Inside Take off or grounded?
Stakes are sky high in the post-brexit aviation sector
Every industry thinks it is the most important when it comes to its position in the queue in Brexit discussions, but the aviation sector arguably has a trump card. Many industries could fall back on World Trade Organisation rules, which were replaced by the free trade agreement the UK and EU now work under, if no deal was stuck before Brexit. But the thing that arguably makes aviation a more urgent topic than some is that there are no regulations to fall back on.
The EU-US Open Skies agreement was signed in 2007, liberalising aviation between the two continents, but when the UK leaves the bloc it will no longer be under the auspices of the rules, meaning a replicated or newly devised agreement will be needed.
The UK, as part of the EU, has enjoyed the fruits of this agreement arguably more than most, given the rapid growth in airport passenger numbers and two of the most dominant low-cost airlines globally, in Ryanair and easyjet. This means there is a lot at stake to ensure Brits and their European cousins can fly across the Channel post-brexit.
British Airways’ owner IAG says the airline industry is talking to the relevant authorities and it is “confident that a comprehensive air transport agreement between the EU and the UK will be reached”.
“It’s in Europe’s interest to have a fully liberalised aviation agreement,” the company said. “A total of 900m travellers each year have benefited from Open Skies in Europe. That not only benefits customers but creates jobs and wealth across the continent.”
Another issue that the airline industry also argues makes it a priority in Brexit negotiations is the fact carriers sell tickets up to a year in advance, meaning it is “important to have legal certainty over future arrangements and this means before the overall Brexit negotiations have finished”, according to IAG.
Ryanair has already said, if there is no clarity on what the post-brexit rules surrounding the aviation industry will be before the country leaves the bloc, it might start cancelling flights. This means a family holiday booked next year using the carrier, to take place in summer 2019, could be cancelled by March 2019 if the airline doesn’t know whether it will be able to fly British customers to Europe and vice versa.
Roughly 30pc of Ryanair’s 131m passengers fly to or from the UK and make up approximately 25pc of its revenues. Rival easyjet makes approximately half its revenue from flights between the UK and EU.
The orange-liveried company has moved to protect itself in recent months by securing an air operator certificate, known as an AOC, in Austria to allow it to keep flying intra-europe regardless of the outcome of the Brexit negotiations. Its easyjet Europe division, based in Vienna, will be able to fly within and between EU27 countries, while its UK AOC will allow it to fly domestic UK routes whether or not there is an agreement. It also has a Swiss AOC.
The importance of securing an aviation agreement becomes even more pressing when the US is considered. This is because the UK needs not only to have an agreement akin to the existing Open Skies one with the EU, but cannot formally discuss such a deal with the US until terms with Europe are confirmed.
Nick Calio, CEO for Airlines for America, the country’s largest aviation trade body, said Chris Grayling, the Transport Secretary, had travelled to Washington last month to meet with Elaine Chao, his US counterpart, and members of Congress, where the importance of preserving frictionless air travel was emphasised.
“I hosted a meeting with Mr Grayling and his team for our members to underscore our interest in a timely agreement,” he said. “Mr Grayling emphasised how important this issue is to his office and the amount of attention it is being given.
“It is my understanding that the US and UK held informal bilateral aviation discussions on Aug 14-15 here in Washington, with a second round of discussions planned for late September/early October in London.” Airports are also making their voices heard because if flights between the UK and EU are grounded, this would have a huge hit to their businesses.
Nick Barton, CEO of Luton airport, said open access to the EU market was “critical”, which was why when the sector was lobbying the Government it was “very singular” in its message.
“We have regular meetings with the Department for Transport, which is an extremely efficient and open department,” he said.
“We have had really strong dialogue with them and have made sure we are telling them what we need.”
Mr Barton added he was happy with what he had seen so far and hoped the DFT would be able to “deploy its skills to achieve what we want”.
Besides flying, travel and trade between the UK and the Continent is also conducted by rail and sea. The UK Chamber of Shipping points out that the number of heavy goods vehicles travelling just through Dover rose by 150pc between 1992, the last year of customs controls, and 2015, to 2.5m. This is equivalent to 17pc of the UK’S
‘A second round of bilateral talks with Washington are planned for late Septemberearly October in London’
current international trade in goods and is worth around £120bn annually. There’s also now the Channel Tunnel, opened after custom controls were scrapped, which serves a further 1.48m HGVS each year. It says it is “imperative” frictionless trade through the UK’S ports is treated by negotiators – on both sides – as non-negotiable.
Guy Platten, chief executive of the Chamber, said recently that the EU sells £240bn of goods to the UK each year, most of which travels through ports. “So the negative impact of a so-called hard Brexit on ports such as Dover will be felt just as severely, if not more so, by European ports,” he said.
“I don’t think the EU has fully grasped this yet.”
The Chamber said it had been working closely with Government since Brexit was announced. It has also been particularly focused on its ferry members to look at how threats to the free flow of trade through ferry ports can be mitigated.
The message is clear from the transport sector: it wants what it has now, or at least a convincing replica. It has largely done what it can to prepare itself based on what it knows now and needs politicians to work towards making its wishes reality.
To travel’s advantage, industry players in the UK and EU understand the mutual benefits of frictionless trade and are lobbying that stance.
But there will be issues to overcome, including the European Aviation Safety Agency. The UK has played a leading role in this important body but it is effectively overseen by the European Court of Justice, which the Government has said it wants no links with, and so could represent a negotiating hurdle.