The UK is the largest aviation market in Europe and the third largest in the world behind the US and China. It has connections to about 400 destinations in more than 100 countries across the world.
But the industry – and that of the wider European aviation sector – is facing a deeply uncertain time. Brexit is set to have serious implications on the market, affecting routes, aviation safety and border security alike.
Although Britain’s prime minister Theresa May is under growing pressure to rule out leaving the European Union on 29 March 2019 without a deal, at the time of writing the threat remains a real possibility. MPs in the UK are not expected to vote again on her proposed deal until 12 March, just 17 days before the planned withdrawal date.
Question marks therefore remain over aviation policy in a post-Brexit landscape. While the worst-case scenario of widespread grounding of flights will be avoided, it is clear that everything will not stay the same after the UK’s exit.
“If the transition period isn’t extended, it is thought that the best-case scenario for UK travellers is if the Brexit withdrawal agreement negotiated by the EU and UK is approved in the British parliament,” says Aidan Mooney, vice president of consulting at ASM.
“If that happens, air services between the UK and countries in the EU should remain the same at least until the end of next year, maybe even longer.”
Contingency plans
However, with the possibility of a no deal still lingering, the European Commission stepped up its contingency planning in December by publishing “provisional measures” that are “intended to maintain basic connectivity for a short transitional period”.
The proposals outline first, second, third and fourth freedom traffic rights to UK air carriers so they can continue to overfly and make technical stops in EU territory, as well as serve direct routes between the respective territories.
However, although the guidance says that the current level of flights between the UK and the EU will be maintained, it does not allow for an increase in flight numbers in 2019 compared to 2018. Capacity currently offered by UK airlines to the EU27 market will therefore be frozen.
A report from the International Air Transport Association found that up to five million extra seats are scheduled for 2019 compared to 2018. “Many of these will be in the peak summer season when families will be booking holidays. These are at risk if a no deal Brexit occurs,” the organisation stressed.
Olivier Jankovec, director general of ACI Europe, added: “This restriction of air connectivity development from a no deal scenario is a detail that matters. If also applied by the UK vis-à-vis EU27 airlines, it would ultimately result in the loss of 140,000 new flights and nearly 20 million passengers on the UK-EU27 market.”
The Routes Europe 2019 Conference Programme will feature exclusive session dedicated to the crucial topic of Brexit, and its expected impact on network planning and travel demand when Britain leaves the European Union.
The European Commission’s guidelines also stated that “none of the usual operational flexibility devices (such as cooperative marketing arrangements, leasing of aircraft, change of gauge or co-terminalisation) have been foreseen for United Kingdom carriers to provide air services under the Regulation”. This potentially prevents codeshare activity involving UK carriers.
In response to the contingency plans, International Airlines Group (IAG) claimed the lack of codeshare provision is “a pertinent example of the disproportionate effect the Regulation will have on consumers across the EU and beyond”.
It added: “No clarification is provided as to how the EU intends to calculate the number of frequencies flown by UK carriers to EU member states, or the level of aggregation that will be used.
“This creates uncertainty as airlines remain unsure whether all of the flights they are currently selling will be able to operate. Meanwhile EU and UK based consumers continue to make bookings for a summer 2019 season that begins on 31 March.”
Ownership rules
Uncertainty also exists for airlines regarding ownership post-Brexit. EU rules stipulate that carriers must be owned and controlled by more than 50 percent of EU investors in order to fly from any point to any other point in the EU, otherwise their flying rights could be curtailed.
IAG, for example, which owns British Airways and the Spanish flag carrier Iberia, is registered in Spain but headquartered in the UK with a diverse base of shareholders. It wants to retain both EU and UK operating rights.
Earlier this month, it capped ownership of its shares by non-Europeans at the current 47.5 percent level to maintain its status as a European-owned airline. However, IAG will continue to consider UK shareholders as EU investors.
IT said UK investors “are not and will not be subject to the restrictions on share acquisitions unless IAG notifies shareholders otherwise. IAG has no plans to issue such a notification”. Although IAG remains confident in its strategy, a report by the Financial Times this month quoted a senior Brussels official as saying the shareholder stance was “totally absurd”, casting doubt on the plans.
https://infogram.com/uk-eu-stats-2018-1h7k23ppowyv4xr
Meanwhile, London Luton Airport-headquartered easyJet has increased its EU ownership to 49 percent - marginally below the 50 percent plus one share that would be required if there is a no deal Brexit and if there is no adjustment period for compliance with EU ownership requirements.
The budget giant said it remains “confident” of its ability to continue flying whatever the Brexit outcome. Its other preparations have included establishing a new airline headquartered in Vienna so it can continue flying between EU countries under an Austrian operating licence.
Over the past two years easyJet has transferred more than 1,000 pilots to the Austrian carrier, reissued 3,300 cabin crew licences and reregistered 133 aircraft from the UK to Austria, and created a second spare parts “hub” in the EU to limit exposure to any logistical supply chain risks between the EU and the UK.
Rival European low-cost carrier Wizz Air has also secured a UK AOC ahead of Brexit, while Ryanair has done likewise to protect its three domestic UK routes. Wizz Air UK currently operates a fleet of nine aircraft, with two more to be transferred this summer.
