2Commission ‘no deal’ preparedness: air connectivity
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Committee’s assessment |
Politically important |
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Not cleared from scrutiny; further information requested; drawn to the attention of the Transport Committee |
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Document details |
Proposal for a Regulation of the European Parliament and of the Council on common rules ensuring basic air connectivity with regard to the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the Union |
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Legal base |
Article 100(2) TFEU; ordinary legislative procedure; QMV |
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Department |
Transport |
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Document Number |
(40306), 15788/18, COM(18) 893 |
Summary and Committee’s conclusions
2.1The proposal under scrutiny was adopted on 25 March 2019. It forms part of the Commission’s no-deal Brexit preparations as outlined in its Communication of 13 November 2018 ‘Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan’.1 Other measures outlined in this action plan—such as those on aviation safety, railway safety and connectivity, and Erasmus—are subject to separate scrutiny.
2.2The Regulation is a unilateral Union measure that would apply in the event of a ‘no-deal’ Brexit (where the EU and UK have not concluded a Withdrawal Agreement under Article 50 TEU). The Regulation would provide for the continuation of basic air services between the EU and UK for a limited period of time (up until an air transport agreement with the UK enters into force or 30 March 2020, whichever is sooner). It is not indented to replicate current arrangements or to maintain the status quo (as prevails whilst the UK is an EU Member State). As a Union initiative for the EU-27, the intended effect of the Regulation—to ensure basic EU/UK air connectivity in the event of a no-deal Brexit—would be dependent upon UK reciprocity and the Government making similar domestic provision. The Government’s plans in this regard were announced in a policy statement published on 7 March 2019 (which will be discussed in further detail below).2
2.3A full background to the Regulation—including the Commission’s rationale for regulatory action, the Government’s Explanatory Memorandum and the Commission’s initial legal and political analysis—can be found in our Fifty-sixth Report to the House of Session 2017–19. Since this Report, the Minister with charge over the Regulation, Baroness Sugg, has written to the Committee on two separate occasions (dated 21 February and 7 March 2019).3 This correspondence is considered below, alongside the final form of the Regulation, how this differs versus the content of the original proposal, and the Government’s own no-deal air connectivity plans.
Regulation (EU) 2019/502 (on no-deal air connectivity)
2.4The Commission’s no-deal air connectivity proposal was adopted on 25 March 2019 by way of written procedure. It is understood that the Government abstained at adoption owing to the treatment of Gibraltar in the proposal, in particular, the inclusion of wording noting Spain’s legal position on sovereignty over the land on which the airport is situated (without reference to the UK’s position). This concern was raised during working group negotiations and, as a consequence, the Government did not support the Committee of Permanent Representatives (COREPER) mandate sought by the Presidency on 15 February 2019. In comparison to the proposal as originally introduced, a number of changes were made during negotiations. The Government views these changes in a positive light and as being beneficial for UK business.
2.5On the substance of the Regulation, it would (in the event of a no-deal Brexit):
- Grant UK carriers first, second, third and fourth freedom air traffic rights.4 The Commission’s initial suggestion of capping the capacity that UK air carriers could offer in the Union at pre-Brexit levels has been removed and, furthermore, provision has been made for fifth freedom all-cargo services by UK carriers between EU Member States and third countries (limited to five months from the date of application of the Regulation and to be capped at 2018 flight frequency levels);5 and
- Make provision for (limited) leasing and cooperative marketing arrangements. On leasing, UK airlines would be permitted to operate using aircraft leased without a crew from any lessor or aircraft using the crew of another UK operator on a wet-lease basis.6 This right is, however, qualified, so that UK airlines would only be able to operate using aircraft leased with crew from an airline of a country other than the UK, providing that this can be justified on the basis of exceptional needs, seasonal capacity needs or operational difficulties. With regard to cooperative marketing arrangements, the Regulation allows ‘codesharing’ between UK airlines and other airlines on services to and from the EU.7 Again, this right is qualified and does not allow UK airlines to codeshare with EU Member State airlines on services wholly within the EU.
2.6It is also worth noting that, as a ‘barebones’ offer, the Regulation would not provide UK carriers fifth (non-cargo), sixth and, especially, seventh freedom rights. In effect, this means that it would not be possible for UK carriers to fly between two third countries and stop in the EU or for UK-based carriers to fly between two Member States (known as cross-trade) or within one Member State (known as cabotage).
