Brexit: will airlines stop flying?
Friday, October 11, 2019
With a little over a fortnight before the United Kingdom is supposed to leave the European Union, uncertainty still haunts several airlines. As is the case within many other industries, no one really knows exactly what will happen to air traffic between the EU and Britain in the event of a no-deal Brexit. With the possibility of Brexit damaging not only British airlines but also the biggest airlines in Europe - Ryanair, Iberia, Vueling and Lufthansa - the question then arises: what are the possible risks or consequences for the airlines, passengers and air travel in general?
How will Brexit impact airlines?
Is a complete halt to air traffic between the EU and the UK a possibility?
The worst possible situation would be a complete halt to air traffic between the United Kingdom and the European Union. This scenario is highly unlikely. The European Commission has already set out measures which will allow flights between the EU and the UK to continue for 9 months after the date of an eventual Brexit. This would apply even in the case of a no-deal exit. Nevertheless, this would only apply to direct flights operated strictly from and to the UK and the EU, point-to-point flights as they are referred to. This leaves intracommunity flights operated by non-EU airlines without guarantee as well as local flights in the UK that are operated by non-British airlines.
Some airlines, such as Ryanair, have already added a Brexit clause in their terms and conditions. In the event of a non-agreement in regards to the Brexit deal, this clause would then activate, enabling Ryanair to cancel flights without facing liability. Almost all experts acknowledge that this will not happen and expect that a deal will be reached. However, Ryanair preferred to be prepared for the worst-case scenario.
As mentioned above, the biggest risk is that Britain will find itself outside of the Open Skies agreement by leaving the European Union. This agreement allows airlines to connect two cities outside their home country. It is through this agreement that EasyJet, a British company, can operate a flight between Paris and Copenhagen. EasyJet has started the process of obtaining a European license through a subsidiary in order to safeguard its flights.
The UK would also have to establish agreements with each Member State of the European Union so that European companies could continue to land on British soil. Reciprocally, British airlines would be allowed to use the airspace of each Member State. All of this would have to be agreed upon before the nine-month period set by the European Commission expires.
Although British Airways does not operate intra-European flights, it’s parent company - IAG (International Airlines Group) is based in London and also owns Iberia, Aer Lingus, Level and Vueling. This could cause many problems after Brexit due to the location of its headquarters and its ownership structure.
Non-European ownership, a much more serious threat to IAG and Ryanair
The shareholders of IAG airlines, EasyJet and Ryanair are largely composed of members from outside the European Union. However, it is essential to have a majority of shareholders from the European Union in order to obtain a European licence. It is thanks to this licence that airlines have the right to fly freely wherever they wish within the EU.
After Brexit, 70% of Ryanair will be owned by non-EU shareholders and it’s the same case for 80% of the IAG. It is certainly valid to ask questions about their future.
Ryanair has already announced its intention to "Europeanise" its shareholder base. Among the measures announced, they plan to withdraw the voting rights of non-EU shareholders, thus encouraging them to sell their shares.
The CEOs of these airlines requested the negotiators a year of transition post-Brexit. This was granted by the European Commission and the airlines will have 9 months after an eventual Brexit to get their affairs in order if they wish to continue operating as they have been until now.
Will flights be cancelled because of Brexit?
As stated previously, flights between the EU and the UK will be protected at least up to 9 months after the eventual departure of the UK. Moreover, British airlines are protected by an agreement already signed by the USA and the UK.
The United Kingdom feared that in the event of a no-deal it would lose its flight agreements with the United States; also members of the "Open Skies" treaty. The United Kingdom and the United States managed to reach an agreement allowing flights between the two countries to continue regardless of Brexit’s outcome. The answer to the questions is: possibly not, but there is no certainty.
This agreement will not make it any easier for IAG and its problems regarding Brexit. Indeed, in the event of the group keeping a British licence, it will be able to benefit from the agreement signed with the USA but the whole problem with the EU will persist. In the scenario of IAG obtaining a Spanish licence and therefore an EU licence, it will not be able to benefit from the agreement that Great Britain has just signed with the United States but will be allowed to operate under the Open Skies treaty.
What happens to the regulations regarding aviation after Brexit?
After the transition period has ended, the United Kingdom will have to choose between reconstructing its safety and regulatory measures (experts believe this would take up to 10 years) or joining the European Common Aviation Area under EASA as a third country member. Something it may be reluctant to do as that would entail acknowledging the European Court of Justice jurisdiction over the topic.
Will my passenger rights be protected after Brexit?
Although there is still a lot of uncertainty about how a post-Brexit UK will function, Enid Heenk, Head of Legal at Flight-Delayed.co.uk, has confirmed that passenger rights will still be protected when departing from the EU. "A delayed flight, or cancelled for that matter, to the United Kingdom will always remain eligible for compensation as long as it has departed from the European Union. As stipulated in European regulation EC No. 261/2004, if a flight departing from the European Union has been cancelled or if it has arrived with a delay greater than three hours, its passengers may be entitled to compensation between €250 and €600".
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Quick recap of Brexit’s main problems affecting airlines
- Airlines will be allowed to operate point-to-pint (direct) flights without any restrictions up to 9 months after the event of a no-deal Brexit, according to the European Commission
- Non-EU airlines that wish to continue operating intracommunity flights will have to reconfigure their ownership structures in order to be granted a European license or face the possibility of having to give up their routes
- The United Kingdom will have to negotiate bilateral agreements with many other countries in order to ensure that its airlines can fly to and from said countries, something they have already done with the United States
- The United Kingdom will have to choose between reconstructing its safety and regulatory measures (experts believe this would take up to 10 years) or joining the European Common Aviation Area under EASA as a third country member.
Some facts and statistic regarding aviation in the United Kingdom
- The United Kingdom ranks as the third largest aviation market worldwide, only behind the United States and China respectively
- There are more than 2000 aerospace related companies currently operating in the United Kingdom
- UK aviation is expected to double from current levels by 2050
- Most of the revenue of the UK’s aerospace is generated by exports. It accounts for uo tor £30 billion out of £32 billion in total
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