The Outlook For UK-Europe, The Trans-Atlantic And Open Skies: How Are Airlines Preparing For The Post-Brexit World?

Transcript

John Byerly:Good morning. It's great to be in Berlin. This is a city where I spent 5 years of my pre-gray hair era and loved every minute of it, and it's so wonderful to be back. This morning we're going to be talking— and thanks, by the way, for a wonderful reception last night. That was just splendid for everyone who was able to attend. We're going to talk this morning about Brexit. So as all of you know, I think every single one of you, on March 29th, just 4 months from now, the United Kingdom's scheduled to exit the European Union. It'll be the first member state ever to do so. Some question whether it will be the last. This morning we'll be discussing what Brexit means for aviation both within Europe and in the transatlantic market. Before introducing our panelists, I'm going to— I wasn't an economics major. I don't have an engineering degree. I did German literature when I was in college. So a literary start to our beginning here, but a serious one. A century ago, as Europe emerged from the carnage of World War I, Ireland's William Butler Yeats captured the uncertainty, the foreboding, and the despair of those times in his extraordinary 1919 poem, The Second Coming, and the first stanza is up here on the screen. So today, as in Yeats's time, the established order is under threat, maybe not yet falling apart. The UK's departure from the EU seems to me at least more a symptom than a cause, a reflection of broader centrifugal forces that are nationalism, me-first sorts of thinking, forces that are shaking the foundations of the established post-World War II economic and political order. Throughout Europe, in Hungary, in Poland, in Italy, to some extent here in Germany, and most certainly in the United States, my home country, the voices of the worst most certainly seem to ring loudest quite often. They're certainly full of passionate intensity. Whether it's the EU, NATO, or the WTO, the old ceremony of innocence, as Yeats called it, in defending those institutions seems to be fading, at least defending them as a matter of principle. That's gone. As much as we might wish for aviation to escape the turmoil of this uncertainty, the reality I think is it's going to be a difficult task. In our world of international aviation, can the center hold, or will aviation be— or will Brexit push us a step closer to the anarchy of protectionism and downturn? A little more pessimistic setting than perhaps the growth scenario presented earlier from our good economics— economist friends. Anyway, to explore this topic, I have 4— with me 4 superb panelists. Jim Callaghan of Croon Callaghan Aviation Consulting. in the Netherlands. Montserrat Barriga, Director General of the European Regions Airline Association. Dave Semanchik, Regulatory Counsel and Senior Attorney at the Airline Pilots Association in Washington. And Mike Whitaker, now Principal of Whitaker Airspace and formerly the Deputy Administrator of the FAA in Washington under the administration of President Barack Obama. We'll begin with our 2 European panelists, Jim and Montserrat, for a look at the prospects for aviation relations after Brexit between the UK and the rest of Europe. We'll then turn to Mike and Dave for an assessment of how the United States and the United Kingdom are seeking to resolve the future of US-UK aviation relations after Brexit. Discussion that follows will address how airlines, airports, and other stakeholders can best prepare for potential coming turbulence. Although we have very limited time this morning, 45 minutes tight, have to be off the stage then, we really aim to have at least 10 minutes for questions at the end. So be prepared. If you've got a question, scribble it down and we'll do our best to get to you at the end. So I'm going to start with Jim Callaghan and I'm also going to take a seat. Jim, could you give us an update on where discussions of aviation stand between Brussels and London?

David Semanchik:Sure.

John Byerly:And your best guess on how things will work out or won't. And since I've quoted William Butler Yeats of Ireland, and you are an Irishman, maybe you could say a little bit about how aviation in your native Ireland is positioned to weather the Brexit storm.

Jim Callaghan:Thanks very much, John. I think we're certainly living in interesting times, as the Chinese would say. And I'm not going to quote any Yeats, even though I had to learn quite a bit when I was in school. But I think we face continuing uncertainty, and everyone will be aware that the— everyone else in the European Union, all the other member states, have agreed to a draft exit agreement, and the parties have issued a joint declaration. The difficulty for aviation is, and I don't know how many people have actually read the documents, I have not read all 586 pages of the exit agreement, but as far as I'm aware, there's one paragraph in the declaratory statement that deals with aviation, and it's quite aspirational. It says it calls for the parties should conclude a comprehensive aviation agreement which covers things like market access and safety and security and ATM, all motherhood and apple pie. The difficulty is there's no indication of what that's going to entail or timing. And so what that does is it continues to drive huge uncertainty in the industry. It's causing additional complexity and also additional cost. And these are 3 things, the last 3 things that the industry needs more of. And so I think what's interesting is you broadly have 2 camps on this issue in the airlines. You have on one hand Willie Walsh, who is basically saying, look, all a bit of a tempest in a teacup, all will be fine on the day. And then on the other hand, you have my old boss, Mike O'Leary, saying the sky is going to fall.

