As the dust settles on the UK's referendum decision to leave the EU, it is
business as usual in terms of applicable law and regulation until the terms of
Brexit are known and the formal Article 50 process is triggered to instigate the
withdrawal process. In many cases, there are a number of potential options which
the UK could follow post-Brexit and this briefing seeks to identify some of the
key issues for the aviation market and explore, in brief, the various options.
Although the legal framework will not change in the short term, Brexit does
have a wider, immediate impact (both positive and negative) on the aviation
market. Relevant factors include foreign exchange movements (affecting fuel
prices and tourism numbers), share price movements, delay in political decision
making as a result of changes in government personnel (as demonstrated by the
deferral of the decision on the Heathrow/Gatwick runway question) as well as
general uncertainty in relation to the future landscape, which could impact
capital investment decisions, availability of funding and other strategic
matters.
The legal position
In this section, we consider the impact of Brexit on the UK legislative
framework. This analysis applies both to aviation-sector specific legislation
(eg regulations affecting passengers' rights) as well as general legislation
which affects the sector, such as legislation in relation to consumer rights,
data protection, State Aid, competition, employment and the environment.
The European Communities Act 1972 (ECA) provides the statutory authority
for EU Treaty provisions and directly applicable secondary legislation to have
legal effect in the UK without the need for further enactment in the form of
national legislation. EU legislation which does not have direct effect is
enacted in the UK either by statute or by secondary legislation.
If the government chooses to repeal the ECA, UK statutory instruments made
under the ECA will lose their justification for implementation in the UK. Even
though they will not automatically be repealed, this potentially raises an issue
as to their legal status. Once the UK leaves, future changes to the EU-law-derived legislation will not be able to be implemented through the ECA.
In any event, the UK will need to implement domestic legislation to fill the
"EU void". This could be effected by re-implementing EU law verbatim or by
drafting new legislation, which could, for example, include versions of EU
legislation which are tailored to address specific UK requirements. This is
clearly a momentous task and uncertainty in this area will be a key concern for
the industry.
Key aviation-specific issues
In addition to the significant issues affecting companies generally, there a
number of key issues which go to the heart of the UK aviation industry,
including:
- access to the single EU aviation market
- access to the US and other aviation markets
- safety regulation.
Access to the single EU aviation market
As a result of EU Regulation 1008/2008, UK-owned-or-controlled airlines are
able to operate throughout the EU single aviation market without restrictions on
matters such as frequency and capacity. This liberalisation delivers significant
benefits to passengers, airlines and airports and has been extended to a number
of non-EU members via mechanisms such as bilateral agreements and membership of
the EEA and European Common Aviation Area (ECAA).
UK airlines will clearly need to have access to the EU market. Solutions
include the options outlined above (membership of the EEA/ECAA or bilateral
treaties) but the viability of the options will depend on the approach taken by member states, particularly in the case of ECAA membership which requires
unanimous member state approval.
Alternatively, airlines may seek to restructure their ownership and/or obtain
their operating licences from an EU Member State so as to continue to benefit
from Regulation 1008/2008. This would be the less preferable option for the UK
given the impact on the UK skills base and UK employment should headquarters and
operational control move overseas.
Access to the US and other aviation markets
Similar issues apply in respect of access to the US aviation market and the
markets in other countries with which the EU has access agreements. The EU/US
"open skies" agreement is of critical importance as it effectively liberalised
the transatlantic aviation market. The potential solutions are similar to the EU
market solutions, namely to "piggy-back" on the EU arrangements or to negotiate
bilateral agreements.
Given the importance of UK/US travel and, in particular, landing slots at
Heathrow, we would expect that the negotiations with the US would be less
fraught than they might be with certain EU countries which may react negatively
to Brexit.
Safety regulation
The European Aviation Safety Agency (EASA) plays a key role in regulating the
civil aviation market in the EU, with a particular emphasis on safety and
airworthiness. EASA also plays a leading role in working with other aviation
authorities outside the EU (eg USA, Canada, Brazil) in order to promote the
free movement of EU aeronautical products, professionals and services throughout
the world. Although the EU regulations establishing EASA will cease to apply on
Brexit, it will be in the interests of all parties for the UK to continue to
participate in EASA. Although there are precedents for non-EU participation and
this should be workable for the UK, this is another critical piece of the
post-Brexit jigsaw which will need to be addressed.
Conclusion
Clearly the industry will welcome certainty in all of these areas as soon as
possible. It will be interesting to see how the negotiations with the EU member states play out in this area. While the involvement of the UK in the single
aviation market delivers undeniable benefits to passengers throughout the EU,
the UK will have to deal with the possibility of members states seeking to
protect the interests of their own domestic airlines and/or adopting an
aggressive negotiation stance.
Please fasten your seatbelts...
For more information, please contact Keith Beattie in our aviation team.