On leaving the EU with no deal: Potential disruption to air travel

In her Lancaster House speech, Theresa May said:

And while I am confident that this scenario need never arise – while I am sure a positive agreement can be reached – I am equally clear that no deal for Britain is better than a bad deal for Britain.
(emphasis added)

Given this position, it’s worth knowing what the consequences of “no deal” would mean. In the worst case scenario (e.g. talks breaking down) this means looking at the consequences of Britain reaching the Article 50 deadline without any sort of agreement whatsoever having been struck with the EU.

In this scenario, on the day before Brexit, Britain will still be a full member of the EU enjoying all the privileges and subject to all the obligations that entails. On the next day, Britain will be outside the EU completely, treated in the EU’s parlance as a “third country” and having to deal with the EU on the default terms they apply to any non EU/non single market country. When references are made to a “cliff edge” in the media comment on Brexit, it is this sudden transition from full EU member to being outside the EU (and the single market) that is being referred to.

Here, I consider the consequences of leaving without a deal for the airline industry, where recently the Guardian reported that UK airlines may have to open bases of operation in other EU states and/or sell off shares to EU nationals post Brexit or lose major routes.

I conclude that if there is literally no deal, the likely consequence will be considerable disruption to UK/EU airline industry. This is in neither the UK or EU’s interests, though and a deal that ensures the UK remains part of the regulatory system for aviation in the EU should be feasible.

As a starting point, consider that to run an airline that operates in any of the EU member states (which for now include the UK), the operator must hold an Airline Operator Certificate (AOC). Under regulation Regulation (EC) No 1008/2008, an AOC must be issued by a “competent authority” of the member state in which the airline is based. The AOC then permits the airline to operate anywhere in the EU. So currently UK-based airlines can operate flights to other EU states simply because they’ve been granted a AOC by the UK’s competent authority.

However once the UK has left the EU, the UK’s no longer a member state and thus its “competent authority” is no longer valid and therefore the AOCs it produces will no longer be recognised as valid for the purposes of Regulation (EC) No 1008/2008.

So what would be the impact?

Firstly, some counter measures can be taken unilaterally by the airlines. They can open up bases in other EU countries and get valid AOCs for the EU that way, hence the advice reported in the Guardian.  Thus the airlines can continue to operate in the EU but at the cost of moving some operations to the EU and/or getting EU nationals to become shareholders.

Secondly the UK government could convert the existing certificates into valid UK certificates (e.g. via incorporating relevant EU regulations into UK law via the “Great Repeal Act”) to ensure the airlines ability to operate in the UK itself is unimpeded.

However Regulation (EC) No 1008/2008 only refers to one aspect of air travel regulation in the EU. Richard North, discussing the same issue as I am here, points out:

For all that, we’ve only referred to one set of regulation. In all, I count over 40 pieces of legislation, ranging from laws on insurance requirements for air carriers and aircraft operators [Regulation (EC) No 785/2004], on the code of conduct for computerized reservation systems [Regulation (EC) No 80/2009], rules for statistical returns [Regulation (EC) No 437/2003 and Commission Regulation (EC) No 1358/2003], air services agreements with third countries [Regulation (EC) No 847/2004], and much, much else, including the allocation of airport slots [Council Regulation (EEC) No 95/93].

Of particular relevance is the establishment of the European Aviation Safety Agency [Regulation (EC) No 216/2008], rules for the airworthiness [Commission Regulation (EC) No 1702/2003 and (EC) No 2042/2003] and, of course, the Single European Sky, covering the provision and development of air traffic control services.

In attempts to repatriate the 74-page Regulation (EC) No 1702/2003, for instance, the Government will find a task more complex than the fishing regulation.

The 114 references to Member State (singular and plural) provide more than adequate testimony as to their purpose. Tied in with 190 references to the European Aviation Safety Agency, it is clearly evident that even extensive re-writing will not provide a workable legal base for re-establishing a UK airworthiness certification system.

The problem here is that simply incorporating the EU regulations into UK law does not work as that only affects the UK. Ensuring that the EU will continue to fully recognise UK airlines in the EU-wide  systems for regulating air traffic will require agreement with the EU itself. Absent such agreement, we can expect disruption to UK/EU air traffic as the airlines and the UK/EU both struggle to adapt to the situation.

North later writes:

Says Jeegar Kakkad, chief economist for ADS, the trade body for the UK aerospace sector, “Maintaining access to the certification regime in Europe is absolutely critical, as there is no UK replacement that can get up to speed quickly enough”. As Pete pointed out earlier, he thinks that if the UK were to assume safety and certification responsibilities – as it did before the creation of EASA in 2002 – it would take ten years to re-create the necessary infrastructure.

The issues do not end here though. For example the EU and the US concluded the EU/US “open skies” agreement with each other in 2007 and the UK would drop out of that agreement on Brexit, due to a clause defining the EU’s territory in terms of territory to which the Treaty establishing the European Community applies – post Brexit that clearly would not include the UK.  Of course the UK and US might agree to continue the arrangements of that agreement with each other post-Brexit, but what this shows is that the UK may have to talk to non-EU countries the EU has agreements with if they wish to preserve arrangements made under those agreements with those countries.

It thus seems to me that if the “no deal” scenario goes ahead, it will cause damage to both the UK and the EU due to disruption of the airline industry and thus both sides have an interest in coming to an agreement that smooths the transition over.

On the prospects of a deal though, it is worth noting that several non-EU states are already members of the EASA(e.g. Switzerland, Norway), whilst Article 7 of the Single European Sky states:

The Community shall aim at and support the extension of the
single European sky to countries which are not members of
the European Union. To that end, it shall endeavour, either
within the framework of agreements concluded with neigh-
bouring third countries, or within the context of Eurocontrol,
to extend the scope of this Regulation, and of the measures
referred to in Article 3, to those countries.
There’s definitely scope for the UK to remain in both of these schemes, and thus the prospects for a deal on this issue look good to me assuming it is given reasonable priority during the negotiations.
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