport? discusses some of the pertinent issues in the four main transport policy areas: aviation, railways, roads and road-based public transport, and maritime. However the FT comment that A swift and hard Brexit would suit France’s president
UPDATE 14 June 2017: Brexit talks ‘must include the voice of UK business from the very start’ say Director magazine.
UPDATE 30 June 2017: A few weeks ago, the FAA Administrator, Michael Huerta, delivered a keynote speech to the Aviation Club of the UK in London. He outlined that on leaving the EU, as the UK will not be an EU member state, it will no longer have status under the 2011 US-EU Bilateral Safety Agreement. The Administrator explained:
Why is this important? With limited exceptions, UK aviation products are currently certified by the European Safety Agency (EASA). And service providers, such as Maintenance, Repair and Overhaul facilities, are certified using EU regulation and EASA procedures.
If the U.K. does not maintain an associated or working arrangement with EASA upon exit from the EU, the UK will need to quickly re-establish competencies in specific areas, especially around the certification of new aviation products.
….I am confident that regulators on both sides of the Pond are committed to “minding the gap” and ensuring uninterrupted, seamless safety oversight and certification of products and services….
For ADS members, retaining access to and influence in EASA is vital. Remaining a member of the agency and working to its regulatory framework is the most cost effective and practical solution to maintaining safety, accessing global markets and attracting global investment.
With non-EU nations such as Switzerland able to negotiate both EASA membership and a bilateral agreement with the US which allocates EASA as the competent authority, there is precedent for the UK to continue to have vitally important regulatory influence and access and fulfill the wishes of the British people following last years’ referendum.
With the debate and discussion on Brexit now turning to what a transitional deal could look like, it is vital that the practical regulatory environment for a variety of sectors is dutifully considered – and that vitally important industries such as Aerospace are not impacted by a regulatory vacuum or potentially damaging ‘cliff edge’.
UPDATE 4 July 2017: The European Parliament Transport and Tourism Committee (TRAN) is to discuss the aviation aspects of Brexit:
High level representatives in the field of aviation have been invited to speak in the next TRAN Committee meeting on the topic of Brexit. Stakeholders will discuss ways in which the UK’s departure from the EU is likely to impact the aviation industry from the perspective of the airports, the airlines and the tourism industry as a whole. The presentations will be followed by a question and answer session with Members.
The hearing will take place on Tuesday 11.07.2017 from 15:00 to 17:00 in Paul Henri Spaak 3C50 and will be webstreamed.
UPDATE 6 July 2017: UK business leaders to call for indefinite delay in leaving single market
Business leaders are to demand that ministers agree an indefinite delay in Britain’s departure from the European single market and customs union to give more time for talks on a long-term trade deal.
In a dramatic escalation of the battle to soften the government’s Brexit strategy, groups representing thousands of UK employers aim to present a united front during a summit at Chevening country house hosted by the Brexit secretary, David Davis.
“This is a time to be realistic,” Carolyn Fairbairn, director general of the CBI, is due to say in a speech on Friday outlining their demands. “Instead of a cliff edge, the UK needs a bridge to the new EU deal. Even with the greatest possible goodwill on both sides, it’s impossible to imagine the detail will be clear by the end of March 2019.”
UPDATE 7 July 2017: ADS fully supports the CBI idea as a practical solution that gives certainty to businesses and gives time to negotiate a good deal for the UK.
Speaking during an update on negotiations with the UK at a meeting of the European Economic and Social Committee on 6 July 2017, Michel Barnier the European Commission’s chief negotiator said that Airbus had been highlighted as a company which would face obstacles to operations once the UK leaves the EU. He mentioned the “constraints” which would apply to “all business which, at the moment, benefit from integration of centres of production” within the EU single market.
However, the UK’s relationship with Euratom, the EMA, and EASA highlights three real problems with this line of Brexit reasoning:
- The unintended consequences of Brexit are myriad
- Leaving international regulators affects investor confidence
- If we want are going to maintain our global market share, we need to ensure that global rules work for the UK
UPDATE 14 July 2017: EasyJet announce they plan to gain an Austrian AOC for a subsidiary to be known as EasyJet Europe.
UPDATE 23 July 2017: US aviation trade body urges Brexit negotiators to prioritise airline industry
“If there is no agreement between the UK and EU by March 2019, other sectors fall back on World Trade Organisation rules but we have no legal framework under which to fly,” Nick Calio, the trade body [A4A]’s chief executive, said.
UPDATE 26 July 2017: Bosses don’t want a Brexit bonfire of red tape
UPDATE 28 July 2017: Paul Everitt, chief executive of ADS, told BBC Newsnight:
When we cease to be an EU member we need to have in place a whole new set of international agreements with, for instance, countries like the US, with Canada and emerging major markets like China, India, Japan. So for us the transition period is important and it’s important that during that period we remain an EU member.
