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Brexit and aviation: Possible solutions for UK carriers

04.08.2016 Aviation

Gillie Belsham

Gillie Belsham Global Head of Aviation, Partner

One solution for a UK carrier would be to restructure operations so as to meet the conditions of Regulation 1008. This would involve changes to the location of the airline’s principal place of business from the UK to a place in the EU and changes of its ownership structure to ensure that more than 50% of effective control is held by EU nationals. 

This solution would obviously present major difficulties and expense to such carriers. In this context, it is significant that it has just been announced that easyJet is in the process of applying for another operating licence from a Member State of the EU.

A second solution for UK Carriers: Access to the EU Market via the European Common Aviation Area

The EU has endeavoured to extend the liberalisation of EU aviation services by creating the European Common Aviation Area (“ECAA”) with non-EU “third countries” such as Switzerland, Norway, Morocco, Israel, and certain Balkan states. Under the ECAA, access is obtained to the EU aviation market by bilateral cooperation agreements negotiated with each third country.

An agreement between the UK and the EU27 to achieve access to the EU market via the ECAA would be possible but would be a complex undertaking, especially as the bilateral agreement would necessarily be influenced by the different interests of the 27 EU Member States (in particular their legacy flag carriers). While the ECAA agreements have been made with a number of states, none have as large and as powerful an aviation sector as the UK and they present less of a competitive “threat”. It is not unlikely that certain Member States would seek to achieve a competitive advantage for their domestic carriers by excluding or restricting UK carriers from having full access to the EU aviation market.

A third solution for UK Carriers: Revival of Past UK Bilateral Air Services Agreements with EU Member States?

It has been suggested in some quarters that, after Brexit, past bilateral air services agreements negotiated by the UK with certain EU Member States could be “revived”. It is difficult to see how this could be possible as such agreements must have been de facto terminated but, in any case, Article 15(4) of Regulation 1008 specifically states that: “Any restrictions on the freedom of Community air carriers to operate intraCommunity air services arising from bilateral agreements between Member States are hereby superseded”. Once, therefore, British carriers cease to be Community air carriers they will be reliant on rights to fly granted under new air service agreements both with the EU27 and indeed other third party states with which the EU has already entered into bloc agreements (the EU/US bilateral being the most obvious).

In EU law, external trade agreements fall under the so-called “Union competence” requiring EU Member states to act collectively rather than unilaterally in negotiating international trade agreements. But, in certain cases, external relations competence is shared between the EU and its Member states, a situation addressed by Regulation 847/2004 in the case of air services agreements with third countries. An application of these principles means that individual EU 27 Member states would not be able to negotiate bilateral agreements with the UK but would negotiate air services
agreements as a bloc. A difficult period of negotiations therefore lies ahead for the UK government in the aviation sector.

Article authors:

Gillie Belsham

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