Earlier this month, Ryanair said it hopes “common sense will prevail” that will lead to either a delay in Brexit or agreement on a 21 month transition deal currently on the table. However, it believes it has “taken all necessary steps to protect Ryanair’s business in a no deal environment”.
In addition to obtaining a UK AOC, the Irish airline will place restrictions on the voting rights and share sales of non-EU shareholders for a period of time to ensure that Ryanair remains “at all times” an EU owned and EU controlled airline, even if the UK exits the EU without a deal.
Potential outcomes
In the longer-term, ASM’s Aidan Mooney says there are four potential scenarios reportedly being floated for negotiation once the UK exits the EU.
The first is that the UK remains in the European Common Aviation Area (ECAA). The ECAA is comprised of the EU27, Norway, Iceland, the Balkan countries and Lichtenstein and is founded on the single aviation market which was developed across the EU in the early 1990s.
It created a number of ‘freedoms’ for EU-registered airlines which have allowed them to have a base in one member state and operate on a cabotage basis within other member states. Airlines support the ECAA option but membership effectively requires acceptance of EU aviation law across all areas.
The second is a UK Open Skies deal with Europe. There is currently an EU-US Open Skies agreement, while the UK recently concluded negotiations with the US on a US-UK air transport agreement. The UK has also secured bilateral air service arrangements with Albania, Canada, Georgia, Iceland, Israel, Montenegro, Morocco and Switzerland among others.
Mooney says: “An option for the UK is to negotiate and agree a similar Open Skies agreement with Europe. This would allow UK and European airlines to operate between any point in the UK and any point in Europe - and beyond - as long as the flight started in the carrier’s home country.”
The third potential option is to negotiate a single bilateral agreement with the EU as a whole, but this would be reliant on the member states giving the EU a mandate to negotiate on their behalf.
However, this could potentially be a lengthy process, with conditions on frequencies, seats, possibly destinations served between the UK and the EU member states. “Alternatively the UK could negotiate individual bilateral agreements with individual member states,” adds Mooney.
The fourth scenario is for the UK to seek better Open Skies deals because of its inherent strengths. “This would mean greater freedoms for UK carriers to operate,” says Mooney. “If we assume this also covers the EU states, then the status quo would maintained or perhaps even improved for the UK.”
Although uncertainty exists over air transport between the UK and EU post-Brexit, Routesonline looks at some of the more eye-caching long-haul routes from the UK set to launch this year.
Charleston, USA
Who? British Airways
When? 4 April 2019
How many times a week? Two from London Heathrow
BA will become the only airline flying direct between Europe and the South Carolina city when it launches the route in April. The service will be operated by a Boeing 787-8 Dreamliner and will become the first transatlantic route for Charleston. It takes the number of US destinations BA flies to from London next summer to 29 and follows flights to Nashville and New Orleans launched in 2018. North Charleston is now home to the second largest Boeing manufacturing facility where it is currently building the 787-10 Dreamliner. BA will take delivery of 12 new Boeing 787-10s between 2020 and 2023. The new flight is projected to generate an estimated economic impact for Charleston of $20.2m annually.
Los Cabos, Mexico
Who? TUI
When? 8 November 2019
How many times a week? Two from London Gatwick
TUI will offer the only direct flights to Los Cabos from the UK when it begins the service in November 2019. Los Cabos is located on Mexico's 1,000-mile-long Baja California Peninsula and known for its beach resorts and golf courses - and said to be a holiday destination for the likes of George Clooney, Jennifer Aniston and Nicole Kidman. Los Cabos hit the headlines in 2017 following a spate of gang violence, however, authorities have reportedly cracked down and increased safety.
Rio de Janeiro, Brazil
Who? Norwegian
When? 31 March 2019
How many times a week? Four from London Gatwick
British Airways already operates flights to Rio de Janeiro from Heathrow, but this service will mark Norwegian’s entry to the Brazilian market. The carrier launched its first service to South America earlier this year with direct flights from Gatwick to Buenos Aires and it has already been increased from four weekly flights to daily following strong customer demand. Norwegian’s budget fares should open Brazil up to a new market of price-conscious UK travellers.
Osaka, Japan
Who? British Airways
When? 31 March 2019
How many times a week? Four from London Heathrow
British Airways is to introduce the only direct air service between the UK and Japan’s second largest city from March when it inaugurates a link between Heathrow and Osaka Kansai. The carrier previously served Osaka until October 1998. The new service covers a distance of 9,531 km with a journey time of approximately 12 hours and 20 minutes. Japan Airlines will offer a codeshare on the new service, while British Airways is also adding four cities to its joint business agreement with the Japanese carrier. The BA code will be put on flights between Tokyo Haneda and Miyazaki, Kumamoto, Komatsu and Matsuyama.
Pittsburgh, USA
Who? British Airways
When? 2 April 2019
How many times a week? Four from London Heathrow
BA flew daily between Heathrow and Pittsburgh via Washington from May 1986 until June 1993 when it moved its service to Gatwick. The airline operated this route with a daily service until October 1999. Pittsburgh is the ‘City of Bridges’, with more than any other city in the world at nearly 450. The area is also home to 90 universities as well as campuses for Google and Uber.
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