Upcoming Event: Brexit and Aviation, November 15. Full details here.

Cathal Guiomard (Dublin City University)

Aviation is overwhelmingly an international business. On it depend key business and political flows – trade in goods and services, face-to-face communications based on crucial business and political travel, as well as everyday tourism and student backpackers. Some of the principles on which aviation is organised politically and legally are likely to become better known in the coming months, especially if there is a hard Brexit, just as the economic crash made Irish people familiar with previous unknown terms from the financial markets.

A great deal of concern has been focused on the possibility that, in the event of a No-Deal Brexit, flights between the EU and the UK would be grounded. This is indeed a possibility, but it is likely that a short-term solution would be found to avert this drastic scenario. Brexit cannot stop aviation and so, other than for a few days or perhaps weeks, it surely won’t. However, what is more worrying is its negative impact on the industry over the long term. Brexit is already disrupting aviation, and putting the status quo back together on a new and sound basis will be costly, especially for the UK.

In an elegant phrase, aircraft have been described as silver needles that knit the world together. Europe is part of that world, and is now knitted together so much more tightly than before the creation of its common aviation area, gradually built up during the 1990s. It is these thick linking strands that Brexit threatens to slice through, returning UK aviation to the world of bilateralism, separate from continental Europe only within which aviation will carry on much as before.

Air travel within the EU up to twenty years ago – and still today in most countries and in practically all international journeys – is bedevilled by a principle called airspace sovereignty. Set out in the first article of the 1944 Chicago Convention it reads: “Every state has complete and exclusive sovereignty over airspace above its territory.” In other words, without another government’s permission, you can’t fly an aircraft outside your own jurisdiction. To do so you need an air services agreement with the other government. Quite why air companies should face these obligations when few others do is a topic for another day. These air service agreements (ASAs) existed and exist to prescribe which airlines might offer what air connections (cities, frequencies, seats per week) between what countries.

The Irish-UK agreement of 1946 is a case in point. Although an extremely dated example, the mindset that drafted it is alive and well. This is an international treaty, registered at the UN. Under its provisions, only two airlines could fly between Ireland and the UK. In 1946 these were: the British Overseas Airways Corporation (BOAC, later absorbed into BA) and Aer Rianta (which at the time included the later Aer Lingus). Flights were permitted between Dublin or Shannon and: London, Glasgow, Liverpool, Belfast and the Isle of Man. When, five years later, Birmingham and Bristol needed to be added, the treaty had to be modified. And so on. It’s not quite the Single Market – or any market.

In the EU, airlines – community carriers – may add and scrap services between any two airports (where there is space) at any time, as would be expected in a commercial business. Outside the EU, it’s different. EU countries, in order for their airlines to fly to and from international destinations, require a set of bilateral ASAs with the corresponding non-EU countries. The Irish Department of Transport has 29 agreements, listed here.

Aviation has managed to keep itself in a class of its own when making international agreements of this kind. For example, aviation is well-known for being outside standard climate-change agreements; these are handled instead by the UN’s civil aviation agency, ICAO. Similarly, aviation is outside the World Trade Organisation (WTO) rules. For Britain after Brexit, this means there is no ‘safety net’ trading agreement for traffic rights that the UK could use.

But the jettisoning of the status quo affects much more than airspace sovereignty and bilateral agreements. The air service agreements (ASAs) are essentially an economic protectionist measure. On top of that, there is safety regulation that gives rise to a large system of further regulatory rules. This includes safety validation of personnel (aircrew, air traffic controllers, key airline managers), equipment airworthiness (aircraft, tested at the level of the individual component), airport safety, air operations, air traffic management, navigation services, and many other aspects. There are rather bulky rulebooks on all of these. UK airlines will not be accepted as safe airlines to fly internationally (not just in and out of the EU but globally) without British replacements for these many rules. Right now, the UK does not have the regulatory agency capacity to take over these roles. The UK is credited with having been the main mover in establishing a dedicated EU aviation safety agency (EASA). But unless the UK can retain membership in EASA after Brexit (some non-EU states are members, such as Switzerland), it will have to fall back on its own resources for safety regulation.

Large UK airlines have given up hope on there being time to replace this work and have opened airlines in EU member states, which will be the legal homes of the companies for the purpose of organising at least their within-EU services. It is not clear what smaller UK airlines will do.

There is a further aspect. To be an airline of a given country, more than 50% of it must be owned by nationals of that country, and such nationals must also have effective control of the airline. This arrangement is also a legacy of the Chicago Convention, and features very explicitly in Ireland’s 1946 ASA with the UK; BOAC and Aer Rianta had to demonstrate that they were, respectively, British and Irish. Britain is a very international economy today; many of its companies are not majority owned by Britons, including many of its larger airlines. This will constitute a problem when the US and the EU get around to negotiating a post-Brexit agreement with the UK under Chicago principles.

The question has also been raised about what will happen to the EU regime of ‘passenger rights’, under which EU passengers on disrupted flights (delayed or cancelled) have a number of entitlements that airlines must provide. Outside the EU, airlines from the UK may no longer be obliged to operate this, somewhat costly, scheme. If the UK does not do so, or does so on a lesser scale, there will be claims of an ‘uneven’ playing field.

There are two last effects of Brexit on aviation that there is space to mention here. Air traffic control is not an efficient service in the EU. There are too many providers (ATC companies), practically no competition, and high charges – much like where EU airlines stood before competition was introduced. There is a large regulatory reform programme (the ‘single European sky’) making rather slow progress. Outside the EU, the UK, a strong voice for competition and efficiency, will have much less influence on the project. But its airlines (and ours) will still have to pay the bills.

Finally, many of the features of Brexit and aviation discussed above will distort the current EU aviation market and make it harder for UK airlines to participate in the market. This will dampen competition, which has brought such substantial benefits not only to EU consumers but also to businesses in non-aviation sectors.

To conclude: Brexit will disrupt aviation in very many different respects, because so much of the industry’s regulation and oversight is carried out on an international basis; for the UK, until now, this has been as part of the EU. All of this can in principle be redone, but not overnight. And it is inevitable that in doing so countries will seek to squeeze an advantage from a jurisdiction which will more often now be the smaller party to the negotiation. But then, it is hard to deny that Brexit is undoing some 50 years’ work, and starting afresh.

 

Cathal Guiomard has, since 2014, been an Assistant Professor of Aviation Management in the Dublin City University Business School, where he teaches and researches regulatory and aviation issues. Prior to that he was the Commissioner for Aviation Regulation in Ireland, responsible for setting airport and ATC price caps, licensing airlines, and some other roles under EU law. He previously worked in other parts of the education sector, in research and in central banking.