Brexit Crisis Averted? EU Agrees On Continuing Air Service

Brexit Crisis Averted? EU Agrees On Continuing Air Service

After the people of the United Kingdom voted to leave the European Union in March of 2019, a lot of industries around the world faced uncertainty. Nobody knew what was going to happen to their businesses. Nor do they do right now, as nothing is certain on how the UK will exit the European Union.

Including the aviation industry. A lot of strict laws surround air travel. Numerous agreements between countries on safety, visa regimes and open skies deals have shaped airline business throughout the 20th and 21st centuries.

Namely, the issue with no-deal Brexit was this – every deal that Britain had with other countries around the world was done under the EU flag. Meaning that if the United Kingdom were to leave the European Union, all of those deals would be voided.

However, the European Parliament and Council have come to an agreement with the European Commission‘s proposal. The proposition allows the airspace between the UK and EU to operate as normal, even in the event of a No-deal Brexit.

Though the agreement is still provisional.

Potential consequences

If the UK government doesn’t reach an agreement with the EU Parliament, the consequences would be catastrophic.

As we already covered the potential consequences in a previous article here, we’ll try to be as short as possible.

To sum up, Brexit already hit airlines hard. On average, they lost 33% value of their shares. easyJet set up shop in Austria and established easyJet Europe. Ryanair and Wizz Air have done the same, except they set up their subsidiaries in the United Kingdom, namely Ryanair UK and Wizz Air UK respectively.

Airlines such as Flybmi and Monarch have declared bankruptcy and are gone off the map completely.

Monarch Airlines declared bankruptcy in 2017 Monarch Airlines declared bankruptcy in 2017

No-deal Brexit will cancel any standing agreements with countries outside the European Union. Although, the British government has already made deals with Canada, Switzerland and the United States to carry air traffic on if a no-deal Brexit happens.

Nevertheless, the British need to make a lot more deals to cover a no-deal Brexit. If not, simply put airlines will have to ground a very significant number of flights to countries outside of the already made open skies agreements and the European Union. That would lead to more airlines being on the potential entrée list to join the Bankrupt Airlines club.

Likewise, even with a proper Brexit deal, IATA has predicted a drop in passenger numbers in the United Kingdom.

British Carriers Will Feel The Negative Impact of a no-deal Brexit British Carriers Will Feel The Negative Impact of a no-deal Brexit

European Parliament and Council and European Commission Agreement

At the end of the last year, the European Commission laid out a proposal to the European Parliament and the European Council. The proposal is about the continuation of air traffic between the UK, EU and other countries around the world.

Of course, the proposal specifically covers the scenario of a no-deal Brexit and is only there to protect the European Union, its passengers and airlines operating within the EU from any significant damage.

Commissioner for Transport, Violeta Bulc is positive about the agreement. She said the following:

"Basic air connectivity between EU and UK airports will be ensured, provided that the UK gives the same treatment to EU airlines. This means that EU passengers will still be able to travel by plane in case of a ‘no-deal' Brexit. However this in no way replicates the significant advantages of the EU's single market.”

The legislating body of the European Union still has not formally approved the proposal. Thus for it to go into effect, the European Parliament and Council have to approve it.

Wizz Air has setup up an UK subsidiary called Wizz Air UK Wizz Air has setup up a UK subsidiary called Wizz Air UK. Source: Wizzair.com

What next?

So, let’s say that the European MP’s say yes to the proposal.

Firstly, it will provide a safe period for Cargo and passenger airlines to continue their operations. Namely, Cargo service providers will have 5 months to adjust their routes and optimize operations to continue operating to third countries after the March deadline.

Cargolux 747 Cargolux Boeing 747. No-deal Brexit will also affect cargo traffic

Just to illustrate what a third country is, the European Union has 28 members. The European Free Trade Association adds 4 more countries, namely Iceland, Liechtenstein, Norway and Switzerland. The European Economic Area doesn’t add more nations, but it includes Iceland, Liechtenstein and Norway.

European Union considers any country outside the EU, EFTA and EEA to be a third country. To illustrate, if a no-deal Brexit goes through, the United Kingdom will be considered a third country.

Secondly, any airline that is registered in the European Union, but a UK national or a legal person from the UK owns a majority of the airline, the carrier has to get an EU national to own the majority percentage of the airline. Else, they would be considered as a third country airline. The company would have to either re-negotiate deals with member states to continue operating within the European Union or move to the United Kingdom.

However, even with all of these measures implemented, a no-deal Brexit will still cause damage. The previously mentioned IATA predictions of falling passenger numbers showcase that, which directly affects profits and the survivability of airlines.

Additionally, the proposal does not guarantee that air traffic will continue as it was before Brexit.

Funnily enough, I love the way the press release states that the plan is not the same as staying in the European Union:

“ replicate the full benefits of EU membership ”

No-deal Brexit Is The Worst Case Scenario

A traffic jam at an airport A traffic jam at an airport

However, we have to remind ourselves that this is only a worst-case scenario. The European Commission has offered the plan only temporarily to prevent the European aviation industry to succumbing to a disaster, not to provide safety for the UK airlines.

Furthermore, the European Commission has presented one more regulation package. This time, it covers the topic of aviation safety. Specifically, it allows airlines registered or operating in the European Union to use parts made or serviced in the United Kingdom.

If the United Kingdom strikes a deal with the EU Parliament, then the proposal is no longer necessary. All the procedures then depend on the deal agreed between the two parties

And just like the proposal would be no longer relevant, so would be this blog post. :(

Source