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Air services from the EU to the UK in the event of ‘no deal’



With Boris Johnson becoming leader of the Conservative party, and thus Prime Minister, speculation is mounting that ‘No Deal’, meaning no agreement on the terms of the UK’s departure from the EU, will mean a number of things. Among them is air travel.

The official UK government advice regarding the UK position on reciprocity of rights for airlines from EU countries, and the basis on which flights will continue in the event of ‘no deal’ is reproduced here in full.


Introduction


Both the UK and EU have repeatedly said that in the event of the UK leaving without a withdrawal agreement, flights would continue. In September 2018, the government published a technical notice which set out that the UK would take a pragmatic approach and envisaged granting member state airlines with permission to operate. This was in the expectation that EU countries would reciprocate and give UK airlines permission to operate.

In December 2018, the Commission published a proposal for a regulation to ensure air connectivity which would be the basis for EU countries to give UK airlines permission to operate in the event that the UK leaves the EU without a withdrawal agreement. A final version of the draft regulation has been provisionally agreed by the EU. This is expected to be confirmed by the Council and the European Parliament shortly.

The draft regulation is intended to apply until the end of March 2020 (or sooner if alternative arrangements are put in place in the meantime), and the rights it provides to UK airlines are conditional on the UK granting equivalent rights to airlines from EU countries.

This statement sets out the UK position on reciprocity of rights for airlines from EU countries, and the basis on which flights will continue for this period, during which time negotiations will be undertaken on permanent future air services arrangements. This also applies to airlines from the EEA and flights to and from these countries. The government intends to issue separate guidance to the Civil Aviation Authority (CAA) on the application of this policy to the granting of foreign carriers permits.


The principles underpinning the UK position are threefold:


to provide certainty and reassurance to industry and consumers;

to minimise potential for disruption to connectivity, especially in the short term;

to support a level playing field for UK industry ahead of future negotiations.


Background

Scheduled international air services operate on the basis of bilateral and multilateral air services agreements under the framework of the 1944 Chicago Convention. Such agreements specify the routes that airlines will be permitted to operate, known as ‘traffic rights’, and any restrictions that the states concerned may impose on air services. Clauses in such agreements routinely specify the conditions under which airlines are eligible to operate. Typically, provided those conditions are satisfied, the state concerned grants the airline authorisation to operate. The foreign carrier permit system is the mechanism through which the UK grants authorisation and ensures that foreign airlines meet the relevant requirements before they provide commercial services to the UK market.

For airlines from one of the 17 non-EU countries with which air services to the UK are currently provided for by virtue of the UK’s membership of the EU, replacement arrangements are in place for all countries with flights to and from the UK, and they will continue as normal.


Policy intention

The UK will, subject to the necessary approvals and under the terms set out below, grant airlines licensed in EU countries a level of access to the UK that is at least equivalent to the rights granted to UK airlines under the EU’s draft regulation on basic air connectivity, for the period during which that draft regulation applies (up to 29 March 2020). Authorisation to operate air services is granted by way of a foreign carrier permit in accordance with Article 250 of the Air Navigation Order 2016. In all cases authorisation would only be granted if the member state airline complies with the Civil Aviation Authority’s published safety, security and other requirements. Foreign carrier permits can be provided on a seasonal basis for scheduled operations, or for a series of charter operations, or an individual permit for an ad hoc flight can be provided.


Traffic rights

Under the EU draft regulation, UK airlines would be entitled fly across the territory of the EU and to make stops in the EU for non-traffic purposes (to refuel or carry out maintenance without embarking or disembarking passengers or cargo). UK airlines would be entitled to operate services without restriction between any pair of points, one of which is in the UK and the other in an EU country (the “third and fourth freedoms of the air”), and all-cargo services from the UK to an EU country and on to a country outside the EU (beyond-EU “fifth freedom” services) within a cap for up to 5 months.

The UK intends to allow member state airlines to fly across the territory of the United Kingdom, and to make stops in the UK for non-traffic purposes. It could be argued that if the UK were to reciprocate on this aspect of the draft regulation on a purely symmetrical basis, it would mean granting third and fourth freedom rights to member state airlines allowing them to operate between any pair of points, one of which is in the UK, and the other in the EU country in which the airline was licensed.

However, the UK has long taken the view that liberalised markets in air services promote choice and connectivity and are in the interests of consumers. As such, for the duration of the EU’s draft regulation the UK intends to go further than symmetrical reciprocity and allow member state airlines to operate from any point in the EU to the UK (limited seventh freedom traffic rights). It would still be up to the EU country concerned to grant an operating authorisation to a member state airline licensed in another EU country to operate from its territory.

Consistent with the principle of reciprocity, member state airlines would be required to file their operational plans, programmes and schedules to the CAA for approval alongside their application for a foreign carrier permit.

As noted, the UK has adopted this approach to provide reassurance and minimise disruption – providing a cushion during which future air services arrangements can be negotiated. Nevertheless, the UK will start discussions on future air services from the perspective of equivalence of traffic rights and a level playing field.


Ownership and control

The EU has stated that UK airlines licensed before the UK leaves the EU will continue to be eligible for permission to operate provided that they are majority owned and effectively controlled by nationals of the UK and/or nationals of the EU and EEA countries. For airlines licensed in the UK after exit day to be eligible to operate, they would have to be majority owned and controlled by UK nationals.