David Semanchik:Right.

Jim Callaghan:Flights are going to be grounded, it's Armageddon. And I think, personally, the truth obviously lies somewhere in the middle. But the difficulty is we don't know. And I think the indications at the moment are that a hard Brexit is looking more and more likely. And the UK government has not dealt with, or doesn't appear to be dealing with, some fairly fundamental practical issues, and you have IATA in recent days urgently calling for engagement with the government to start to deal with these issues to avoid massive disruptions or potential massive disruptions. And so I think, you know, this is, is really causing an issue for airlines, and there's no indication of when this might be resolved, and you have Airlines like Ryanair and easyJet who depend on the liberalized market, and I think possibly the reason why Willie Walsh can be fairly sanguine about this issue is that BA is wholly a UK-based carrier, so they don't rely terribly much on the market access provisions of the liberalized market, whereas The likes of Ryanair and EasyJet are pure European carriers, and so they've had to apply for additional AOCs in order to be able to maintain their flight schedules. And this is driving more complexity in the operations and additional costs. And so I think that's really the fundamental issue. This is not— there is no upside to Brexit for aviation. This is all about managing the the downside. And just to switch for a moment to some more sort of unknowns, if you will, or potential side effects of Brexit. In my own native country, if there were to be a hard border between north and south of Ireland, you have approximately a million or over a million passengers in the north who use Dublin Airport, As a hub, and you can be sure that if there's a hard border that requires people to wait anywhere up to 2 or 3 hours to get through, that traffic is going to evaporate. And so, whereas that may be an opportunity for Belfast Airport, it does have an impact on the south, or the Republic of Ireland, as we would say. So, I think the difficulty with this kind of panel is that We're still largely in the dark of where this is all going to pan out, but I do think that it's symptomatic of the way the government seems to be dealing with it, is that there is no real engagement with the industry on how to make sure that the most important aviation market in the EU is protected in terms of its ability to continue to drive the economic benefit And so I think in brief, with 4 months to go after 2 years, I don't think we're much further ahead in terms of clarity on this issue.

John Byerly:Thank you very much, Jim. Montserrat, how do you and your member airlines judge the situation? What points are you stressing in Brussels and in London as March 29th is just around the corner? Is it enough to Buckle up our seatbelts, or should we be donning life vests or even putting on parachutes?

Montserrat Barriga Whitaker:We— I don't know. The answer to that question is we don't know. The uncertainty is still so huge, and we're only 4 months to the deadline of Brexit implementation, which is March 2019. And that— I mean, I'm a very positive and optimistic person, but We need to be realistic here, and there is such a huge level of uncertainty. Yes, there is a deal now, as Jim mentioned, but the deal only mentions aviation in very wide terms. I'm actually going to read the sentence that he was referring to. It says that the UK and the EU should agree to negotiate a comprehensive air transport agreement covering safety, security, Air traffic control, consumer protection, and market rules for aviation companies. Yes, that's what we want. But we wanted that for over 2 years. Yes, it's very general, and it's not enough. The problem, I think, is that, in my opinion, the EU has used time definitely as a negotiating weapon. And now this is becoming very, very serious. The UK proposed to request to keep the UK within EASA, within the European Safety Agency, but the EU has ignored that request, so we still don't have certainty over that either. So this opens such a wide spectrum of possibilities that our airlines airlines I represent, which are 50 European airlines, are very worried about the situation. I was to mention also, IATA produced a very comprehensive report, the study of the effects of the UK leaving the EU on airlines flying to and from the UK. I recommend everyone to read that document because that is what looks like anything that may happen, all the possible scenarios, and then airlines can plan for those scenarios. And in that report, it's mentioned that in the case of no deal, there will be no time to negotiate a comprehensive agreement. And we are— because the current deal needs to be approved by the UK Parliament in 2 weeks, and we don't know what's going to happen. It could not be— perhaps it's not going to be approved. Perhaps there would be a second referendum. The UK would decide to take a position similar to Norway or Iceland, or perhaps there would be a lack of confidence in the current UK government and there would be elections. We don't know. Or perhaps the deal would be approved. But then the problem is the time, the uncertainty. This is where we are. I would like to read— we are actually producing— this is a paper that we are, in my association, going to produce next week. We were thinking of, should we wait until the UK government says something? Because we've been waiting and waiting, and there is no clear outcome of the process, then I think we should just publish it. I'll give you one example. This is a quote from Martin Isler. He is Executive Vice President of Luxair. These guys fly 7 times a day between Luxembourg and London City Airport. So he says, this is the most important route for Luxair, and should we lose traffic from one day to another, it would be catastrophic for us and our customers. And also, we are concerned about the validity of licenses and certificates of some of our exclusive suppliers for our Bombardier aircraft. Bombardier is in the room, are UK-based. We procure numerous spare parts from the UK and use the UK training facilities. A hard Brexit it would cause important and costly disruptions with our operations. This is just one airline. You know, if you extrapolate, you can imagine the impact that may have in Europe.

