NBAA Convention News

UK Bizav Faces Brexit Uncertainties as EU Talks Struggle

 - September 22, 2020, 11:09 AM

Speakers at a Brexit webinar on Wednesday organized by the British Business and General Aviation Association (BBGA) tried to paint a positive picture of what the industry will face when the transition period for the UK’s departure from the European Union (EU) ends on December 31. However, with just 71 business days remaining, multiple uncertainties remain regarding the regulatory framework that will apply for UK and EU companies, and on how market access may be impacted.

Almost 200 webinar participants were reminded that much of the uncertainty hinges on the ongoing negotiations over the future relationship between the UK and the EU. At the start of September, UK Prime Minister Boris Johnson unilaterally imposed an October 15 deadline, while also introducing legislation that would override some aspects of the Withdrawal Agreement signed last year to provide a legal foundation for the transition period. EU leaders have protested that this will amount to a breach of international law, raising concerns that this might undermine efforts to reach industry-specific agreements such as the Bilateral Aviation Safety Agreement (BASA) that it is hoped will apply when the UK ceases to be a member of the European Aviation Safety Agency at the end of 2020.

BBGA chairwoman Aoife O’Sullivan, who is a partner with The Aviation Law Firm, insisted that even if political negotiations over the future UK/EU relationship break down, there will still be sufficient legal framework to support industry continuity at least in the short term. “We are not rushing headlong off a cliff,” she said. “If there is no deal, there has always been contingency legislation in the UK and Europe that can be brought back in [having been repealed by the Withdrawal Agreement] that would allow for continuity in aviation safety. So, for example, [aircraft] type certificates would remain valid for a short period of time.”

However, even if the integrity of aviation safety standards can be upheld, serious questions remain about market access and the ability of aircraft operators and service providers to do business across the new border that will exist between the UK and the 27 remaining EU states.

O’Sullivan and other experts confirmed that it is by no means certain that all nine aviation “freedoms” will be maintained, and the most significant loss seems like to be the Fifth and Sixth Freedoms that allow aircraft operators to fly between two foreign countries on a flight originating or ending in their own country or having made a stop in their own country. These freedoms are critical to the private charter sector, and also to scheduled airlines.

Also in doubt are the rules governing cabotage rights that currently allow UK and EU operators to fly charters within their respective territories. David Harding, deputy director for general aviation with the UK Department for Transport, confirmed that cabotage traffic rights are unlikely to be maintained at the end of the transition period, leaving operators needing to request permission to conduct individual flights.

This has left operators like UK-based Saxon Air uncertain as to whether it can take charter bookings into 2021 that would require access to the Fifth and Sixth Freedoms. “Being able to pick up charters elsewhere is critical to the competitive landscape,” said CEO Alex Durand. He also expressed concern over whether passengers will be able to freely cross borders and whether Saxon Air’s 50-percent EU flight crew will be allowed to continue working in the UK and its UK crew within the EU.

Durand said operators also face uncertainty over tax and fuel duty issues, and what rules will apply regarding who can own and control a UK-based air operator’s certificate. Additionally, he is concerned about how to maintain airworthiness requirements for both aircraft and the personnel, triggering doubts as to whether his team should complete checks and other procedures under existing rules before December 31 and where things will stand with regard to the operator’s supply chain at the end of the transition. “We need to make decisions and we simply don’t have the information we need to make them,” he said. “Let’s not wait until the last minute, we need to be able to take decisions.”

As things stand, the industry is likely to have to wait until the second half of October to see whether the UK/EU Future Relationship negotiations result in a binding agreement. At the same time, negotiations over the proposed BASA governing relations between EASA and the UK Civil Aviation Authority (CAA) are continuing. CAA officials Rob Bishton and David Kendrick assured BBGA members in the webinar that the agency is well prepared to assume full national responsibility for regulating UK aviation once the departure from EASA is complete.

Despite the acknowledged uncertainty and concern on the part of business aviation companies, webinar presenters did try to highlight some potential benefits to the UK industry of being outside the EU and beyond EASA’s jurisdiction. Adrian Jones, a director with tax and import/export advisors Martin Fiddler Aviation, made a case for the UK becoming a favored location for closing aircraft sales transactions.

“It could be good for brokers, lawyers, and financiers because, unlike the Channel Islands and Switzerland, it would mean closings would take place outside Europe and yet the aircraft wouldn’t have to be imported into the UK [for tax purposes] with the right warehousing arrangements in place,” Jones explained. He pointed to the 130 tax treaties that the UK has with other countries and the fact that it has an established aircraft support industry as further advantages in this niche activity.

Harding said the UK government is determined to take advantage of Brexit to make the UK aviation sector more competitive. “Outside EASA we will have the autonomy to develop our own regulations and we’ll do what’s right for our industry,” he told the webinar. “We will look to make regulations that are more tailored to the UK industry and this might include simplification of licensing and medical certifications.”

The UK Department for Transport official also confirmed that in the fall the government will publish a plan to help the aviation sector recover from the severe drop in business resulting from the Covid-19 pandemic. It will focus on areas such as supporting the aviation workforce and boosting skills, as well as increasing regional air transport links and innovation aimed at achieving leadership in zero emissions.