2.7Changes were also made to the proposal prior to adoption covering ownership and competition rules. On ownership, there has been a slight softening in the Union’s position such that UK carriers will be exempt from EU rules—to the effect that carriers have to be either majority owned or controlled by EU-based entities—for six months from the date of application of the Regulation. Within two weeks of the entry into force of the Regulation, air carriers that do not meet EU ownership and control rules must present a plan for remedial action to their relevant licensing authority (for licences issued by a competent authority other than that of the UK). This will not affect the validity of operating licences during the initial six-month grace period. Failure to comply with EU ownership and control rules within this timeframe would, through the relevant competent authority, result in the revocation of a carrier’s licence to operate.
2.8As a unilateral Union measure (dependent upon UK reciprocity or ‘equivalence of rights’ for its effect), the Regulation makes provision for monitoring UK compliance with a number of ‘level playing field’ requirements. In effect, these have been included with the intention of ensuring that the UK does not gain any unfair competitive advantage—versus Member States—during the application of the Regulation (as a consequence of being outside of the EU’s supervisory and enforcement framework).
2.9The Regulation allows the Commission to adopt Implementing Acts to remedy situations in the event that the UK: grants subsides to UK carriers; does not have in place or effectively enforce competition law; fails to establish or maintain an independent competition authority; fails to maintain standards relating to the protection of workers’ rights, safety, security, the environment, or passengers’ rights; and allows any form of discrimination against Union carriers. With regard to the maintenance of standards, it is unclear which EU legal acts would fall under the heading of, for example, workers’ rights or the environment. This ‘enforced’ form of non-regression—enforced as it has not been agreed to bilaterally between the UK and EU (unlike that in the draft Withdrawal Agreement)—will have to be understood and carefully policed by the Government if the Regulation were to become applicable.8
The Government’s commitment
2.10As mentioned above (at paragraph 2), the Government published a policy statement on 7 March 2019 setting out its response to the Union’s no-deal air connectivity plans, specifically, in terms of whether it would reciprocate the rights the Regulation offers to UK carriers. The Government’s own offer follows, in effect, a form of ‘enhanced’ reciprocity; whereby the effects of the Union’s Regulation would be mirrored with the addition of further rights. This approach is justified against the Government’s belief in liberalised air service markets, however, mention is also made of ensuring future UK operational capacity. The Union is highly unlikely to match this offer and no new legislative proposals have been forthcoming. The effect of the UK’s offer on a future bilateral air service agreement with the EU is also unclear; in that it is entirely possible that the rights that would be extended to EU carriers could form the basis of a future UK/EU arrangement (and that the Government’s no-deal proposals could, consequently, be viewed by the EU as the UK’s opening gambit).
2.11With regard to traffic rights, the Government intends to allow EU carriers to fly across the territory of the UK and to make traffic stops in the UK for non-traffic purposes. Above and beyond the Union’s offer, the Government would allow Member State carriers to operate services from any point in the EU—in addition to the country where they are registered—to the UK (known as ‘limited’ seventh freedom traffic rights). The Government would also allow cabotage—for services within the UK—until 27 October 2019. It appears that this date was suggested prior to the most recent extension of Article 50 TEU—which, at the latest, will last until 31 October 2019—and has not since been updated.
2.12On leasing rules, the UK would, again, match the Union’s offer but would allow Member State airlines to lease aircraft with crew from Member States other than that with which they are registered. For codesharing arrangements, the Government intends to allow both UK and Member State airlines to act as either the marketing or the operating airline for any service operated between the EU and UK. Member State airlines already codesharing with UK airlines on services wholly within the UK would be permitted to continue doing so. Any additional requests to codeshare would be subject to the approval of the Civil Aviation Authority (CAA).
2.13The Government has proposed a similarly liberal approach to ownership and control. Rather than having to satisfy the CAA that Member State airlines are majority owned and controlled by nationals of the Member State in question, Member State airlines would, instead, need to satisfy the CAA that they are majority owned and effectively controlled by EU nationals and/or nationals of other EEA countries and/or nationals of the UK. The Government has said that should the Regulation become applicable, the CAA would work jointly with the Department for Transport (DfT) to monitor the treatment of UK airlines operating ‘to’ the EU. The details of this arrangement are not outlined any further save for a statement to the affect that monitoring will include the review of ‘level playing field’ and non-discrimination considerations. It is also unclear whether the CAA and DfT will undertake similar reviews for Member State carriers providing intra-UK services.
Outstanding issues
2.14The Committee’s first consideration of the Regulation under scrutiny was committed to the House as trilogue negotiations were beginning. As a consequence, many of the questions the Committee asked—and the requests for further information it made—have since been addressed in the run-up to the adoption of the Regulation. Where appropriate, these are explored above (mainly at paragraphs 5–9).
