Chaos in the skies?
In an article originally published on Liberal Democrat European Group, former senior air transport executive Laurie Price explains what is at stake for aviation.
The lack of progress on the commercial air transport aspects of Brexit negotiations could result in chaos for the UK air transport industry, passengers and UK trade unless addressed very quickly. Airline planning cycles take at least two years to develop. Schedules for winter 2018/2019 have to be filed in April 2018 at the twice yearly International Air Transport Association (IATA) Schedules Conference, and those for summer 2019, by September 2018, less than a year away. That means knowing and planning networks, frequency, capacity and detailed schedules now so the requisite fleets and resources can be identified, sourced, crews trained, slots confirmed, maintenance schedules aligned and services marketed.
As a non EU member, the UK will no longer qualify under the long standing freedoms of the 'EU Open Skies' and 'EU/US Open Skies' agreements. All routes, services, frequencies and activity currently covered by those blanket exemptions have afforded airlines immense flexibility and freedom of action, whilst increasing service, frequency and reducing fares for consumers. This could be suspended upon Brexit until such time as the requisite substitute air service licences and bilateral agreements have been negotiated and put in place.
The pre 'Open Skies' regime was a very long and protracted regulatory process which required skill, knowledge and experience both within the airlines and by the regulators. If an airline won the sought individual route licences it would then have to seek bilateral designation from both its own and the Government of the destination. This was never an easy process as it would cover city pairs to be served, designated airlines, frequency, capacity, schedules, pricing and sometimes even products. Brexit Britain could be forced to revert to this cumbersome, time consuming, costly regime which stifles innovation and reduces market opportunity and service development in many parts of the world. It is yet another example of how Brexit risks making Britain less, not more, global.
This is why EasyJet has formed an Austrian subsidiary to maintain its full EU operating rights. But it all takes time to establish and increases costs. The resulting UK air service network, frequency, prices available and products would be very different to today. The UK's long standing leadership in air transport, with all the benefits that confers to trade, tourism, economic development, employment, connectivity and social cohesion could be threatened. The broader adverse impact on UK's thriving high tech aerospace sector, would be equally damaging.
Ironically, it is the Leave voting UK regions which would be likely to be worst hit by the reduction in air networks and service post Brexit. Faced with increased regulatory hurdles and growing costs as a result, airlines would retrench and focus on the major markets around London, Manchester and lowland Scotland. Airlines would redeploy aircraft and crews to their EU subsidiaries.
In announcing its latest results, EasyJet said that the post Referendum currency devaluation versus the Euro and the $ had reduced its profits by £100 million (about 25%). The devaluation of the pound also hastened the demise of Monarch as many of its costs increased by 20% and revenues reduced by the same margin. As a largely UK origin and destination market airline, Monarch did not have the market offsets which EasyJet and Ryanair, with multiple EU operating bases, enjoyed.
Spain, Greece, Portugal and Italy might agree to the UK continuing to have open air transport access to their markets along the lines of the current EU Open Skies, as primary ex UK tourist destinations (they were always major Inclusive Tour charter destinations). However, other EU nations might take a different view, and could revert to bilateral arrangements in relation to their air links to the UK. But as yet we have no clarity.
Furthermore, there are likely impacts on the UK role and its participation in Air Traffic Control (ATC) and Eurocontrol. Although theoretically outside EU purview, Brexit is likely to impact the UK's ability to influence air transport policy and future European air traffic management. Fragmented ATC within Europe is already one of the greatest causes to delay and disruption of air services, and Brexit is likely to make the situation worse.
The threat of Brexit to air transport must be addressed urgently if the UK is to maintain its vital international network of air services and global connectivity. It's an aspect of trade that the Government remains almost silent on, claiming all will be well as it's in the EU interest that UK demands are met. Unfortunately, the world does not owe the UK a living. Fortunately, time will tell, but at present the outlook is far from positive.