Policy statement on UK position on rights for airlines from EU countries, and the basis on which flights will continue if there is a no-deal Brexit.
The EU’s Regulation 2019/502 on common rules ensuring basic air connectivity (‘the EU Regulation’) entered into force in March 2019. This Regulation provides the basis for EU countries to give UK airlines permission to operate if the UK leaves the EU without a deal. Subject to some minor modifications, it also applies to Norway and Iceland through its incorporation into the EEA Agreement.
The EU’s Regulation was originally intended to apply until the end of March 2020, but a proposal to extend this to October 2020 was announced by the European Commission on 4 September 2019. The rights the Regulation provide to UK airlines are conditional on the UK granting equivalent rights to airlines from EU countries.
In March 2019, the UK published a policy statement setting out the UK position on rights for airlines from EU countries to operate for the duration of the EU Regulation. This statement was also intended to apply until end of March 2020. In order to provide more certainty for consumers and industry, the UK also proposes to extend the period for which these contingency measures apply to cover the 2020 IATA summer season (which lasts until 24 October 2020), for air services between the UK and the EU. This proposal remains subject to reciprocity by the EU.
The revised statement is set out below.
The government will issue guidance to the Civil Aviation Authority (CAA) on the application of this policy statement to the granting of foreign carriers permits.
The objectives underpinning the UK position on these contingency arrangements are threefold:
- to provide certainty and reassurance to industry and consumers
- to minimise potential for disruption to connectivity, especially in the short term
- to maintain the principle of a level playing field for UK industry in future negotiations
Therefore, the UK will, subject to the necessary approvals and under the terms set out below, grant airlines licensed in EU countries a level of access to the UK that is at least equivalent to the rights granted to UK airlines under the EU Regulation, for the period during which that Regulation applies (i.e. under current proposals, October 2020).
Furthermore, the UK has also – for the duration of these contingency measures – chosen to take a more liberal approach than the EU in a few select areas in order to ensure disruption for consumers is not the result of this UK action.
However, the UK will start negotiations on future arrangements on the basis of equivalence and a level playing field.
The arrangements set out in this statement will also apply to Iceland and Norway, and so references throughout to the EU, EU Member State and EU airlines should be read accordingly.
Under the EU Regulation, UK airlines will be entitled to fly across the territory of the EU and to make stops in the EU for non-traffic purposes (i.e. to refuel or carry out maintenance without embarking or disembarking passengers or cargo). UK airlines will be entitled to operate services without restriction between any pair of points, one of which is in the UK and the other in an EU Member State (the ‘third and fourth freedoms of the air’), and all-cargo services from the UK to an EU Member State and on to a country outside the EU (beyond-EU ‘fifth freedom’ services) within a cap for up to 5 months from the date that the UK leaves the EU.
The UK intends to allow EU Member State airlines to fly across the territory of the United Kingdom, and to make stops in the UK for non-traffic purposes. If the UK were to reciprocate on this aspect of the Regulation on a purely symmetrical basis, it would mean granting third and fourth freedom rights to EU Member State airlines allowing them to operate between any pair of points, one of which is in the UK, and the other in the EU Member State in which the airline was licensed.
However, the UK has long taken the view that liberalised markets in air services promote choice and connectivity and are in the interests of consumers. As such, for the duration of these contingency measures the UK intends to go further than symmetrical reciprocity and allow EU Member State airlines to operate from any point in the EU to the UK (seventh freedom traffic rights). It would still be for the EU Member State concerned to grant an operating authorisation to an EU Member State airline licensed in another EU Member State to operate from its territory.
The UK’s position on reciprocity for EU Member States airlines on fifth-freedom all-cargo services beyond the UK is set out below.
Consistent with the principle of reciprocity, EU Member State airlines operating to/from the UK would be required to file their operational plans, programmes and schedules to the CAA for approval alongside their application for a Foreign Carrier Permit.