John Byerly:Thank you very much. I think I'm putting on my parachute at this stage. The safety angle is one we can discuss. It's incredibly important. Everyone seems to assume it's going to get worked out, but you were talking about an agreement to agree, and I think I learned in law school it's hardly worth an It's written on, right? And there's so little time to do the details of any aviation agreement, whether safety or commercial relations, aviation rights would be involved. All right, let's turn from EU-UK aviation and look at post-Brexit aviation relations between the UK and the United States. There are some important developments on that front that I'll outline briefly and then turn to Dave and Mike to discuss and assess. So what's interesting is that in Washington tomorrow, Wednesday, there will be a negotiating round between the United States and the United Kingdom, the umpteenth in a series of negotiating rounds and digital video conferences between the two sides going back about a year and a half. The sense is that an agreement could be hammered out. It would be an agreement on an air services agreement and related memorandum of consultations that would govern US-UK aviation relations after Brexit occurs, after the UK is no longer a party, a member of, covered by the US-EU Air Transport Agreement. Now my understanding of the texts which although seemingly being closely held, they all seem to be circulating very widely throughout the aviation community. I've seen them and seen them from sources on both sides of the Atlantic. The text of the agreement very closely, almost word for word, follow the US Open Skies template. Consistent with that, the standard nationality clause, and this whole issue of ownership and control has been by far the most difficult issue in the negotiations, The standard nationality clause is in the authorization agreement, in the authorization article in the agreement. What that means is that only those airlines that are owned and controlled, substantially owned and effectively controlled by nationals of the UK or the US respectively, have rights to operate. There is, however, an annex to the agreement which has legal force or will have legal force Air Force that appears to grandfather those UK airlines that as of some magic date, past or present or in the near future, that have been received authority from the US Department of Transportation to operate. So that could be Virgin Atlantic, it could be BA, it could be Norwegian Air UK. The agreement would allow ownership and control of those airlines to be by the standards in the US-EU agreement. Namely by any combination of EU citizens. A further complication then is that that grandfathering in the annex is subject to a couple sub-paragraphs in the annex that subject grandfathering to limits. Future changes in ownership or control of grandfathered UK airlines could subject their rights to operations, their right to operate to the United States to review by the Department Department of Transportation, and at least legally to possible revocation or restriction. Final couple points. I understand that the agreement does not contain some of the add-on provisions that were included in the US-EU agreement at the EU's request. For example, there's no Article 17bis labor article in the US-UK draft agreement, although there is apparently a sentence. There is a sentence in the draft memorandum of consultations that endorses the upholding of high labor standards. There's also nothing in the agreement, no annex that grants UK airlines special access to US Fly America traffic. That's one of those great American protectionist schemes that means that government employees, I was one for 31 years, have to travel on US flag carriers or at least have US flag carrier tickets. Exceptions were made for Switzerland and Japan back in 2010, but none apparently will be included in the US-UK agreement, which is sort of interesting. In any event, that's a summary of where I understand things stand at the present time. Where— what is your assessment of the results that can be expected in Washington tomorrow? Rather than donning life jackets, it sounds to me that passengers on the transatlantic can sit back and enjoy a smooth landing. Is that your view?

