Aviation if there is a “no deal” – Status overview

Introduction

This article examines what a “no deal” Brexit would mean for the aviation industry following the publication of EU and UK legislation to address this.

Air transport services with respect to traffic rights and services directly related to traffic are excluded from the WTO General Agreement on Trade in Services (GATS). If the Withdrawal Agreement is not ratified then there will be no implementation or transition period. EU law will cease to apply to the UK and the UK will become a “third country” from an EU perspective as at the end of the Article 50 notification period. This article describes the terms of the legislation published by the EU which would apply from that point to provide basic connectivity and continuity of air services between the EU and the UK. It also summarizes the UK government position as outlined in guidance and legislation.

It is important to note however that the situation remains fluid. Airlines and other aviation businesses will need to closely monitor developments as further information emerges.

Flying rights

UK airlines operating to, from and within the EU

The EU published Regulation 2019/502 on March 25, 2019 on common rules ensuring basic air connectivity with regard to the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the Union (the Connectivity Regulation), which provides as follows:

• UK airlines will be able to fly existing routes to and from the EU (1 – 4 freedoms of the air).
• For a maximum of five months from the date on which the UK ceases to be subject to EU law, UK airlines will be able to exercise fifth freedom rights in respect of scheduled and unscheduled all-cargo services. The Connectivity Regulation provides that the total seasonal capacity provided by UK airlines for such all-cargo services shall not exceed the total number of frequencies operated by those airlines for those services during the 2018 IATA winter and summer seasons respectively.
• For a maximum of seven months from the date on which the UK ceases to be subject to EU law, UK airlines will be able to continue to operate on routes which are subject to public service obligations provided that the right to operate the route was granted in accordance with Articles 16 and 17 of Regulation 1008/2008 prior to such date.
• Save as outlined above, UK airlines will not be able to exercise rights to fly between EU destinations (5 – 9 freedoms of the air).
• Unlike early drafts of the Connectivity Regulation, there is no cap on the expansion of services other than as outlined above.
• More flexibility is provided for UK and EU airlines to enter into cooperative marketing arrangements such as code sharing, subject to the approval of the aviation authority in the relevant EU member state. However, this should not be used to circumvent the limitations on air services provided under the Connectivity Regulation. For example, it would not be possible for a UK airline to code share with an EU airline on a route which was wholly within the EU.
• UK airlines will be able to use leased aircraft to provide the services referred to in the Connectivity Regulation subject to the approval of the aviation authority in the relevant EU member state. However, to the extent that aircraft are wet leased from outside of the UK then that leasing should be justified on the basis of exceptional need, seasonal capacity needs or operational difficulties and should not exceed the duration needed to overcome that need or difficulty.
• The EU Commission can take action to restrict the rights afforded to UK airlines under the Connectivity Regulation where it believes that those rights are not reciprocated for EU airlines in the UK (including with respect to competition).
• The exercise of the right will be subject to the relevant UK airline securing approval from the civil aviation authorities of all of the member state destinations to which it flies. In addition, UK airlines will need to obtain an EASA Part-TCO (Third Country Operator) authorization. EASA permitted UK airlines to start applying for a Part-TCO beginning January 7, 2019.
• The Connectivity Regulation prohibits EU member states from entering into separate bilateral air services agreements with the UK pending the earlier of (i) the negotiation of a comprehensive air services agreement between the EU and the UK and (ii) March 30, 2020.
• The rights afforded under the Connectivity Regulation would only last until the earlier of March 30, 2020 or the entry by the UK and the EU into a comprehensive air services agreement.

Pursuant to a statutory instrument, The Operation of Air Services (Amendment etc.) (EU Exit) Regulations 2018 No. 1392 (UK Air Services Regulation), the UK Government will require UK carriers to hold a route license issued by the United Kingdom Civil Aviation Authority (the CAA) for the performance of services to the EU. The explanatory memorandum to the statutory instrument states that the CAA has contacted those UK carriers who are not already in possession of a route license in order to inform them of this.

