Since the United Kingdom voted to leave the European Union on 23 June 2016, there have been more questions asked than answered. One question that continues to be unanswered is the full impact of Brexit on the aviation industry.

About a week after the referendum, the board of the European Regions Airlines Association (ERA), a trade association that represents the European aviation industry, held a meeting in their offices in Surrey, to come up with a three point initiative as to how to protect European carriers that are based and fly into the UK.

On top of this, Simon McNamara, director general of ERA and his colleagues, have been lobbying the British and European governments to negotiate a good deal for the aviation industry. “We have been working with the Civil Aviation Authority and, more recently, the Department for Transport, but we are a European organisation, so our prime focus is Brussels and Cologne,” he says.

The ERA has 52 member airlines and 144 associate and affiliate members which include airlines, airports, manufacturers and suppliers. Eight of ERA’s 52 airline members are British carriers, including Flybe, BMI Regional, Aurigny Airlines and Titan Airways.

Despite having a proportion of ERA members based in the UK, McNamara stresses that it is not only UK-based carriers that will face challenges following Brexit. “ERA’s view is that Brexit is not a British problem, it is a European problem when it comes to aviation. The benefits that the liberalisation of air transport has brought for airlines far outweighs the disadvantages and legal complexities of EU law that we have,” he says.

Although McNamara’s organisation has a history of challenging EU-formed legislation, he still believes that European aviation is in better health with Britain in the EU. EU 261 is a rule that has often been referred to as one of the main problems with EU legislation from an airline perspective, because it raises prices for airlines and makes surcharges on fares. Under the rule, if a flight is more than three hours late, each passenger is entitled to up to £460 ($579) in compensation.

“We were the first ones to complain about the EU and the complexity EU law can bring to airlines, EU 261 being a perfect example, but the benefits of having a free market outweigh these complexities. We'd rather aviation was part of that free market so there needs to be a mature discussion by all sides about how we preserve that free market.”

With a weaker sterling exchange rate, the UK population is likely to travel less and outbound load factors will decrease as a result. The International Air Transport Association (IATA) forecasts that the number of UK air passengers could be 3-5% lower by 2020. With weaker outbound load factors, UK-based carriers will lose out the most.

UK-based airlines have also been hit by the low value of the pound against the dollar. Aviation is an industry where most of the costs are paid for in dollars and the profits are made in the local currency, meaning British carriers have been losing out. IAG scaled back its growth plans following Brexit and EasyJet’s profits were hit by the referendum result, falling 27.9% in 2016 from 2015’s figure for the year end 30 September.

McNamara believes traffic rights for flying into and out of the UK are a prime concern. “The first part of our position on Brexit concerns traffic rights and preserving a free and open market between the UK and mainland Europe. The position we have taken is that we would like to preserve the status quo when it comes to traffic rights.” In other words, McNamara wants European operators have free access to UK markets and UK operators have full access to the EU markets.

“Brexit potentially means more restrictive access to the UK for carriers in Europe and more restrictive access for UK carriers to Europe. None of that is good. Over 40% of our airline members operate to, from or within the UK.”

Threat to ACMI market 

At the moment, EU operators with an EU Air Operators Certificate (AOC) and an EU operating license, can freely lease to another EU operator without permission.

For example, an airline like Titan Airways, which is based in the UK, is able to freely-lease aircraft to a French, Italian airline or a Spanish airline without any restrictions.

But McNamara says a hard Brexit could change this. “The ACMI (aircraft, crew, maintenance and insurance) market is a big market for our members, whether it be short-, medium- or long term leases and we don't want to see that put at risk. We want full freedom of intercommunity leasing, where UK carriers are able to lease to EU carriers and EU carriers are able to lease to UK carriers without restriction.” This is less of a problem for the dry lease market as most of the lessors are based in Dublin, rather than the UK.

The third part of the ERA’s position is on the application of European Aviation Safety Agency (EASA) rules and regulations. The association would like to see EASA rules and regulations continue to apply to UK-based operators and companies in the UK who currently work to EASA rules so the industry has a common regulatory framework for Europe.”

“Our fundamental position on EASA and technical regulations is that we have a common regulatory system. And that system works well, because aviation is a business that doesn’t respect borders and a common regulatory system makes life easier for operators moving around Europe and moving aircraft. I think taking the UK outside when it comes to setting regulation is not really a sensible thing.”

No formalities

One of the main hindrances of the negotiations, McNamara says, is the fact that the European Commission has banned any debate of Brexit until Article 50 is triggered. Because of this, ERA and other organisations that want to negotiate Brexit terms cannot hold formal meetings. The ERA board has only been able to have off-the-record conversations so far.

“This is somewhat frustrating because it's not going to be easy to negotiate this. We need as much time as possible. It's certainly holding back our lobbying in Europe but it hasn't stopped us taking a position and raising the topic whenever we have meetings with people, even if they're not officially allowed to be on the record on the topic.”

Is there any chance that aviation will be given special treatment from other industries that will be affected by Brexit, considering its vitality to international connectivity? “We would like aviation to be treated as a separate case, but we also have to be realistic and accept that aviation is just one industry out of multiple industries that are going to potentially be feeling the consequences of Brexit. My guess is that that aviation will be part of a bigger negotiation and the risk there is that we become traded against something else. That would be a shame because I’d like to see aviation dealt with on its own but there is a strong risk that it won't be.” 

At time of writing, the UK is the end of the final days of a historic trial being heard in the Supreme Court in Westminster. The trial will determine whether the UK Prime Minister, Theresa May, has the executive power to trigger Article 50, the UK’s formal exit from the EU, herself, rather than having to do so via a parliamentary vote.

Regardless of how Article 50 is triggered, McNamara believes that the biggest risk for the aviation industry is a decision from the Brexit negotiations that is motivated by politics rather than on “rational headed thinking about what’s good for business”.

“I'm yet to meet someone in the aviation business who doesn't want to preserve the status quo. If that's the position of industry, let's try and negotiate with UK and European governments to make that happen.”