2.15In her letter of 21 February 2019, the Minister failed to fully address the question of whether if the proposal was not adopted at EU-level, the Government would pursue bilateral air service agreements with EU Member States and, if it would, whether these agreements would be new agreements or updates to the 25 extant agreements the UK has with Member States. As the proposal has been adopted, the Committee no longer seeks answers to these questions.
2.16The Committee thanks the Minister for her correspondence of 21 February and 7 March 2019 and welcomes the adoption of Regulation (EU) 2019/502 (on no-deal air connectivity). The Committee also welcomes the Government’s policy statement of 7 March 2019, in particular, its commitment to reciprocate the rights granted to UK carriers—to EU carriers—should the Regulation become applicable. As argued by the Government and the Commission, failure to agree contingency arrangements in this area could result in serious disruption for businesses and passengers and, furthermore, considerable economic harm for service providers and those dependent upon air transport (whether directly or further along supply and operating chains).
2.17With regard to the substance of the Regulation, we agree with the Government that in comparison to its form as originally published, the Regulation presents an improved offer to UK carriers. We highlight, in particular, the granting of fifth freedom all-cargo services for UK carriers (operating services between EU Member States and third countries), the inclusion of (limited) leasing and cooperative marketing arrangements, and the (slight) softening of the Union’s position on ownership and control rules.
2.18We note the Government’s offer to reciprocate the rights provided for by the Regulation for Member State carriers and, furthermore, highlight the ‘enhanced’ form of reciprocity outlined in its policy statement of 7 March 2019; whereby the effects of the Union’s Regulation would be mirrored with the addition of further rights. We acknowledge the Government’s rationale for this offer (i.e. set against the benefits of liberalised air service markets and ensuring future UK operational capacity), however, we caution that the Government’s no-deal proposals could be viewed by the EU as the UK’s opening gambit in negotiations on a future UK/EU bilateral air services agreement.
2.19On the Regulation (as adopted), we seek the Government’s view on:
- Article 9(3) (infringements of fair competition rules), in particular, those EU laws that would potentially fall under the headings of “…workers’ rights, safety, security, the environment, or passengers’ rights” (in this regard, we request an illustrative list).
2.20On the Government’s commitment to reciprocate for EU carriers the rights that would be provided for by the Union’s Regulation (as laid out in its policy statement of 7 March 2019), we seek further information on:
- If, in light of the recent extension of Article 50—and its potential extension until 31 October 2019—cabotage rights for EU carriers would be provided for beyond 27 October 2019; and
- How the CAA and DfT would monitor the treatment of UK airlines operating services to the EU and whether this function would extend to EU carriers providing services within the UK (cabotage).
2.21We retain the file under scrutiny pending satisfactory answers to the questions asked above and request a response by 19 June 2019.
2.22We draw this report to the attention of the Transport Committee.
Full details of the documents
Proposal for a Regulation of the European Parliament and of the Council on common rules ensuring basic air connectivity with regard to the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the Union: (40306), 15788/18, COM(18) 893.
Previous Committee Reports
Fifty-sixth Report HC 301–lv (2017–19) chapter 5 (27 February 2019).
1 European Commission, ‘Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan’ (November 2018).
2 HM Government, ‘Air services from the EU to the UK in the event of ‘no deal’’ (March 2019).
3 Letter from Baroness Sugg to Sir William Cash MP (21 February 2019); and Letter from Baroness Sugg to Sir William Cash MP (7 March 2019).
4 By way of explanation: first freedom rights provide the right to fly over a country without landing; second freedom rights the right to refuel or undertake maintenance in a foreign country without embarking or disembarking passengers or cargo; third freedom rights the right to fly from one’s own country to another; and fourth freedom rights the right to fly from another country to one’s own.
5 Fifth freedom rights provide the right to carry passengers from one’s own country to a second country, and from that country onward to a third country (and so on).
6 Wet-leasing is the practice whereby one airline—the lessor—provides an aircraft, complete crew, maintenance, and insurance to another airline or other type of business acting as a broker of air travel—the lessee—which pays by hours operated.
7 Code sharing is a practice whereby two or more airlines publish and market a flight under their own airline designator and flight number as part of their published timetable or schedule. Codeshares allow flights to be operated into and out of the EU by air service providers based in a third country as if they were an EU carrier.
8 See Article 4 of Annex 4 to the Protocol on Ireland/Northern Ireland of the draft Withdrawal Agreement.
Published: 21 May 2019