David Semanchik:I think you can put the parachute away. Yes. It's wonderful to be here, first of all. Thank you for the invitation. Coming from the US, we have a much less complex issue with the UK, and so I think it is already easier to be solved. But the first thing I would like to say is that whether or not there is an agreement, both sides have an established understanding that there's a commitment to the continuity of air services in the market, and there's a commitment to the continuity of the incumbent operators. I will just make a point that often the US allows air services between itself and another country even when there is no agreement in place at all. And that's done on the basis of comity and reciprocity. So essentially, we all get along together. If there's no issues that are adverse to US aviation interests, some limited services would be allowed. And that's happened actually fairly recently. So if there is no agreement, that is a way in which air services would continue to operate until such time as an agreement would be in place. Now, having said that, um, based upon what John has just laid out, the major issue has been ownership and control, as you can tell. Um, in the US-EU agreement, there is the European Community Carrier Concept that allows ownership and control in and among EU Nationals and EU airlines. When you take the UK out of that, normally one would consider that the ownership would have to then follow, that UK carriers would have to be owned and controlled by UK nationals. But the annex, which is part of the agreement, put in an annex for legal reasons, but will effectively operate as a part of the agreement like no other, will allow the incumbents to continue their service under their— the continued ownership limits. And the concern, and that's been sort of an understanding for a while, but the concern that is not yet resolved is exactly to what extent changes in ownership going forward would be decided now or decided on a case-by-case basis later. Another note, the US has an established procedure where it can look on a case-by-case basis using the public interest considerations in the US aviation law to allow waivers of nationality clauses where all of the parties involved are in an open skies agreement with the US. There is not reason, I think, to don the life jackets because of these various ways out to allow the incumbents to continue to operate. From the airline pilot perspective, the people I represent, ownership and control is always a main concern for us because it ultimately goes to who in management decides what flying our pilots will do versus what flying another airline's pilots may do, particularly if they're in a common ownership structure. So I'm happy to talk much more about that at a different time, perhaps over a beverage in the back of the room later, but those are some of the concerns that we typically have.

John Byerly:Thank you very much. So I'm happy to be pulling off Half my life jacket when I'm flying across the Atlantic, but then strapping it back on when I go from London to Berlin. Mike, at a CAPA conference back a year ago in October, you and I discussed— the panel was about, well, guess what, Brexit. And at that time, you stressed the importance to airlines of predictability and noted the United States and the UK have never really had very easy aviation relations. All the way back to 1946, I guess, in Bermuda I. What's your view of a likely US-UK agreement that Dave, or that we've described here, discussed here? What, if anything, does the agreement tell us about the Trump administration's approach to international aviation?

Michael Whitaker:Oh, well, I don't know about that second one.

John Byerly:And you're free as an Obama administration employee to be just as honest as you wish to be.

Michael Whitaker:Well, you know, I would start by observing that it, it's an unusual negotiation when the best-case outcome is status quo. Usually you go into a negotiation to try to improve on the regulatory regime, but I think as our first panel this morning pointed out, I think all 3 of the economic presentations pointed out, there is this headwind out there potentially called protectionism, and this is perhaps part of that headwind. Congratulations. We're going to initial a deal tomorrow that keeps the relationship exactly as it's always been. You and I have been on panels together going back much further than last year. Certainly, 10 years ago, we would have been and probably were on a panel discussing the US-EU agreement that had recently been signed. I guess it must be 11 years old now.

John Byerly:Yeah.

Michael Whitaker:And there was supposed to be a next step to that, which was further liberalization, getting rid of things like the Fly America Act, looking at ways to allow cross-border mergers, attacking the famous cabotage, foreign ownership control. And none of those issues have really gone anywhere. And I think the prospect of them actively being debated now is pretty close to zero. So I think maybe one of the headlines is tyranny of low expectations. We've managed to sign an open skies agreement. Congratulations.

John Byerly:Let's talk for a moment about the headwinds of protectionism. I think that's, that's a big elephant in this room. It's one that concerns me deeply, less from what's happened in aviation in the United States. It looks like at least Indeed, if not in word, the Trump administration continues to negotiate open skies agreements. I think they reached one with Barbados or someplace like that recently. There are a few more. That's good from my perspective of open skies lover. Is protectionism in aviation something that— protectionism, we mean more restrictions, more national-driven limits protecting our carriers at the expense of maybe broader market liberalization and growth. Are you concerned about this? Jim, first.