Furthermore, authorisation to operate air services is granted by way of a foreign carrier permit in accordance with Article 250 of the Air Navigation Order 2016. In all cases authorisation would only be granted if the EU Member State airline complies with the Civil Aviation Authority’s published safety, security and other requirements. For scheduled services, Foreign Carrier Permits are generally provided on a seasonal basis, while for charter operations they may be granted either for a series, or as an individual permit for an ad hoc flight.
The UK will start discussions on future air services on the basis of equivalence of traffic rights and a level playing field.
Ownership and control
The EU has stated that UK airlines licensed before the UK leaves the EU will continue to be eligible for permission to operate provided that they are majority owned and effectively controlled by nationals of the UK and/or nationals of the EU and EEA countries. For airlines newly licensed in the UK after exit day to be eligible to operate, they will have to be majority owned and controlled by UK nationals.
The UK believes restrictions on airline ownership and control are outdated, and do not reflect the reality of the global capital markets and the basis on which investment is made. What matters is that an airline is safe, secure and properly regulated, not the nationality of its shareholders. Ownership and control restrictions simply constrain the ability of airlines to raise capital and structure themselves efficiently and effectively.
Therefore, the UK intends to take a more liberal approach for the duration of this contingency measure. Rather than require an EU Member State airline to be majority owned and controlled by nationals from that EU country, in order to be eligible to operate services between the EU and the UK, an EU Member State airline would instead need to satisfy the CAA that they are majority owned and effectively controlled by EU nationals and/or nationals of other EEA countries and/or nationals of the UK.
The UK will start discussions on future ownership and control arrangements from the perspective of a level playing field.
All cargo services beyond the UK
Under the EU Regulation, for up to 5 months after exit day, UK airlines will be entitled to operate all-cargo services from the UK, to a point in the EU, and onwards to a third country. The EU’s Regulation would cap the number of such services that UK airlines could operate at ‘2018 levels’.
In line with the principle of reciprocity, the UK intends to allow EU airlines to operate all-cargo air services between any pair of points of which one is situated in the UK and the other is situated in a third country, as part of a service with origin or destination in the EU. The total seasonal capacity to be provided by EU27 airlines for those services would be limited to the total number of frequencies operated by EU Member State airlines in the IATA summer 2018 season on a pro-rata basis. Should the EU Regulation be amended to reflect summer 2019 frequencies then the UK intends to reciprocate. Authorisations would be granted for up to 5 months.
The EU has been clear that UK airlines will no longer be able to operate intra-EU services including domestic (cabotage) services. The UK’s position remains that liberalised markets in air services (including air traffic rights such as cabotage) promote connectivity, choice and value for money for consumers. However, the UK also has to ensure a level playing field and fair competition for UK businesses, and as such, airlines from EU countries will no longer have the automatic right to operate intra-UK services.
Nevertheless, to ensure the continuation of connectivity within the UK provided by scheduled air services and provide time for that market to adjust to these new arrangements, the UK intends to allow EU Member State airlines to operate scheduled services wholly within the UK for the duration of the IATA Winter season 2019/20 (that is, up to 28 March 2020). In terms of the market adjustment required, EU Member State airlines operating such cabotage services would be able to continue air services wholly within the UK beyond the start of the IATA 2020 summer season only if they establish an airline in the UK with an operating licence issued by the CAA, or a UK/EU agreement is reached allowing cabotage and intra-EU and UK services for all UK and EU Member State airlines.
The UK will start discussions on the potential for future cabotage within the UK by EU Member State airlines from the perspective of a level playing field.
The EU Regulation will allow UK airlines to operate using their own aircraft, aircraft leased without crew (‘dry lease’) from any lessor, or aircraft leased with crew (‘wet lease’) from another UK operator. However, the EU Regulation goes on to stipulate that a UK airline will only be able to operate using an aircraft wet leased from an airline of a state other than the UK, if that lease could be justified on the grounds of exceptional needs, seasonal capacity needs or operational difficulties. As such the expectation under EU law is that a UK airline would not wet lease an aircraft from a non-UK airline without first considering whether another UK airline is able to provide the aircraft and crew.
