Category: Trade

Brexit & Aviation 116

On your marks, get set and go.  The starting pistol hasn’t been fired yet, but the players are on their marks.  It’s a 100-meter sprint.  Or should I say a 109.361-yard sprint to the end of the year.

The EU27 Member States are having their preparatory discussions on their future relationship with the UK[1].  At the same time statements are drifting out of British Minister’s offices containing rhetoric more suited to an election campaign.

Croatia’s presidency of the Council of the EU[2] is up and running until 30 June 2020 when Germany takes over.  The EU’s “Internal EU27 Task Force for Relations with the United Kingdom” has published slides that illustrate the likely situation after the 31st January.   They recognise that transport, including aviation will be a fundamental component of the EU-UK relationship.  It’s clear that UK aviation operators will no longer have the same access rights as EU Member State operators.

Now, according to The Financial Times the British Chancellor is saying[3]: “There will not be alignment, we will not be a rule taker, we will not be in the Single Market and we will not be in the Customs Union — and we will do this by the end of the year.”

These words maybe for public consumption because to an extent they speak the obvious.  One exception is the notion that the UK will not be a “rule taker”.  Naturally, this can be interpreted in many ways, even in this year, when the existing Withdrawal Agreement becomes law.  Because that agreement has the affect of taking European rules and making them UK rules.

In trading with large markets, like the EU and US there’s going to be the obligation to meet their standards.  It seems obvious to say but that means having rules that are either taken from those parties or that are acceptable to those parties.  Call that what you like but it is taking rules.  Never in the past did the UK Parliament approve every single new or modified rule that the was part of compliance with an international agreement and it’s likely that will continue.

EU aviation rules are designed to be compliant with international standards and recommended practices.  There is scope for the UK to deviate from the existing arrangements.  The question should be asked, as to; why and what are the benefits in doing so?

Meanwhile, as the scene is set for the next step in these vital international negotiations, the daily news in the UK is far more trivial; a £500,000 crowd funding exercise for some big bongs in London is filling the airwaves and newspapers.

[1] https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200115-transport_en.pdf

[2] https://eu2020.hr/

[3] https://www.ft.com/content/18ddc610-3940-11ea-a6d3-9a26f8c3cba4

Brexit & Aviation 113

As we have found over the last 3-years and more, reports and reality are often far apart.  Being reported is that the British Prime Minster (PM) is saying that there will be “no alignment” with the European Union (EU) after Brexit is done[1].  Boosted by a UK Parliamentary majority this stark statement maybe no more than playing to the galleries.

However, political positions are hardening.  The UK Government has excluded an extension of the transition period and enshrine this in the Withdrawal Agreement Bill (WAB).  Many believe that this is not a good-faith implementation of the Withdrawal Agreement negotiated with the EU.

Now, the UK Parliament’s role in scrutinising any future relationship has been diminished.  So, if EU-UK negotiations go badly there’s no holding back the hard-core right-wingers who are unconcerned if the UK reverts to trading on only WTO terms.

So quickly to become bullish is a high-risk strategy. Having been at this process for so long it’s likely the EU will remain united and undaunted by the threat of a breakdown in talks.  Afterall, it deals with States that are bigger and more powerful than the UK.  So, maybe the UK PM is still primarily speaking to a domestic audience.  As the slogan “Get Brexit Done,” used by the Conservative Party in their 2019 General Election messaging fades into the background, the UK’s place in the world seems more vulnerable[2].

The aviation sector relies on long-term commitments to regulated markets.  Global investment is more likely with an assurance of stability and a sense of direction.  Contrary to right-wing political opinion good regulation benefits growth.  At the same time, it benefits sustainability as unprecedented climate change continue to escalate.

Thinking about how to achieve a close and constructive relationship with the EU is vital.  The practical downsides of Brexit is starting to become evident[3].  It could be that the political struggle for a Brexit is ending an initial stage.  Now, the daunting task to define Brexit is only just starting.

If anyone considers it’s easier for the UK to pivot towards the United States rather than the EU they are in for a shock.  Federal law governing international aviation less flexible and more complex than EU law whatever some may wish you to think.  Reality will bite quickly and not to the advantage of the UK.

There will be people thinking about these challenges over Christmas and the New Year.  Most of us will be happy not to hear a Brexit word or a three-letter abbreviation for a couple of weeks.  2019 will not be missed.  It’s quite enough to know that 2020 will be full of breaking news and tantrums about the ups and downs of this continuing saga.

[1] https://www.telegraph.co.uk/politics/2019/12/20/boris-johnson-insists-will-no-alignment-eu-brexit/

[2] https://aviationweek.com/defense-space/getting-brexit-done-brings-defense-challenges

[3] https://www.birminghammail.co.uk/news/uk-news/huge-changes-british-holidaymakers-flying-17440064

Brexit & Aviation 106

I’m waiting for the headline: The European Union (EU) has agreed to extend #Article50 a third time.  This could delay any possible #Brexit until June 2020.  Now, that sounds a lot saner than jumping off a cliff edge.  Especially if Britain and Ireland say they can bridge the gap between their two positions.  The Pound Sterling shot up as the markets took stock of the News that Prime Minister Johnson may not want to force us out of the EU on October 31st with No Deal.   Nevertheless, there’s a hell of a lot of people who remain with no trust in this administration.  The cold hard reality is that agreeing with Ireland most likely means the Democratic Unionist Party (DUP)[1] will be very unhappy.  Then the prospect of getting any deal through the UK Parliament gets even harder.