The BBC go on:
Such agreements are needed, he said, even if the UK chooses to remain a part of the European Aviation Safety Agency (EASA), which has largely replaced domestic air safety regimes in EU member states over the past 15 years.
Mr Everitt added that ADS was not aware that the UK government had started “detailed work” on these relationships. He said leaving the EU without these in place would mean “chaos, because we don’t have a system to ensure that our products are safe and secure to fly”.
The aerospace industry, which employs about 120,000 people in the UK and generates about £28 billion worth of exports, is keen to avoid regulatory divergence which would require double certification of aircraft parts and components.
“We are very clear that we wish to remain a member of the European Aviation Safety Agency,” said Mr Everitt. “And we don’t believe that there is a viable alternative that can be up and running in a reasonable period of time.”
UPDATE 7 August 2017: Rolls-Royce calls for Britain to stay in Euratom and EU aviation agency
The engineering group, which is one of Britain’s biggest exporters, is calling on the government to maintain influence on the rules set by the European Aviation Safety Agency and Euratom.
Rolls-Royce said that it would expand its German presence if there were increased hurdles to trade either with the European Union or the United States.
UPDATE 11 August 2017: New briefing papers from the House of Commons Library:
- Brexit: the July negotiations What happened at the second round of Brexit negotiations from 17 to 20 July 2017?
- Importance of trade with the EU for UK industries Examines the importance of trade with the EU for the sectors and industries of the UK economy
- Employment of other EU nationals in the UK Provides statistics on nationals of other EU countries working in the UK
- The UK’s contribution to the EU budget (updated: 31 July 2017) Looks at how the UK contributes to the EU budget and how much it receives back
- Brexit: the exit bill (updated: 31 July 2017) Considers the issues related to the ‘single financial settlement’ – the UK’s financial contribution to the EU after Brexit
UPDATE 14 August 2017: The Institute for Government explain the Aviation and the European Common Aviation Area (ECAA)
UPDATE 15 August 2017: UK suggests ‘temporary customs union’ with EU
ADS’ Paul Everitt tweeted: “Proposals suggest 2 stage transition, which will create uncertainty – change to third country status also means a lot of work pre March 19”. Full ADS statement: Industry Needs a One Step Transition. ADS also say:
Agreeing with the EU that the UK should remain part of the EASA system allows UK airlines and UK aerospace businesses the certainty they need that the safety rules and regulations which they must abide by, will not change dramatically.
Regulators like the European Aviation Safety Agency help put UK businesses on a level playing field with our international competitors. Remaining a member of EASA after we leave the EU is the most cost effective and practical solution to both protecting passenger safety and accessing global markets.
The Government’s proposals provide a practical approach that would allow the UK to choose to stay within EASA and EU space and R&D programmes post-Brexit. Creative solutions can be found and the Government must work with our European partners to reach a good deal for industries both in the UK and in Europe.
The ECJ currently acts as the ultimate dispute resolution body for agencies like EASA.
UPDATE 5 September 2017: Britain’s aerospace sector could be priced out after Brexit
UPDATE 12 September 2017: The RAeS recommend the UK should stay a full EASA member.
UPDATE 2 March 2018: Terresa May’s Mansion House speech states a UK desire to remain an EASA member State.
UPDATE 7 June 2018: The UK Government publish a series of slides on the ‘Framework for the future UK-EU partnership’ for transport, in which it sets out its “desire to secure liberal aviation market access arrangements”.
UPDATE 22 September 2018: Cabinet at war after May’s humiliation in Salzburg
UPDATE 24 September 2018: The DfT publish a series of technical notes on the impact if no-deal is agreed with the EU27. This is supported by a new UK CAA micro site:
The CAA has developed this microsite to be 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.
The CAA understands that the aviation industry and its consumers want as much clarity as possible with respect to the UK’s future relationship with the EU.
A key feature of the EASA safety system is mutual recognition of licences, certificates and approvals among participating member states. Aviation is inherently an internationally integrated industry. This is reflected in regulatory arrangements for personnel such as pilots and engineers, and support operations such as design, maintenance and spare parts production. We believe that if the UK Government and CAA’s preferred outcome of ongoing EASA membership proves not possible, then a continuation of mutual recognition, at least for a time-limited period, would strongly be in the interests of consumers and the aviation industry both in the UK and the rest of Europe.
ADS believes it is clear that the best outcome for air passengers, airlines and businesses across the aerospace sector is for continued UK membership of the European Aviation Safety Agency (EASA), as set out by the Prime Minister in March this year as a UK priority for negotiations.
With only a few months remaining before the UK leaves the EU, it is vital that preparations for all potential outcomes are stepped up and that technical discussions take place between the Civil Aviation Authority (CAA) and European Aviation Safety Agency (EASA) to address the complex legal, insurance and passenger safety issues at stake, and ensure continuity of business is maintained.