What does the EU-UK Trade and Cooperation Agreement mean for aviation?
On 24 December 2020, the UK and EU finally announced that an agreement had been reached regarding their future trading relationship. Given that 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, the aviation industry had long awaited the news of a deal. So what does the new EU-UK Trade and Cooperation Agreement (TCA) mean for aviation? We set out below a high-level summary of some of the key provisions.
Air Traffic Rights
In general the TCA provides EU and UK carriers with unlimited rights to fly between the UK and the EU (1 – 4 freedoms of the air).
The TCA leaves it open for the UK to negotiate with individual EU member states for the provision of fifth freedom rights (being the right for UK carriers to operate to an EU member state and then to travel to a non-EU country and vice versa) for cargo services only.
However UK carriers will not be permitted to operate passenger or cargo services between EU destinations. Similarly EU carriers will not be permitted to operate passenger or cargo services between UK destinations.
More flexibility may be agreed between EU member states and the UK with respect to non-scheduled services.
Code Sharing/Blocked Space Agreements
Code sharing arrangements between UK, EU and third country carriers are permitted provided that the relevant operating carrier has the necessary rights to perform the relevant service. A UK marketing carrier would be able to enter into a code sharing arrangement to offer a service from the UK to an EU destination and then onwards to a final destination in the EU or a third country. However customers will need to be informed which carrier will be operating which sector of the relevant service. In addition any code sharing arrangement may be subject to the approval of the relevant aviation authorities of the carriers involved who will ensure that safety, security and competition requirements are met.
Dry leasing is generally permitted. The TCA also allows UK air carriers to wet lease (aircraft plus crew) from EU carriers. However EU carriers can only wet lease from UK carriers if the leasing can be justified on the basis of exceptional need, seasonal capacity or operational difficulties of the lessee and is for a duration strictly necessary to fulfil that need or overcome the relevant difficulty. In other words the EU will start to apply “third country” restrictions to wet leasing by EU carriers from UK carriers whereas it appears from the TCA that the UK will not introduce equivalent restrictions for UK air carriers wishing to wet lease from EU carriers. The TCA acknowledges that leasing may also be subject to requirements imposed by the UK and EU member states providing for leasing arrangements to be approved by their relevant aviation authorities to verify compliance with the conditions of the TCA and safety and security requirements. The EU and the UK agree that where this is the case they will endeavour to expedite the approval process and reduce the administrative burden on air carriers.
Ownership and Control
Ownership and control restrictions are maintained. As such for an air carrier to be considered as an “air carrier of the United Kingdom” for the purposes of the TCA, it must be both majority owned and controlled by UK nationals with its principal place of business in the UK, licensed in accordance with UK law and hold an air operator’s certificate issued by the CAA. For an air carrier to be considered as an “air carrier of the Union” for the purposes of the TCA, it must be both majority owned and controlled by nationals of EU member states, other EEA member states or Switzerland (or a combination of these), with its principal place of business in the EU, hold an operating licence issued in accordance with EU law and hold an air operator’s certificate issued by EASA or an aviation authority of an EU member state.
There is however a grandfathering provision for UK air carriers with a valid operating licence granted in accordance with EU law as at the 31 December 2020 and which are owned and controlled by EU nationals (whether alone or in combination with UK nationals). There is no equivalent grandfathering provision for EU air carriers controlled by UK nationals (whether alone or in combination with EU nationals).
In addition there is also a commitment to discuss the liberalisation of ownership and control restrictions in future as part of the Specialised Committee on Air Transport (a committee formed to monitor the application of the TCA) initially within 12 months of the TCA coming into force.
Recognition of Existing Authorisations
Certificates of airworthiness, licences and certificates of competency issued by the EU or UK and which are valid and still in force will continue to be recognised by the other party for the purposes of conducting air services provided that they also comply with the requirements of the Chicago Convention. There are in addition procedures established for consultation on safety issues and for ramp inspections.
With respect to aviation safety more generally the agreement does provide for cooperation on various aspects of aviation safety such as airworthiness, operation, air traffic management and personnel training and licencing. Annexes are to be developed by the Specialised Committee on Air Transport to outline the scope of the cooperation in each relevant area. The Annexes will also set out the terms on which each of the UK and the EU may recognise each other’s findings of compliance and certification in future. At present there is only one relevant Annex included in the TCA and this deals with Airworthiness and Environmental Certification. It sets out a process for the recognition of future design and environmental certificates.
There are also provisions which provide for future information exchange in matters of safety and proposals to revise laws in this area. However as anticipated, the UK will no longer be a member of the European Aviation Safety Agency (EASA).
Air transport services are subject to the general “level playing field” provisions regarding social and environmental issues. However in addition there are some specific provisions relating to non-discrimination in the provision of ground handling services, allocation of slots and the taxation of aircraft fuel.
The TCA provides for both parties to ensure effective and non-discriminatory measures for consumer protection including compensation for denied boarding, cancellation and delays and to consult with each other as to their proposed measures for this. Of course EU carriers are subject to EU Regulation 261/2004 in this regard. There are also plans for the UK to transpose the regulation into UK law by virtue of the European Union (Withdrawal) Act 2018 and The Air Passenger Rights and Air Travel Organiser’s Licensing (Amendment) (EU Exit) Regulations 2019 and to amend the Civil Aviation (Denied Boarding, Compensation and Assistance) Regulations 2005 on and as from 1 January 2021.
The aviation industry will be relieved that a comprehensive agreement has finally been reached between the UK and the EU on aviation. Thankfully it preserves basic connectivity for air transportation services between the UK and the EU and pragmatism has been shown in many areas such as the recognition of existing certification and grandfathering for UK air carriers with substantial EU shareholdings.
However it is also clear that this agreement is not intended to represent the last word in terms of the relationship between the EU and the UK in aviation matters. Instead it establishes processes for future dialogue to build the relationship in certain areas such as aviation safety and the liberalisation of ownership and control restrictions. Aviation is by its nature a truly global industry and it is to be hoped that once the politics of Brexit abate in future, both sides will pursue the opportunity to establish a close partnership for the benefit of the industry.