The UK believes restrictions on ownership and control in aviation are outdated, and do not reflect the reality of the global capital markets. What matters is that an airline is safe, secure and properly regulated, not the nationality of the owner. Ownership and control restrictions simply constrain the ability of airlines to raise capital. Therefore, the UK intends to take a more liberal approach for the duration of this measure. Rather than require member state airlines to be majority owned and controlled by nationals from that EU country, in order to be eligible to operate services between the EUand the UK, member state airlines would instead need to satisfy the CAA that they are majority owned and effectively controlled by EU nationals and/or nationals of other EEA countries and/or nationals of the UK.

The UK will start discussions on future ownership and control arrangements from the perspective of a level playing field.


All cargo services beyond the UK

Under the EU draft Regulation, for up to 5 months after exit day, UK airlines would be entitled to operate all-cargo services from the UK, to a point in the EU, and onwards to a third country. The EU’s draft regulation would cap the number of such services that UK airlines could operate at 2018 levels.

In line with the principle of reciprocity, the UK intends to allow EU airlines to operate all-cargo air services from any pair of points of which one is situated in the UK and the other is situated in a third country, as part of a service with origin or destination in the EU. The total seasonal capacity to be provided by EU27 air airlines for those services would be limited to the total number of frequencies operated by member state airlines in the IATA summer 2018 season on a pro-rata basis. Authorisations would be granted for up to 5 months.


Cabotage

The EU has been clear that UK airlines would no longer be able to operate their intra-EU services. The UK’s position remains that liberalised markets in air services (based on liberalised air traffic rights such as cabotage) promote choice and connectivity for consumers. However, the UK also has to ensure a level playing field and fair competition for UK businesses, and as such airlines from EU countries will no longer be permitted to operate intra-UK services.

Nevertheless, to provide short term continuity of air services within the UK and provide time for the market to adjust to these new arrangements, the UK intends to allow member state airlines to operate services wholly within the UK for the duration of the IATA summer season 2019 (that is, up to 27 October 2019). In terms of the market adjustment required, member state airlines operating such cabotage services would be able to continue air services wholly within the UK beyond the IATA summer season only if they establish an airline in the UK with an operating licence issued by the CAA, or an agreement is reached allowing cabotage for all UK and member state airlines.

The UK will start discussions on the potential for future cabotage within the UK by member state airlines from the perspective of a level playing field.


Leasing

The EU draft Regulation would allow UK airlines to operate using their own aircraft, aircraft leased without crew from any lessor, or aircraft using crew of another UK operator on a wet-lease basis. However, the draft regulation goes on to stipulate that a UK airline would only be able to operate using an aircraft leased with crew from an airline of a state other than the UK, if the lease can be justified on the grounds of exceptional needs, seasonal capacity needs or operational difficulties.

If the UK were to reciprocate on this aspect of the draft regulation on a purely symmetrical basis, it would mean imposing an equivalent restriction on a member state airline wishing to operate using aircraft leased with crew from an airline of an EU country, other than that in which it is licensed. However, the UK has long taken the view that flexible, and safe wet leasing arrangements allow the market to operate smoothly and overcome short term difficulties that would otherwise cause disruption for consumers. As such, the UK intends to take a more flexible approach for the duration of this measure and allow member state airlines, subject to approval from the CAA, to lease aircraft from another EU country.

Member state airlines would be able to operate the services using their own aircraft, aircraft leased without crew from any lessor, or aircraft leased with crew from another operator. Nonetheless if a member state airline wishes to operate to the UK using leased aircraft, it would need to seek approval from the CAA before doing so. Where a member state airline wishes to operate to the UK using aircraft leased with crew from an operator licensed by a country that is not an EU member state or the UK, it would need to satisfy the CAA that the wet lease is justified on the grounds of exceptional needs, seasonal capacity needs or operational difficulties of the air airline and that the leasing does not exceed the duration which is strictly necessary to fulfil those needs or overcome those difficulties.

The UK will start discussions on future wet leasing arrangements from the perspective of a level playing field.


Cooperative marketing arrangements

The EU draft regulation sets out the ways in which UK airlines will be allowed to codeshare with other airlines on services to and from the EU. While UKairlines will be able to codeshare with airlines on their services to and from the EU, the provision does not include the ability for UK airlines to codeshare with member state airlines on services wholly within the EU.

On a reciprocal basis, the UK intends to allow both UK and member state airlines to act as either the marketing or the operating airline for any services operated between the EU and the UK. Member state airlines already code sharing with UK airlines on services wholly within the UK would be permitted to continue doing so. Any additional requests to codeshare – for instance on UK domestic air services – would be subject to approval, in line with the principle of reciprocity. Any codeshare arrangements for air services falling outside the scope of the EU draft regulation would continue unaffected subject to the usual expectations of reciprocity.

Codesharing arrangements with third country airlines would not be affected by this statement.


Fair competition

The EU’s draft regulation empowers the Commission to monitor the competition between UK airlines and member state airlines for the duration of the draft regulation. If the conditions are deemed to be unfair, the Commission can establish limits on the allowable capacity for UK airlines, or require EU countries to refuse, suspend or revoke permission to operate. The circumstances in which the EU would take such measures would be if the UK provided subsidies to its airlines, failed to apply competition law or maintain an independent competition authority.

The Commission would also propose restrictions if the UK’s application of standards in safety, security, workers’ rights, passenger rights or the environment was deemed to be inferior to that in EU law.

The EU (Withdrawal) Act 2018 will retain in domestic UK law all EU law in force on exit day, including law on the areas mentioned above. In terms of reciprocal arrangements, the CAA will work jointly with the Department for Transport to monitor the treatment of UK airlines operating to the EU and ensure they are able to compete with member state airlines on a level playing field. In particular, discrimination against UK airlines in their operations to the EU will be investigated and acted upon.





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