Amongst the latest news from Ireland is a series of Frequently Asked Questions (FAQs)[2] on Brexit from the Irish Aviation Authority (IAA).  Post Brexit Ireland realises that it will need to develop new trade routes, especially those of air transport.

In the UK a “No-Deal Readiness Report” has just been released[3].  The part of the Government document on UK airlines highlights that Brexit means more bureaucracy and not less as some people may have claimed:

  • UK airlines operating to and from the EU will need to obtain a Part-TCO safety authorisation from the European Aviation Safety Agency (EASA) and an operating permit from each relevant Member State. The Civil Aviation Authority (CAA) website provides extensive and detailed information on the actions that airlines need to take on its website.
  • UK aviation personnel involved in the operation and maintenance of aircraft (pilots, cabin crew, engineers and air traffic controllers) will need to ensure they have obtained the relevant licences and safety authorisations from the CAA and EASA. The CAA website provides extensive and detailed information for the action that personnel and UK airlines need to take.
  • EU airlines will need to apply for an operating permit from the CAA, their website provides extensive and detailed information on the actions that EU airlines need to take.

Further on the document is quite clear that UK regulatory bodies will no longer be able to license products for the EU market.  UK regulators will take on regulatory functions currently carried out by EU regulatory bodies, like the European Aviation Safety Agency (EASA) in Cologne.  Further on in section E, the document talks about Aerospace goods.  It doesn’t make pleasant reading.  If the UK leaves without a deal, the EASA will no longer automatically recognise aviation safety certificates and approvals issued by the UK Civil Aviation Authority (CAA).

Aerospace companies continue to warn of “serious risk” in current plan, as the UK Government fails to reassure them about participation in EU agencies.   It might be nice to think that the UK will continue to be a global aviation leader but in this new situation it will be in competition with its former partners.  I suppose few who voted in 2016 realised any of this would be an outcome in 2020.

[1] The Democratic Unionist Party is a unionist political party in Northern Ireland favouring British identity

[2] https://www.iaa.ie/news/2019/10/02/iaa-publishes-brexit-faqs

[3] https://www.gov.uk/government/publications/no-deal-readiness-report

Aviation & Brexit 97

The 40th G7 summit has taken place this week in Biarritz, France.  The 7 are Canada, France, Germany, Italy, Japan, United Kingdom (UK), United States (US) and the European Union (EU).  Japan and Canada have just signed major free trade agreements with the EU.  Otherwise the talk was of increasing trade tensions between the world’s biggest economies, namely: US and China.  The environment did get a look in given the wild fires in South America.

In the past, G7 leaders have recognised the “urgent need” for the aviation industry to adopt zero-carbon growth strategy.   Since there was no joint statement from this week’s meeting its difficult to tell if this continues to be an urgent concern.  The signs are not good given the empty chair when discussion with world leaders were on helping the Amazon forest and reducing carbon emissions.

The International Civil Aviation Organisation (ICAO) Carbon Offsetting & Reduction Scheme for Aviation (CORSIA) should also play an important role in achieving global environmental goals.  At a regional level, there’s the Advisory Council for Aeronautics Research in Europe (ACARE)’s long-term aim to reduce air transport CO2 emissions by up to 75% by 2050.  I don’t know if UK organisations will remain part of the ACARE[1] post-Brexit.  That may happen for those international companies wishing to remain with influence in Europe.

At his first G7 summit as UK Prime Minister, Mr Johnson was consumed by the thining quicksand of Brexit.  It’s said we have now gone from “a million to one” all the way to “touch and go[2]” as to whether the UK and EU agree a Brexit deal.

I’m wondering if Mr Johnson knows what “touch and go[3]” means.  Maybe he does and the “go” will be a last minute extension to forge a final agreement on the Irish issue.

One subject the Brexiters are looking at is cutting the UK’s Air Passenger Duty (APD).  APD was introduced in 1994.  It has grown to be one of the highest taxes on flying in the world and brings in a considerable revenue to the UK Treasury.  The UK MP for the town of Crawley, that’s near London Gatwick Airport, chairs an Air Passenger Duty All Party Parliamentary Group that meets in Westminster.  They are pressing the UK Government’s finance ministry to drop the tax to boost flying after Brexit.  What that will do for national and international environmental goals isn’t known.

A week ago, a leaked UK Cabinet Office Operation #Yellowhammer document was made public.  Setting out the likely aftershocks of a No Deal Brexit, it doesn’t make for pleasant reading.   It now appears that the document is from this month and not a historic document as some Ministers claimed.  In fact, a Government Minister dismissed this as “Project Fear” and “scaremongering” and yet the document is by the Government.  The report lists delays at EU ports and airports as one major risk.

The UK’s £36 billion aerospace sector is now faced with the work of preparing for a disorderly Brexit for a second time this year.  Without a doubt a No Deal Brexit remains the worst outcome for flyers and the aviation industry.  There are many UK businesses that are particularly vulnerable since they are not able to adapt.  Also, with the currency falling in value control may go to overseas buyers as they snap up good deals.

There is no mandate for a reckless No Deal Brexit but it seems increasingly likely.

[1] https://www.acare4europe.org/about-acare/members

[2] https://www.euronews.com/2019/08/23/g7-summit-begins-on-shadow-of-us-china-trade-war

[3] https://calaero.edu/what-is-a-touch-and-go/