EU airlines operating to, from and within the UK

• Pursuant to guidance entitled “Air services from the EU to the UK in the event of “no deal” (March 7, 2019) published in response to the Connectivity Regulation (the UK Connectivity Guidance) the UK government announced that it would be prepared to extend equivalent or better rights to EU airlines operating to, from and within the UK. The UK plans to permit EU airlines to operate flights from any point in the EU to the UK, to grant reciprocal rights for a 5-month period for all cargo services and to allow intra-UK flights for the duration of the IATA summer season 2019 (i.e. up to October 27, 2019) with the possibility of such cabotage rights extending beyond that period if the EU airline establishes for that purpose an airline in the UK with a CAA-issued operating license.
• The UK Connectivity Guidance states that airlines will be able to use leased aircraft to provide the services referred to in the Connectivity Regulation subject to the approval of the CAA. However, to the extent that aircraft are wet leased from outside of the EU, then that leasing should be justified on the basis of exceptional need, seasonal capacity needs or operational difficulties and should not exceed the duration needed to overcome that need or difficulty.
• The UK Connectivity Guidance provides that the UK will allow UK and EU airlines to code share on services operated between the EU and the UK. If an EU airline is already code sharing with a UK airline on a service wholly within the UK then it will be permitted to continue to do so. However, additional requests to code share on UK domestic services will be subject to approval.
• EU airlines would need (a) a foreign carrier permit and (b) a “UK Part-TCO (Third Country Operator) safety authorization issued by the UK CAA. The UK Department of Transport has said that, in principle, an airline which holds an EASA Air Operator Certificate will meet the criteria for issuance of a UK Part-TCO authorization.

Ownership and control

UK airlines

• Licensing - The UK Department of Transport has said that it does not intend to impose nationality restrictions on the conditions for the issuance of an operating license. This is reflected in the changes to be made pursuant to the UK Air Services Regulation. As such, UK airlines with significant EU ownership or control should not need to make changes to their ownership and control structure for the purposes of UK licensing requirements.
• Air services agreements – However, where the UK airline operates a service pursuant to an air services agreement with another country, it will need to ensure that its ownership and control structure will meet any nationality criteria established under that air services agreement. Note that the new US/UK Air Services Agreement which was agreed in November 2018 (although is not yet in force) provides that, for UK airlines to benefit from the rights under the agreement, substantial ownership and control of the airlines should be vested in the UK or UK nationals or both. However, there is an exception under Annex I for any airline that was authorized by the US Department of Transportation to operate that route as of November 28, 2018 subject to certain conditions, including that substantial ownership of the airline remains vested in the UK or an EEA state as of November 28, 2018.
• UK airlines operating to the EU – For the purposes of the Connectivity Regulation, an airline will constitute a “UK air carrier” if it is over 50 percent owned and controlled by UK nationals or by a combination of UK and EEA nationals.

EU airlines

• Licensing – Pursuant to the Connectivity Regulation, if an EU airline would cease to comply with EU ownership and control rules as a result of the UK ceasing to be a member of the EU, then that will not affect the operating license of the relevant EU airline for a 6-month period from the date on which EU law ceases to apply to the UK (such period, the ownership and control grace period). However the relevant airline would need to present a plan to remedy the ownership and control issue by the end of the ownership and control grace period within two weeks from the date on which EU law ceases to apply to the UK, failing which its operating license could be revoked.
• EU airlines operating to the UK – The UK Connectivity Guidance provides that an airline will constitute an EU airline for the purposes of operating services to the UK if it is over 50 percent owned and controlled by UK nationals or by a combination of UK and EEA nationals.

