Brexit and aviation: no change yet. Then "bare bones"?

Summary

• A 'bare bones' deal seems likely if the transition period ends with no new deal.
• This would extend much, but not all, of UK-EU market access rules and give some ownership and control flexibility. It would also extend safety regulation.
• The UK will need to agree new bilaterals with a number of non-EU countries.
• The bare bones approach could be further extended if necessary, but a new comprehensive UK-EU air transport agreement is the priority.

A 'bare bones' deal is likely if the transition period ends with no new deal

Before the ratification of the withdrawal agreement, which does not cover the future relationship between the UK and the EU (merely the immediate terms of its withdrawal), there had been a risk of a hard Brexit following the day of departure.

This risk went away once the withdrawal agreement was approved, but in aviation the planning for it could prove vital if the transition period ends with no agreement over future UK-EU trading arrangements.

To mitigate the risk of a 'cliff edge' cessation of traffic rights between the UK and the rest of the European single aviation market, the two sides had provisionally agreed to a 'bare bones' aviation agreement. This would last for a period of up to 12 months from the date of the UK's departure, or until a new comprehensive air transport agreement was agreed.

This approach was designed to mitigate the impact of the UK's leaving without a withdrawal agreement. It now seems reasonable to assume that it would now become the default approach from the start of 2021 if the transition period ends without a new agreement on air transport between the EU and the UK.

Although this assumption is untested, it is useful to recall the outline of the planned approach.

This would extend much, but not all, of UK-EU market access rules…

As previously envisaged, the bare bones aviation agreement would preserve basic connectivity between the EU and the UK (i.e. third/fourth freedom services between the two sides, in addition to seventh freedom rights for EU airlines to operate to the UK from any EU state). The UK also proposed to give EU airlines fifth freedom cargo rights to non-EU countries.

However, the agreement would not include access to each party's internal/domestic market. In this respect, it would mean a reduction in the current level of liberalised access.

…and give some flexibility on ownership and control

The EU proposed to give its airlines time to satisfy ownership and control restrictions in the event of a no deal Brexit.

If an EU airline ceased to comply with EU requirements to be majority owned and controlled by EU nationals, it would have six months to meet all those requirements in full.

This was to be conditional on the submission within two weeks from the entry into force of the regulation of a "precise and complete plan", detailing the measures intended to achieve compliance within six months.

The UK took a more liberal approach on ownership and control, effectively allowing airlines with an existing UK licence to continue to qualify as UK airlines if they were controlled either by UK or EU/EAA nationals.

Safety regulation would also be extended

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 for 9 months. It would also allow further extensions if necessary.

For its part, the UK Civil Aviation Authority said that EASA certificates, approvals and licences would be recognised for use in the UK and on UK aircraft for up to two years after the Brexit date. In addition, EU regulations applicable at the point of Brexit would be retained in UK domestic legislation.

The UK will need to agree new bilaterals with a number of non-EU countries

It is assumed that existing agreements between the EU and non EU member states, covering both market access and safety, will also continue to apply to the UK during the transition period.

The European Union has asked third countries with whom it has trading agreements of all kinds - including those related to aviation - to continue to treat the UK as if it were an EU member state until the end of 2020 and there is no obvious reason for them not to do so - unless they want to restrict competition from UK airlines.

Beyond the transition period, in addition to agreeing new market access rules with the EU, the UK must also negotiate new bilateral agreements with 17 non-EU countries where rights are currently granted under EU agreements. New safety bilaterals will also be needed.

The most important of these extra-EU agreements will be a new UK-US deal - necessary once the UK falls out of the EU-US open skies agreement.

A draft UK-US agreement, following the familiar, liberal, open skies approach, has been negotiated and is ready to come into effect when the transition period ends. However, it is unlikely to preserve the existing rights of EU airlines to serve the US from the UK, or of UK airlines to serve the US from the EU.

Sanity should prevail, but uncertainties remain

The withdrawal agreement allows for an extension of the transition period by mutual agreement of the EU and the UK, but the Prime Minister of the UK Mr Johnson has repeatedly stated that he will not seek such an extension.

His steadfastness in this regard is designed to focus both sides on reaching an agreement on mutually beneficial new trading arrangements before the end of 2020.

Ironically, however, it also risks a no deal scenario, which would benefit neither side.

This would bring about the fallback position where goods are traded under WTO rules, but there is no similar default for aviation, which requires explicit agreement if international traffic rights are to continue.

In such circumstances, the bare bones approach would most likely be further extended by mutual agreement.

Airlines and air passengers (along with accommodation and ground service providerss) can take comfort from the fact that there will be no change to the traffic rights or safety regulations until at least the end of 2020. Moreover, the prospect of a sudden interruption to airline schedules in 2021, even if no new agreement between the UK and the EU has been reached, has all but disappeared.

Nevertheless, Brexit still leaves some uncertainties related to aviation market access and safety regulation (setting aside the possible impact on demand through economic effects).

It seems likely that the future will less liberalised than the current situation. Even if it is only slightly less so, it will be a rare (and unwelcome) example of liberalisation's reversal in a major aviation market.