If the UK were to reciprocate this aspect of the EU Regulation on a purely symmetrical basis, it would mean imposing an equivalent restriction on an EU Member State airline wishing to operate using aircraft leased with crew from an airline of an EU Member State, other than the EU Member State in which it is licensed. However, the UK has long taken the view that flexible, and safe wet leasing arrangements allow the market to operate smoothly and overcome short term difficulties that would otherwise cause disruption for consumers. As such, the UK intends to take a more flexible approach for the duration of this measure and allow EU Member State airlines, subject to approval from the CAA, to operate to/from the UK using aircraft wet leased from another EU Member State.
Consequently, the UK intends to allow the following arrangements. EU airlines would be able to operate to/from the UK using their own aircraft, aircraft dry leased from any lessor, or aircraft wet leased from another operator. Nonetheless if an EU airline wishes to operate to the UK using leased aircraft, it would need to seek approval from the UK CAA before doing so. Furthermore, where an EU Member State airline wishes to operate to the UK using aircraft leased with crew from an operator licensed by a country that is not an EU Member State, it would need to satisfy the CAA that the wet lease is justified on the grounds of exceptional needs, seasonal capacity needs or operational difficulties of the airline and that the leasing does not exceed the duration which is strictly necessary to fulfil those needs or overcome those difficulties.
One exception to this would be if an EU airline sought to wet lease from a UK operator. Subject to the usual safety approvals, the UK intends to allow this without the need to satisfy the UK CAA that it is justified on the grounds of exceptional needs, seasonal capacity needs or operational difficulties of the airline and that the leasing does not exceed the duration which is strictly necessary to fulfil those needs or overcome those difficulties. However, it should be noted that EU airlines would also have to seek approval for such a wet lease from the competent authority in the relevant EU Member State, as required by Regulation 1008/2008.
The UK will start discussions on future wet leasing arrangements from the perspective of a level playing field.
Cooperative marketing arrangements
The EU Regulation sets out the ways in which UK airlines will be allowed to codeshare with other airlines on services to and from the EU. While UK airlines will be able to codeshare with airlines on their services to and from the EU, the provision does not include the ability for UK airlines to codeshare with EU Member State airlines on services wholly within the EU or from points in the EU to points beyond.
On a reciprocal basis, the UK intends to allow both UK and EU Member State airlines to act as either the marketing or the operating airline for any services operated between the EU and the UK. EU Member State airlines already codesharing with UK airlines on services wholly within the UK would be permitted to continue doing so. Any additional requests to codeshare – for instance on UK domestic air services – would be subject to approval, in line with the principle of reciprocity. Any codeshare arrangements for air services falling outside the scope of the EU Regulation would continue unaffected subject to the usual expectations of reciprocity.
Codesharing arrangements with third country airlines would not be affected by this statement.
The EU Regulation empowers the Commission to monitor the competition between UK airlines and EU Member State airlines for the duration of the Regulation. If the conditions are deemed to be unfair, the Commission can establish limits on the allowable capacity for UK airlines, or require EU countries to refuse, suspend or revoke permission to operate. The circumstances in which the EU would take such measures would be if the UK provided subsidies to its airlines, or failed to apply competition law or maintain an independent competition authority.
The Commission would also propose restrictions if the UK’s application of standards in safety, security, workers’ rights, passenger rights or the environment was deemed to be inferior to that in EU law.
The EU (Withdrawal) Act 2018 will retain in domestic UK law all EU law in force on exit day, including law on the areas mentioned above.
In terms of reciprocal arrangements, the CAA will work jointly with the Department for Transport to monitor the treatment of UK airlines operating to the EU and ensure they are able to compete with EU Member State airlines on a level playing field. In particular, discrimination against or unnecessary restrictions placed on UK airlines in their operations to the EU will be investigated and acted upon.
- Brexit ‘no-deal’ preparedness: Final Commission call to all EU citizens and businesses to prepare for the UK’s withdrawal on 31 October 2019
This statement updates the UK’s original statement of reciprocity published in March 2019.