Certification

UK issued certification for use on EU-registered aircraft or within the EU

• The EU published Regulation 2019/494 of March 25, 2019 on certain aspects of aviation safety with regard to the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the Union (the Aviation Safety Regulation), which provides for a time limited recognition of certain certification issued by EASA to UK entities. These comprise certain type certificates, approval of changes to type certificates, supplemental type certificates, approvals in respect of repairs, European Technical Standard Order authorizations and design organization approvals.
• The above approvals will be valid only for 9 months following the date of application of the Aviation Safety Regulation. The idea here is that the UK will not be able to assume responsibility as “State of design” until the UK has left the EU as that function is currently undertaken by EASA. Article 68 of Regulation 1139 of 2018 provides for the possibility of certification being issued for EU purposes pursuant to certification issued by a third country where the EU is satisfied as to the equivalent level of aviation safety regulation in the relevant third country. Perhaps, in time, a determination of equivalence could be granted in respect of the UK. 
• The EU has also agreed that the following certification issued by the CAA prior to the date of application of the Aviation Safety Regulation will remain valid for use in the EU: certain authorized release certificates for products, parts and appliances, certain certificates of release to service for completion of maintenance, airworthiness review certificates.
• The Aviation Safety Regulation also provides for EASA and EU member state aviation authorities to be able to treat examinations taken in CAA-monitored training organizations for licensing aircrew and people involved in continuing airworthiness as if they had been taken in EU-monitored training organizations. Note that this only applies to examinations taken prior to the date on which EU law ceases to apply in the UK and to the extent that the relevant license has not yet been issued following the completion of the examinations.
• Ongoing mutual recognition of certification (outside of the scope of Article 68 or the Regulation as outlined above) is not envisaged by the EU.
• Continued membership of EASA is also not envisaged. Note that Article 66 of EC Regulation 216/2008 (the Basic Regulation) does provide for participation in EASA by “third countries” who are parties to the Chicago Convention but this is subject to the adoption of EU law relating to aviation safety and a role for the Court of Justice of the European Union.

EU issued certification for use on UK registered aircraft or within the UK

• The UK Government’s “no deal” notices envisage that certification issued by EASA or issued pursuant to an EASA or EU member state civil aviation authority approval will remain valid for use in the UK for a period of up to 2 years. At the end of that two-year period, new certificates would be required issued pursuant to UK legislation.

Qualifications - pilot and engineer licenses

Pilot licenses

• The UK CAA has stated that EU-issued Part-FCL Commercial Pilot Licenses will continue to be recognized by the CAA for the purposes of flying UK-registered aircraft. However those licenses will need to be validated by the CAA.
• The EU has indicated that a UK Part-FCL License will not continue to be recognized in the EU for the purposes of flying EU registered aircraft and that validation would need to be sought from a civil aviation authority in an EU member state.

Engineer licenses

• The UK CAA has stated that EU-issued Part 66 Licenses will continue to be recognized by the CAA for the purposes of releasing to service UK-registered aircraft for a period of 2 years post Brexit. After such time a UK-issued Part 66 License would be required.
• The EU has indicated that an EASA Part 66 License which was issued by the CAA will not continue to be recognized in the EU for the purposes of releasing EU-registered aircraft to service. As such, the license would need to be transferred to the civil aviation authority of an EU member state.

Wet leasing

• The UK UK has indicated that UK airlines will be able to wet-lease EU registered aircraft under effectively the same regulatory regime as exists currently.
• The EU has indicated that following Brexit, the UK will be considered a “third country” for the purposes of wet-leasing and thus the ability of EU airlines to wet-lease UK registered aircraft will be subject to “third country” restrictions.

Preparing for a “no deal” – what can airlines do?

The potential issues for aviation have been known for some time and, as such, many airlines will be well progressed in their “no deal” planning. The Connectivity Regulation and the Aviation Safety Regulation provide some reassurance as to the continuation of basic connectivity on routes between the EU and the UK. In particular the removal of the cap on expansion of services which was contained in the earlier draft of the Connectivity Regulation is to be welcomed. However as airlines and aviation businesses will know, continuation of flying rights are only part of the story. Issues relating to recognition of qualifications, licenses and certification, training, supervision of maintenance and wet- leasing are all important for the functioning of an airline and are only partially mitigated by the measures which have currently been announced. It is hoped that following the withdrawal of the UK from the EU, a more comprehensive deal can be negotiated for the aviation.