No sign of Brexit aviation threat being heeded

by John Whelan

Ryanair boss Michael O’Leary and the British Airline Pilots’ Association general secretary Brian Strutton may have little in common, but they are in agreement that the UK needs to urgently close out an agreement with the EU on access to the EU’s Open Skies framework post- Brexit.

Michael O’Leary: Deal needed on EU’s Open Skies framework.

Fresh anxiety was pumped into the concerns of both and the wider aviation industry in mid- December when the EU Commission’s Directorate-General for Mobility and Transport stated in a notice to all UK and EU aviation bodies that “as of withdrawal date (March 30, 2019) the operating licences granted to airlines by the UK Civil Aviation Authority will no longer apply”.

In response, Mr Strutton, said: “Here it is in black and white from the EU Commission: UK flights to the EU will be grounded in March 2019 should no agreement be reached. We need the UK government to sort air traffic rights now. Once again, no deal is not an option.”

Ryanair recently applied for a British air operating licence in a bid to keep its domestic UK services operating in the event of a hard Brexit. Nevertheless, shareholders, already nervous about the impact of pilot union recognition, are worried they may be asked to sell off some of their shareholding if the UK fails to conclude a deal on access to the single aviation market with the EU.

Under EU regulations airlines must ensure that 50% of their ownership is held by EU nationals. Dublin- registered Ryanair is 60% owned by EU nationals, but that drops to 40% once UK shareholders are excluded.

Aer Lingus and British Airways owner AIG faces similar problems. Both, however, have extraordinary provisions in their articles of association to force investors to sell up, should their shareholder base fall below the 50% threshold.

IAG has a provision to force non-EU shareholders to divest within 10 days in the event of threat to its licence to freely fly across the EU. The divestiture clause exists because non-compliance with EU ownership will result in the suspension of the carrier’s operating license and, with it, the rights to carry passengers, mail, and cargo within the EU single market.

However, there are also many other sectors of Ireland’s aviation industry providing jet engine and airframe maintenance services into the UK market. Once the UK is formally out of the EU these businesses will be damaged. Our prominent aircraft leasing industry will also lose some of its trading flexibility. Wet leasing, in particular, will be impacted as under these agreements the aircraft is operated under operator certificate.

In contrast with other sectors, the aviation sector is not covered under the World Trade Organisation rules, hence in the event of a ‘no deal’ there is no fall-back position. Brexit Minister Simon Coveney must take a more direct interest in ensuring that negotiations on air services between the UK and the EU take place as smoothly as possible.

The UK’s broad December Brexit deal offered reassurance, but the really tough free-trade negotiations have yet to begin. There is little sign that aviation is being prioritised or that the need for urgency is understood.

John Whelan is a consultant in Irish and international trade

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