UK Air Transport Braces For No Deal Brexit Consequences

 - September 12, 2019, 6:27 AM
British Airways, along with all UK airlines, faces significant uncertainty as to how a No Deal Brexit could impact its ability to operate into the remaining 27 European Union states. (Photo: British Airways)

The prospect of the UK leaving the European Union (EU) on October 31 without a deal on future relations now appears to be the working assumption of the country’s air transport industry, and it is not a prospect it relishes with less than 50 days to complete preparations. The UK industry’s morale has not been improved this week by the publication of the government’s “reasonable worst-case planning assumptions” for the so-called No Deal Brexit (see below).

Further compounding the unsettled atmosphere is the threat of further damaging strike action by British Airways pilots after a two-day strike on September 9 and 10 that resulted in the cancellation of more than 1,700 flights worldwide and a reported cost to the company of almost $50 million per day. Another strike is scheduled for September 27 and no date has been set for a resumption of talks between the British Airline Pilots Association (BALPA) and BA management.

The union has a mandate from its members to take further strike action through January 2020. Unlike other BA employees, BALPA members have rejected an 11.5 percent pay increase to have been implemented over three years. On September 12, BA started pre-emptively cancelling flights on September 27.

Meanwhile, Heathrow Pause, an environmental group demanding the scrapping of plans to build a new runway at the UK’s main airport, is threatening to disrupt traffic on September 13 by flying drones in the no-fly zone. Police say they are preparing to block the protest action.

At face value, the UK air transport business is not facing the severe cliff-edge scenario feared by other industries bracing for a No Deal Brexit. On September 5, the UK Department for Transport confirmed that reciprocal arrangements with the EU to maintain air traffic rights after Brexit will continue through October 2020. Under EU Regulation 2019/502, which was originally due to run through March 2020 to take account of the original March 31, 2019, Brexit deadline, UK and EU airlines can continue to fly between any pair of points between the territories and will be able to make further stops within the territories without embarking or disembarking passengers (e.g. for fuel or maintenance needs). Cargo operators will be able to make a stop in either territory and then fly on to an external final destination. For this period, the UK also will still remain a member state of the European Union Aviation Safety Agency (EASA).

This still constitutes a downgrade in traffic rights, and especially so for UK airlines, which will have more limited Fifth Freedom rights. “In the long term, we need to get a new comprehensive air services agreement that is as good as what is available today,” said Rob Griggs, director of policy at industry association Airlines UK, referring to an agreement that would take the two sides beyond October 2020.

Evidently, there is complete consensus within the EU/UK air transport sector about the desirability of reaching a long-term agreement that would largely preserve the status quo. But given the politically fractious environment in which the UK’s Conservative government remains in a standoff with the EU over finalizing the so-called Withdrawal Agreement that would lay the foundation for a relatively smooth Brexit, no-one can be sure that this desired outcome for air transport will be achieved.

“There is no absolute assurance that this comprehensive air services agreement can be reached,” Griggs told AIN. He acknowledged that there could still be regulatory differences over issues like cabotage rights, aircraft leasing, and airline ownership and that the political dynamics of post-Brexit relations could make it hard to iron out “divergences.”

For instance, the EU’s position is that UK airlines licensed before the October 31, 2019, Brexit date will be eligible for permission to operate (into the EU) provided they are majority-owned by nationals of the UK and/or of the EU and European Economic Area countries. For airlines newly licensed in the UK after Brexit, they would have to be majority-owned by UK nationals. By contrast, the UK government has signaled its intention to liberalize nationality requirements for airline ownership in a move that could make it harder to achieve wider alignment over aviation regulations.

Late on September 11, the UK government released its so-called Operation Yellowhammer report on what it described as “reasonable worst-case assumptions” about the impact of a No Deal Brexit. It was forced to publish the report when the UK Parliament, in which the governing Conservative Party no longer holds a majority, passed an emergency motion on September 9 demanding that it do so.

The government has since been accused of failing to publish the report in full and has also refused to comply with the legislation’s demand that all internal government communications associated with the controversial decision to suspend Parliament from September 9 should also be made public. On September 17, the Supreme Court in London will rule on whether or not the government’s suspension of Parliament through October 14 was legal.

The Operation Yellowhammer report warns of a lack of public and business preparedness for a No Deal Brexit, which officials expect to worsen due to the even greater uncertainty that would be triggered by this outcome. It anticipates shortages of food, fuel, and medicines that could trigger public disorder. More specifically for air transport, the report says that new immigration arrangements between the UK (as a "third party") and the EU will result in delays at airports.

Airlines UK believes that the main adverse impact of a No Deal Brexit on the sector will be from anticipated economic decline and public perception concerns resulting in reduced demand for travel. The group said that immigration delays could be mitigated by clear communication of new requirements to passengers and indicated that it is not anticipating shortages of jet-A fuel.

Last year, approximately 160 million airline passengers flew between the UK and the European Union. The European Regions Airline Association has said that all 50 of its member carriers would be directly or indirectly impacted by a No Deal Brexit and 46 percent of them would be directly impacted.

UK Prime Minister Boris Johnson insists that he has committed to achieving a Brexit deal with the EU that would provide a more level foundation for subsequent talks over so-called “Future Relations.” But political opponents, now including more than 20 Conservative Members of Parliament, have accused him of failing to present any concrete proposals for a Withdrawal Agreement that would replace that which was provisionally agreed by his predecessor Theresa May, only to then be rejected by Parliament. The EU is due to hold a summit meeting on October 17 and 18, and this is widely regarded as the last opportunity to avoid a No Deal Brexit.

Comments

I read earlier this year that British Airways (International Airlines Group - IAG) is now wholly a Spanish Corporate Entity, thus allowing unrestricted operations all-throughout the EU and operating entirely under EASA rules. Did I read this wrong?

Jeremy, you are right to say that IAG is categorised as EU carrier under ownership rules. Earlier this year, the group chose to limit non-European ownership to 47.5 percent in order to preserve this status. The wider situation, however, is more complicated and subject to change. Under EU 2019/502, which is set to remain in force until October 2020 even in the event of a No Deal Brexit, the EU is committed to maintain permission to operate rights for carriers that are majority owned by nationals of the UK and/or the EU and EAA–as long as these carriers were licensed prior to Brexit. The UK government has indicated that it intends to liberalise this policy unilaterally, but has not provided details as to how and when it would do this.

Show comments (2)