Jim Callaghan:Look, I think there's always a tendency of governments to try and protect their national carriers. I think what's interesting in Europe at the moment is that you have a clear process of consolidation going on. And yet you still have governments who are desperately trying to prop up their carriers. And I think Alitalia is always the example of choice, where clearly you have a bankrupt airline that has been continuing to operate on the basis of almost a billion, another billion euro of state support. And yet you've got a state aid policy in Europe which is supposed to be very strict in these situations. So, you know, I think there does continue to be protectionism, particularly in Europe. I think in the US, yes, it's very welcome that the US is— it looks like it's going to conclude an open skies agreement. I think it would be inconceivable that they wouldn't have an agreement with the UK, but I I think, to Mike's point, that it's basically just status quo is an indication that no further advancement is going to be made, and there's this kind of entrenchment. The other one that, just to spend a minute on, is when you look at what happened to Norwegian in the US before the Trump administration, one could wonder how much of their financial situation at the moment is due to that delay in them getting the traffic lights for the US. So I think it's always an issue in the aviation industry.

John Byerly:Montserrat, airlines, although they sometimes spout a liberal view, really there's a lot of zero-sum thinking in airlines. The passenger that my competitor carriers— carries is It's one I won't be carrying. There was some posturing early on about a year ago among some European airlines that formed a group called, I think, the Platform for something or the other. I think it included Lufthansa and Air France, setting out rather strict rules for what a Brexit aviation relation should be, and it was— seemed a little less than the status quo. Your views on protectionism and whether some airlines in Europe will see this as an opportunity to gain a competitive advantage vis-à-vis, say, British Airways or Ryanair or EasyJet?

Montserrat Barriga Whitaker:Well, I'm not sure I understand the questions because I'm sure all the others hear what you say, but here it's very, very bad noise, very nice sound. I'm sorry.

John Byerly:Do you see protectionism? Do you see some European airlines seeing a possible advantage in Brexit offering them a chance to gain a competitive advantage vis-à-vis, say, British competitors like EasyJet and British Airways?

Montserrat Barriga Whitaker:Well, some, some of course have the means to do it, like IAG. Well, IAG could very easily decide whether they want to be a British airline or, or a Spanish airline. They can do that. I mean, it's something that is doable. Some of the other airlines, the majority of the other European airlines, they just can't choose. It's just not allowed like that. Definitely, ownership and control is something that is one of the most important topics after Brexit. What's going to happen with the UK-owned airlines, and are they going to be discriminated versus the other European airlines? Also, because we can't forget, UK It's not— I mean, it won't be European Union, but it'll still be Europe. So why not, you know, perhaps thinking of a possibility of a system similar to the Norwegian system, or Iceland, or Swiss? They're still European countries, not part of European Union, and there's still free movement of passengers and in a number of agreements that can facilitate business a lot and especially not damage the passengers. The current ownership and control rules in Europe are not overprotectionist, I understand, because we only need 51% of the shares need to be European. The rest could be Chinese. American, but then, you know, are we considering the UK from now on after Brexit a complete foreigner out of the eurozone just because it's not part of EU27? It's another uncertainty of the process. I understand the UK wants to keep the status quo on that particular point as well, obviously.

John Byerly:Dave, Mike? Kind of views on— yeah, Dave.

