Global menu

Our global pages

Close
Brexit: Aviation sector

Brexit: Aviation sector

  • United Kingdom
  • Brexit
  • Competition, EU and Trade - Brexit
  • Transport - Aviation

27-05-2016

Brexit and the legal implications for businessesThe EU single aviation market is the world’s largest and most successful example of regional market integration and liberalisation in air transport. Whether you are in the Remain or Leave camp, the prospect of the United Kingdom voting to leave the European Union in June raises a number of important issues for the aviation sector. If the UK votes Leave, there would inevitably be a period of transition until the UK’s aviation strategy is decided and negotiations take place with the EU and potentially with third countries. This will cause a great deal of uncertainty in the industry, at least temporarily. But what will actually change? We consider below how Brexit might affect the regulation of aviation in the UK.

  1. Access to a Common Aviation Area
  2. Impact on UK aviation law
  3. Nationality of airlines

1. Access to a Common Aviation Area

Following a vote to leave the EU, the UK would continue to be a member of the EU single aviation market until the date it actually leaves (1).

As a member of the EU, the UK benefits from air traffic rights negotiated at EU level which enable airlines owned and controlled by EU member states to operate freely without restrictions such as on capacity or frequency. As an EU member state, the UK also benefits from participating in common aviation areas with non-EU countries, such as the European Common Aviation Area (ECAA).

EU member states are also subject to aviation agreements agreed between the EU and third countries. The most significant example being the EU / US ‘Open Skies’ agreement (2) which enables EU and US airlines to fly without restriction to destinations on both sides of the Atlantic. The ‘Open Skies’ agreement has had a significant impact on the competitive landscape of the UK’s aviation market by establishing a mutual regulatory framework for flights between the EU and the US.

All of this facilitates greater competition between airlines and, working effectively, results in lower fares and more choice for passengers.

Whilst the outcome of trade negotiations will of course be crucial for all business sectors, the shape of the UK aviation sector post-Brexit will also be determined by the ability and willingness of the UK government to retain access to the EU aviation market, or to build new relationships with non-EU countries, to protect passengers and businesses alike.

What alternatives are available?

There are a number of options that the UK government will need to consider quickly in order to minimise disruption and uncertainty in the UK aviation sector. These options are explored below.

Option 1: Re-join the ECAA

  • The ECAA is effectively an extension of the EU’s single aviation market, incorporating non-EU countries such as Norway and certain Balkan countries such as Albania and Bosnia-Herzegovina. The UK is automatically a member of the ECAA through its EU membership. The UK could maintain access to the single aviation market by re-joining the ECAA as an “independent” country. However, this is not a certainty and will depend on negotiations and the will of other countries. It is a very real prospect that existing ECAA members, particularly the EU, will require the UK to maintain close cooperation on aviation issues and, crucially, ensure that the UK’s aviation laws and standards maintain equivalence with those of the EU. There may be no room for negotiation for the UK government and re-joining the ECAA may in some respects feel like business as usual for the regulation of UK aviation.

Option 2: Bilateral agreement with the EU

  • The UK could try and negotiate a bilateral aviation agreement with the EU as Switzerland did in 1999 (3). The extent to which this would be notably different to joining the ECAA is questionable given that the Swiss / EU agreement adopts EU law and principles, but theoretically there could be scope for negotiation. It is important to note that negotiating such an agreement with the EU could be very complicated and time consuming, particularly if the UK government wishes to derogate in any way from EU law.
  • Whilst it is possible that the UK could instead negotiate bilateral agreements directly with individual EU member states, this would be extremely complicated and unlikely to be a priority for the UK government during the initial ‘exit period’, not least because it would be a huge undertaking to successfully negotiate with several EU member states at once during the two year exit period. This option would be particularly complicated because the EU reserves certain exclusive competences in respect of aviation agreements (such as the rules on the allocation of slots) meaning that individual member states have limited scope as to what they can agree. Moreover, EU member states are legally obliged to ensure that any bilateral aviation agreements with third countries are compatible with EU law (4). Therefore, as with ECAA membership, the UK is unlikely to be able to derogate from EU law should it choose to pursue bilateral aviation agreements with individual EU member states.

Option 3: Bilateral agreements with third countries

  • The UK would be free to negotiate bilateral agreements with non-EU countries. Currently, the EU has air service agreements with the US, Canada, Morocco, Jordan and Israel among others. Negotiating similar agreements with these countries quickly during the two year exit period could be crucial to minimise disruption and ensure UK airlines continue to benefit from existing air traffic rights with non-EU countries. Of course, the UK would have discretion to negotiate aviation agreements with new countries as well. It is not clear how strong the UK’s negotiating position could be but there would be a blank canvas in respect of the aviation laws and standards that might apply.

2. Impact on UK aviation law

The rules and standards that govern UK regulation primarily come from the EU.

One example is the Airport Charges Directive (5) which requires certain airports (6) to ensure that the charges paid by airlines to use airport infrastructure for aircraft landing, freight and other purposes, are not discriminatory. The Airport Charges Directive was transposed into UK law by way of the Airport Charges Regulations 2011 and will continue to apply in the UK (unless it is actively amended or repealed). Regardless of this, airports would remain regulated by the CAA and UK competition law (to the extent that this remained unchanged) would continue to apply to dominant airports as well as anti-competitive behaviour - thus the commercial, legal and regulatory impact of a Brexit in respect of airport charges is likely to be minimal.

However, this is just one example.

Existing EU laws transposed by way of regulations would not automatically apply after Brexit. Depending on what is negotiated, this could mean a derogation from key aviation rules such as those that require airport slots to be used efficiently and allocated in an equitable, transparent and non-discriminatory way.

State aid rules will not automatically apply either and the government will have to make a decision quickly as to whether or not it will implement a UK system on state support. The government’s approach to state support of airport infrastructure, regional airport development, and start-up airlines will be particularly interesting.

However, as discussed above, there may be only limited scope for the government to divert from the laws and regulations that govern the UK aviation sector should the UK wish to maintain access to the EU aviation market.

3. Nationality of airlines

UK owned airlines with EU carrier status are able to operate anywhere within the EU by benefiting from freedom of establishment and non-discriminatory market access. An airline gains EU carrier status when it is granted an operating licence by a competent licensing authority. In order for a business to gain an operating licence, amongst other requirements, its principal place of business must be in an EU member state and EU member states and/or nationals of EU member states must own more than 50% of the airline and hold effective control of the business (7).  

If the UK is unable to gain the same air traffic rights on similar or equivalent terms as it currently enjoys, it is possible that UK based airlines could be forced to base themselves elsewhere. Airlines may consider relocating or restructuring their businesses to continue to benefit from the single EU aviation market in the absence of a post-Brexit aviation deal with the EU.

 

1. The Lisbon Treaty prescribes a two year exit period following formal notification of the UK’s decision to leave the EU.
2. See Council Decision 2007/339/EC.
3. The agreement came into force in 2002.
4. Regulation (EC) No 847/2004 on the negotiation and implementation of air service agreements between Member States and third countries.
5. Directive 2009/12/EC.
6. The Airport Charges Directive applies to EU airports handling more than 5 million passengers per year, and the largest airport in each EU member state.
7. Regulation (EC) 1008/2008 on common rules for the operation of air services in the Community.

Visit our Brexit Legal Advice Hub for in-house lawyers

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings