Brexit and aviation law

Brexit has changed legislation affecting many aspects of the functioning of the European Union and Great Britain, as well as bilateral relations between London and individual EU states. One such area is aviation law, both in relation to international air transport and general aviation.

Trade and Cooperation Agreement

Great Britain withdrew from the European Union on 1 February 2020. Until the end of last year, there was a transitional period during which European law, including regulations on the functioning of air transport market and aviation safety regulations, were to apply to the United Kingdom. The transition period was to be used by London and Brussels to negotiate an agreement on the future relationship and partnership. Indeed, on 24 December 2020, the European Commission and the British government agreed on the terms of the Trade and Cooperation Agreement^[1], which provisionally entered into force on 1 January 2021. The provisional application of the Agreement is, on the one hand, to allow for a harmonious completion of the procedure for approving its content by the EU bodies, and thus to avoid a specific regulatory void in the Community’s relations with London (the initial period of provisional application, which was supposed to last until 28 February, was extended until 30 April 2021).

Aviation law after Brexit, freedoms of the air

The regulation of air transport in the Trade and Cooperation Agreement is a significant step backwards from where the United Kingdom was part of the EU’s common air transport market (Article 100 paragraph 2 TFEU). There are issues in this agreement that need to be refined during further UK-EU bilateral relations, but it must be admitted that the current situation is incomparably better than the system of bilateral agreements between London and individual European capitals, which could become a necessity in the event of a hard Brexit. Today, the Aviation Trade and Cooperation Agreement appears to be a reasonable compromise that has kept the pre-Brexit status where possible (especially in the regulatory sphere). It is also worth noting that provisions of the Brexit agreement guarantee carriers from the United Kingdom and EU Member States equal rights by way of reciprocity. In this article, we will consider the situation of carriers from EU Member States, bearing in mind that the issues discussed will apply symmetrically to British carriers.

The Brexit agreement preserves the third and fourth freedom traffic right, i.e. the right to carry air operations between Great Britain and the European Union (Member States), which in practice covers most of the air traffic involving the United Kingdom and the EU.

Fifth freedom traffic right is also guaranteed, i.e. the right to land in the territory of the other party to carry air traffic between that other party and a third country, as part of air transport service originating in or destined to the first party to the agreement. Importantly, however, the fifth freedom in the Trade and Cooperation Agreement was limited to cargo traffic only, so passenger or mixed traffic is excluded.

What does this mean in practice? On the basis of such delegation in the Brexit agreement, it will not be possible for the Polish Airlines to operate a flight from Warsaw to New York with an intermediate airport in London, for which the Polish carrier could sell tickets for the entire Warsaw-New York route as well as Warsaw -London and London-New York route.

However, European carriers can operate as marketing carriers under a code-sharing agreement on routes between any two points, one in the UK and the other in a third country.

Domestic routes not for foreign airlines

Pursuant to the Brexit agreement, EU carriers will not be able to carry out domestic air operations in the UK. Of course, this restriction works symmetrically for British carriers. However, in practical terms, this ban will not have a significant impact on the existing network of connections, both in the UK and in the EU. Until now, such services have been provided by EasyJet, Ryanair and Wizz Air, however, so far all these carriers have managed to register subsidiaries either in the UK or the EU, which are treated as carriers of the other party to the contract under the provisions on nationality and effective control.

Nationality and effective control

Access to connections between EU countries and Great Britain is possible for carriers who meet the requirements which can be grouped into the following categories:

• Requirement of origin: the carrier is owned (directly or through majority shareholding) and remains under effective control of an EU or EEA Member State
• Hub requirement: the carrier’s principal place of business is within the EU
• Regulatory requirement: the carrier has a valid license (or an equivalent document) and an AOC (Air Operator’s Certificate) issued by EASA or authorities of a Member State
• Safety requirement: the carrier’s operations comply with the EU safety and aviation security requirements.

In relation to British carriers, the above requirements have been defined similarly, but the agreement introduced a specific license, because a British carrier will also be considered to be a carrier “controlled” by entities from the EU or EEA Member States or Switzerland alone or jointly with British entities. However, this only applies to airlines that obtained a valid AOC before 31 December 2020.

This was to prevent the exclusion of British flagship airlines (such as British Airways controlled by international holding company IAG) from the definition of a British carrier.

Effective control regulations have led to a situation where, for example, Wizz Air, whose 80% of share capital is represented by non-EU shareholders, limited the right to vote or participate in the general meeting to approximately 60% of ordinary shares. As a result, this may lead to an outflow of large investors from outside the EU, who may be discouraged by potential restrictions on their corporate rights resulting indirectly from the Brexit agreement.

Operational issues

The Trade and Cooperation Agreement links the issue of obtaining operational and technical permits with the issue of nationality and effective control. And so, EU carriers must remember to obtain a British Operating Authorization and Technical Permission. Clearly, only a carrier holding a valid AOC issued by EASA or by a Member State aviation authority and an air operator’s license (or an equivalent document issued by the relevant aviation regulatory authority) can apply for the Operating Authorization. In Poland, the Civil Aviation Authority is responsible for issuing both  documents.

Naturally, if any of the above requirement is not met, the United Kingdom, acting through the Civil Aviation Authority (CAA), may take steps to refuse to issue, withdraw, suspend or limit the Operating Authorization or Technical Permission or to impose additional conditions.

One should remember that currently British carriers are treated by European aviation law as Third Country Operators (TCO) and as such are subject to the provisions of Regulation No. 452/2014^[2].

Airlines from EU Member States will be able to establish their offices in the UK, hire (post) their employees, and perform their own ground handling of aircrafts.

British carriers have symmetrical requirements and powers under the Brexit agreement.

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A symmetrical deal, but not entirely

In addition to the above liberal treatment of British airlines compared to carriers from the EU, carriers from the UK received yet another advantage, the so-called wet-leasing, i.e. leasing of an aircraft with a crew (ACMI – Aircraft, Crew, Maintenance and Insurance). A British carrier can thus use aircrafts provided by other carriers, both British and EU, while European airlines can only use aircrafts of other EU carriers.

What next?

Regulations of the Brexit agreement on air transport constitute a compromise between full harmonization (as has been the case so far within the common market), and the network of bilateral agreements between London and individual European capitals. How the practice will evolve? Will the mutual rights of carriers be gradually extended to return to a “quasi” common transport market? Time will tell.

Author:

Piotr Dudek
Director of the New Technologies Department, Defence & Aerospace
TGC Corporate Lawyers

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[1] Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, on the other part (JL EU L444/14).

[2] Commission Regulation (EU) No 452/2014 of 29 April 2014 laying down technical requirements and administrative procedures related to air operations of third country operators pursuant to Regulation (EC) No 216/2008 of the European Parliament and of the Council.