David Semanchik:Sure. So you asked the question about protectionism and is it rising and what, what are our views? To me, one side of the coin could be called protectionist, but the other side of the coin is called enforcement of existing agreements. And where we come out is that we have these extraordinarily liberal agreements that the US calls open skies, and that means fifths and sixths for passengers and up to sevenths for cargo, free pricing, unlimited frequencies, unlimited designations, and several other elements that are sort of the hallmarks of open skies. So with that, it— to me, it's hard to say that that allows for a protectionist environment until such time as we find that one party or another may be violating the In open skies agreements and non-open skies agreements that the US has with the world, there is always the clause about the fair and equal opportunity of carriers on both sides to compete. Often when there's a suspected violation, the people involved, the carriers or sometimes labor unions like ours, will say that we think that that particular fair and equal opportunity opportunity to compete clause is being violated. What's remarkable is that there has of late been action. Usually governments act in a more or less glacial pace, but there has been action to try to enforce some of the agreements. I do not take that as being protectionist. I take that as a sign that the system is working as intended. One other point to make quickly, and I'm sure you'd like to jump in on that too. Thank you, Jim, for raising Norwegian. It's a— the Norwegian case in the US occupied a fair bit of my life. And so just a reminder about that. The labor clause called Article 17bis that was in the second stage agreement was, and this is purely my view, a creative way to deal with the concept of pan-European airline ownership and control. Since there is no pan-European labor law, despite exploring that idea in many forums and panels like this one that were set up for the express purpose of looking at what the labor effects would be of a more liberalized agreement, the idea was to come up with language that recognized benefits of high labor standards, Uh, and that, uh, acknowledged that the, the parties did not intend that such labor standards would be undermined in the implementation of the agreement. So there was great optimism, I think, on both sides, and certainly on airline labor side, uh, that, that is a, that was a meaningful, uh, clause. It was put to the test in the Norwegian case. I will spare you the 3 years of DOT litigation over it. And afterward, but it may be subject to differing interpretations by different people as we sit here today. From Labour's view, it is a very important set of language, and it's something that I think we view as an opportunity to build on. Where we go with that, I don't know. I am not optimistic that the US-UK agreement that John sketched out will fit the bill in any way, shape, or form, but it is, it is useful language for us to look towards the future to build upon.

John Byerly:Mike, maximum 1 minute, and then we're going to turn to questions from the audience. Any comments on this theme that you actually opened up?

Michael Whitaker:So I think, you know, it's important that the regulations keep pace with what's going on in industry. So open skies is clearly better than what used to be there before, but it's not as liberal as what was envisioned. So if you look at what US carriers are doing and what European carriers are doing, so you have companies like BA and Lufthansa that are making acquisitions. They're growing their market through acquisitions. In the US, that's really not an option at this point. So you've had about as much consolidation, I think, as you can have. The carriers are making a lot of money. So what are they going to do with that money?

Montserrat Barriga Whitaker:Yeah.

Michael Whitaker:Are they going to just buy their stock back, give big dividends, or are they going to grow their business? They can't grow organically. You would normally do that through acquisitions, and I think they're being excluded from that opportunity in the current regulatory scheme. Final point.

John Byerly:I think we've had a good setting of the table for your questions. Who's got one? And I'll— I see one right here. If we've got a mic coming up. Please identify yourself if you could when you ask a question.

Jim Callaghan:Certainly.

David Semanchik:Philip Saunders from Travelport, and a British citizen, unfortunately, with no second EU passport.

Jim Callaghan:My question is this.

David Semanchik:Obviously, in Britain, we have a delicate situation with a deal that may well not get through Parliament. And although we hope that our parliamentarians will be responsible enough to avoid a hard Brexit, it's becoming increasingly likely. I know there's uncertainty, but if the panelists had to give an educated guess of what actually will happen on the 20th of March, if it's the right day, and then 6 months later, could you give us your best estimate, please, of what will actually happen?

John Byerly:Start with Jim.

Jim Callaghan:Best estimate, it's going to be postponed, prolonged, probably for another 2 years before there's any kind of Montserrat?

Montserrat Barriga Whitaker:I think the transition period will be carried over because there are people needs, there are citizens' needs, business needs, families, you know, so I think it'd be postponed.

Michael Whitaker:Either of you? Absolutely no idea.

John Byerly:Another question? Yes, here in front. Microphone is coming real quick. Thank you.

David Semanchik:Charles Manjone, Air Malta Chair.

Jim Callaghan:It seems a done deal or a non-deal that there won't be—it will be a hard Brexit.

David Semanchik:Therefore, there won't be any deal.

Jim Callaghan:That's what we are assuming here today. In such an event, if there are old ASA agreements. which have not been revoked between the EU states and the UK. Do you think that those ASA agreements can be revived again?

John Byerly:Jim, that sounds like a legal question to you first. Will the Netherlands-UK agreement pop back up into existence?

Jim Callaghan:Yeah, for sure, for sure. I think where they haven't been revoked, They can be reignited, but I think the problem is that the current market access in a lot of cases is far beyond what the old ASAs would have provided for, so it'd be a significant gap if that happens.

David Semanchik:I would suggest if anyone here would like to be hired by the British Department of Transport for its future bilateral negotiations, get your resume in.

John Byerly:Montserrat, anything on that point about the existing bilateral or the suspended bilaterals between EU member states and the United Kingdom?

