EBACE Convention News

Navigating Brexit, No-deal Brexit, or No Brexit

 - May 16, 2019, 6:00 AM
Athar Husain Khan, secretary-general of the European Business Aviation Association (EBAA).

Athar Husain Khan, secretary-general of the European Business Aviation Association (EBAA), is quite straightforward about the Brexit process and how the UK's departure from the European Union might affect EBAA members. The process so far has been “exponentially chaotic and unpredictable,” he said. At the end of April, he pointed out, the Brussels-based lobby trade group and its wide variety of members still had no clarity what they must do to be fully compliant with the post-Brexit UK and European Union (EU) regulations, and by when. “We still don’t know whether Brexit will happen, if we’ll have a transition period, or if the current extension will last even longer,” he told AIN.

Initially, the UK was due to leave the bloc on March 29 at 23:00 GMT. Then the date was postponed to May 22 because the members of the UK Parliament did not support the 585-page withdrawal treaty that Prime Minister Theresa May had negotiated with Brussels. Last month, the EU27’s leaders granted yet another extension until October 31—though the UK can depart the EU before that if May can somehow get her deal approved by the country’s lawmakers. Throughout this jigsaw of delays, a hard Brexit loomed on March 29 and April 12, forcing the bizav ecosystem to prepare twice for a worst-case situation where EU laws would stop applying to the UK and plow out of the European Common Aviation Area (ECAA)—including EU-negotiated Air Transport Agreements—immediately.

“Our biggest concern right now is unpredictability,” Kahn asserted. “Brexit’s unpredictable outcome poses risks, both operational and financial, to everyone: our operators, the entire aviation supply chain, the British economy, and the European economy. In addition, business aviation traffic tends to follow the curve of the economy. When the economy grows, aviation traffic increases. Alternatively, when the economy retracts, traffic decreases. This is observed at global, regional, and, national levels.”

For Norwich Airport-based private aircraft operator and aviation service provider SaxonAir, the subsequent extensions to Brexit made no difference to preparations, “but it has allowed us to have a less complicated summer flight program,” according to its CEO and British Business General Aviation Association vice-chair Alex Durand. “We will have no further lead on the operational environment we can expect post-Brexit, which makes it impossible to plan for. All we can hope for is that we won’t be left with only days to react to the final terms of Brexit, which is the situation we were expecting to face for March 29.”

The company, which operates business jets and helicopters, was not ready for the initial March 29 Brexit deadline, Durand conceded, “because we didn’t know what we would be required to do.”  Moreover, it’s still unknown how to be fully compliant with the post-Brexit regulations, and by what date, he noted. “We have been given guidance on planning for a no-deal Brexit, but in reality, there is little we can confidently do without knowing the final regulatory landscape,” he told AIN.

What has been the most challenging, for operators and EBAA alike, Kahn explained, was to obtain information from the regulators—the British Civil Aviation Authority (CAA) or the European Union Aviation Safety Agency (EASA)—on what needs to be done. Requirements to obtain valid Third Country Operator (TCO) certificates, licenses, etc. came very late, around the time regulators started to consider hard Brexit a likely scenario. And, he added, “It is important to remember that measures taken by both UK and EU regulators in case of hard Brexit are provisional. They aim at ensuring safety and basic connectivity for a limited period of time, in case the UK leaves the EU without an agreement. This means that in case of a transition period, our operators will be operating under the current framework [pre-Brexit] for the first two years. The specific conditions after those two years are not entirely defined yet.”

By the end of March, the EU had adopted no-deal regulations that arrange aviation security, market access for UK airlines, and regulate the validity and/or recognition of the EASA certificates and licenses held by UK organizations. The basic air connectivity rules will give UK airlines third- and fourth-freedom rights to and from the EU—they may not operate intra-EU flights— conditional to reciprocity from the UK side. As regards ownership and control, the legislative act will give airlines holding an operating license issued by an EU member state but not meeting EU ownership and control requirements six months to fully meet all those requirements. EU law requires EU interests to majority own—50 percent plus one share—and effectively control its airlines. Also, the UK government has released the technical details of the measures it plans to take to ensure flights will continue if the UK leaves the EU without a deal.

SaxonAir applied and was accepted by EASA as an approved Foreign Carrier. The application process for the EASA Foreign Carrier Approval was relatively straightforward and was processed relatively quickly, Durand said. Even though the websites for both the UK, the CAA, and EASA were rather late appearing, “they did provide as much information as we could expect to have.” Likewise, FAI Aviation Group in Nuremberg, Germany, obtained the permits from the UK CAA needed to continue operations into and out of the UK, the company’s chairman and founder Siegfried Axtmann said. The UK national and/or EU regulator and authorities have been accommodating to help FAI prepare, as was EBAA, he said.

“We informed our members on either side of the channel about the necessary steps to be taken to operate post-Brexit,” Kahn emphasized. “We believe most of them were ready.” Regarding the extensions, no one was able to predict them. “Indeed, one might consider that our operators did rush to be compliant, but being able to operate to/from the UK was so critical that our operators had to do their homework to be ready in case of hard Brexit,” he added.

FAI’s Axtmann is not too concerned that his company, Germany’s largest business jet operator with 25 jets and over 13,500 hours logged in 2018, did spend time and money on preparing for something that might not happen. SaxonAir, however, sees it differently. “We’ve incurred costs applying for an approval we may not need, as well as direct costs planning to subcontract intra-EU flights in the days following March 29 and then April 12, as well as re-planning fuel stops for long-range flights away from the EU. We also didn’t roster EU nationals for this period in case of delays to the UK license validations,” said Durand. The costs for the additional approval are relatively little compared to the cost of setting up an EU operation, he admitted. “However, any costs aren’t welcome after a quiet winter, and the larger cost has been the charter-traffic slowdown caused by a stagnation of investment and activity in the UK due to uncertainty around Brexit.”

The "real" costs are the ones related to the energy and efforts deployed by operators, their staff, and advisors to be compliant, EBAA’s secretary-general pointed out. Often, this necessitates the involvement of law firms and legal experts, which may have even more impact on costs than those linked to obtaining certificates and licenses, especially for small operators. The real question is not whether the association’s members spent time and money on preparing for something that might not happen, according to Kahn, but “what would be the cost of being unprepared if Brexit does happen.” Brexit has been a “very frustrating process” from day one—the referendum held on June 23, 2016—he concluded. “But one thing is certain, Brexit not happening would solve all the challenges our operators face today and will likely face in the future.”