UK airlines and EU air services after Brexit

UK-headquartered aviation law specialist Clyde & Co has gone public with basic advice on how the Brexit referendum vote could affect British registered carriers. At a time when shares in UK commercial air transport have been harder hit by the referendum vote than almost any other sector, this advice is apposite and helps the un-initiated to understand why they have taken such a hit on their equity values.

Clyde makes clear that the legal landscape is complex, and here I am only presenting the simplest part of their advice relating directly to intra-EU and UK-EU services. Exit from the EU also affects British carriers’ bilateral air service agreements with North America and the rest of the world.

This is what Clyde says: “The most significant consequence will be that air carriers which have been granted their operating licence by the UK CAA will no longer be “Community carriers” for the purposes of EU Regulation 1008/2008 (“Regulation 1008”), and thus will no longer be able to enjoy the right to fly between any two points in the EU/EEA that is conferred by such status under the Regulation.

“In the absence of any other arrangements, the old bilaterals between the UK and the other EU Member States, which have been overtaken by EU liberalisation and hence dormant for years, would become effective again, and should provide a sufficient legal basis for most 3rd and 4th freedom services, but in most cases only those two freedoms.

“The services most affected will be 7th and 9th freedom services – in other words, between two non-UK points in the EU (eg, Amsterdam – Barcelona) and between two points in the same EU Member State (eg, Rome – Milan), which would no longer be automatically permitted.” End of quote.

On the other hand the EU has been pretty much an Open Skies organisation toward Norwegian regarding its intra-EU services. Norway is not in the EU but is in the European Economic Area, and its most rapidly growing airline has been permitted the kind of freedoms most EU-based carriers enjoy.

That does not mean the EU is compelled to be liberal toward British carriers’ intra-EU services, but they might be.

EasyJet would be the most affected of all British carriers because of the huge number of intra-EU and UK-EU services it offers. While it had always made clear its wish for the referendum vote to favour remaining in the Union, it clearly has Brexit plans up its sleeve and isn’t panicking.

And although it says it doesn’t want to move its HQ out of Luton and into an EU state, if it had to do so it could. Then it would be able to register its company and its fleet outside the UK, like its arch-rival Ryanair, which is registered in Ireland, an EU state.

The issues regarding services from the UK to the rest of the world are manifold, because the EU has, for many years now, overseen – and used its negotiating weight in – bilateral agreements between all EU states and the outside world. And some of Norwegian’s applications to serve the USA from European countries other than Norway have bounced off a rubber-brick wall on America’s eastern seaboard, because it is not the EU’s job to support non-EU airlines’ applications. Norwegian’s negotiations with the USA over services by its UK division have become even more difficult since the Brexit vote.

There will be a lot of talking to do during the next two years while the UK continues to enjoy the privileges of EU membership, but in the meantime the uncertainty generated by this limbo situation is causing considerable stress in the industry.

 

 

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