Montserrat Barriga Whitaker:No, I just hope things will carry on.

John Byerly:Another question right here in front.

Jim Callaghan:North Atlantic traffic is driven by far more things than just UK-US agreement. It is driven also, by large, by joint ventures. And these joint ventures, they are subject to antitrust immunity, in that case, EU-US. What is your best guess what will happen to joint venture between UK and US operators?

John Byerly:So there's something in just in these texts, I think in the memorandum of consultations between the United Kingdom and the United States that people are hoping, I think, will be blessed tomorrow in Washington, that essentially indicates an intention to continue the antitrust immunity at least from the perspective of the US regulatory authority, the US Department of Transportation. And I know that the United Kingdom has begun with its competition authority a review of existing joint ventures, I guess on the assumption that DG COMP at some point is no longer going to be responsible for this. But my sense is, and from my discussions with lots of US officials, is that the United States is not going to move to shake the antitrust immunity between BA and American Airlines or between Virgin Atlantic and Delta Airlines, for example, nor would this have any effect on Lufthansa-United's joint venture and antitrust immunity. Is that an answer, or I can ask the panelists to—

Michael Whitaker:I mean, I think the— I think it's a An interesting point because you do have a new sheriff in town now with the UK Competition Authority. And for if you're AABA, you're, you've got a series of conditions already on your immunity that certainly will be reviewed. And I think they have a time-limited review from the EU side. So I'd be a little, I'd be getting to know my new regulator if I were in that situation.

John Byerly:Follow-up.

Jim Callaghan:That's probably clear from the standpoint of UK and the US. But the antitrust immunity covers Europe as well.

John Byerly:Right. Yes.

Jim Callaghan:So DG Comp will be relevant here, I believe.

Michael Whitaker:And is contingent on complete open skies. So you do have to— if you revert back to the old Netherlands agreement between the Netherlands and the UK, you potentially put that antitrust immunity as it is between KLM and Delta connecting at Heathrow, Another question here in front again.

John Byerly:If you're in the back, really yell out and we'll catch you before we're finished.

David Semanchik:Hey guys, Azeem Barotawala from Volontio. Just a question, this is mainly for John and Michael. As an American and with a president who I guess at best can be called erratic, My question is, are there other individuals further down within the administration that are, that in your minds are more of a, say, steady hand through this entire process? Because a lot of times when I follow what the president's saying, he seems to change position a lot on a variety of issues, and I'm sure that with respect to Brexit and aviation and things like that, he's also said a number of conflicting opinions. So I'm just curious as to your level of confidence that the Department of Transportation in the US actually does have capable independent individuals who are, who are managing this process.

Michael Whitaker:We call them the deep state.

John Byerly:The president calls it the deep state of these bureaucrats like I was at the State Department upsetting the plans of the highest levels. There are many very well-versed capable, balanced individuals in the US government, career and political, in the Trump administration who recognize the value of aviation. We'll say that on the US-UK agreement, I was a little surprised that despite President Trump's strong endorsement of Brexit, his known antipathy towards the European Union and multilateralism as institutions That the agreement the British appear to be getting from the United States is really a little less beneficial than the agreement we negotiated with Switzerland back in 2010. I mean, Swiss, great country, great airline, part of Lufthansa Group, but the Brits are not getting everything that the Swiss got. About 95% of it. 95, 98%, but there's a little difference. And that surprised me a little bit. I thought maybe the Trump administration would reward the United Kingdom for its courage in leaving the EU with a beneficial, quick agreement. And it was a very difficult negotiation. Mike?

Michael Whitaker:Yeah, it's just probably worth mentioning that it— the open skies policy has been endorsed by Democrat administrations, Republican administrations for 25 years. So I think we'd all be a little surprised if there's too much deviation from the—

John Byerly:The main template. Dave, one last comment from you and then our time's up.

David Semanchik:I just wanted to endorse what John said, that the career-level people at the State Department and at the Department of Transportation are really superb, very thoughtful, very smart people who I can sleep at night knowing that they're helping sort of run the operation, as it were. And the political people who've been recently appointed on top of them also are quite well-versed in aviation and understand, understand the issues.

John Byerly:Thanks. Thank you, audience. Thank you, panel, for a great presentation and my view. Really appreciate it.

David Semanchik:Thank you.

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