A study of the effects of the United Kingdom leaving …

A study of the effects of the United Kingdom leaving the European Union

on airlines flying to and from the UK

Prepared for:

The Industry Affairs Committee of The International Air Transport Association - IATA

October 2018 R-038-001-001 Final

TABLE OF CONTENTS

EXECUTIVE SUMMARY..........................................................................................................................................4

1 INTRODUCTION..............................................................................................................................................9

1.1

CONTEXT FOR THIS STUDY..........................................................................................................................9

1.2

KEY ASSUMPTIONS ....................................................................................................................................9

1.3

SCOPE .................................................................................................................................................... 10

1.4

METHODOLOGY .......................................................................................................................................11

1.4.1 Key publications.......................................................................................................................11

1.4.2 Industry and subject matter experts.......................................................................................12

1.5

TIMING OF THIS STUDY..............................................................................................................................12

2 FUTURE OF UK-EU AVIATION RELATIONS...............................................................................................14

2.1

BASE SCENARIO.......................................................................................................................................14

2.1.1 Market access...........................................................................................................................14

2.1.2 Safety and security regulation ................................................................................................15

2.2

VARIANTS ON THE `BASE' SCENARIO...........................................................................................................15

2.3

POSSIBLE ALTERNATIVE SCENARIOS ? `NO DEAL' .......................................................................................16

2.3.1 Multilateral EU-UK agreement .................................................................................................16

2.3.2 Individual Bilateral Agreements ..............................................................................................17

2.3.3 Remain part of the European Common Aviation Area (ECAA).............................................17

3 SUMMARY OF FINDINGS ............................................................................................................................18

3.1

RISK BASED EVALUATION APPROACH ..........................................................................................................18

3.1.1 Method.......................................................................................................................................18

3.1.2 Definitions.................................................................................................................................18

3.2

RESULTS OF ASSESSMENT ........................................................................................................................19

3.2.1 Base scenario ...........................................................................................................................20

3.2.2 No Deal scenario ......................................................................................................................22

4 A I R S E R V I C E S A GR E E M E N T S ..........................................................................................................25

4.1

OVERVIEW ............................................................................................................................................25

4.2

BACKGROUND ON AIR SE RVICES AGREEMENTS ...............................................................................25

4.3

NEW UK-THIRD COUNTRY ASAS, SUCH AS UK-US ....................................................................................27

4.3.1 Background ..............................................................................................................................27

4.3.2 Potential Options......................................................................................................................27 4.3.3 Most likely outcome .................................................................................................................29

4.3.4 Implications for airlines ...........................................................................................................29

4.4

BREXIT IMPACT ON CURRENT OR FUTURE EU-TC ASAS ..............................................................................30

4.5

POTENTIAL BREXIT IMPACT ON WET LEASING...............................................................................................30

5 FLIGHT OPERATIONS AND SAFETY..........................................................................................................31

5.1

SECTION OVERVIEW.................................................................................................................................31

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A study of the effects of the UK leaving the EU on airlines flying to and from the UK

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5.2

SAFETY AND SECURITY FRAMEWORK AND THE ROLE OF EUROPEAN AVIATION SAFETY AGENCY

31

5.2.1 Background ..............................................................................................................................31

5.2.2 Brexit impact.............................................................................................................................31

5.2.3 Potential Options......................................................................................................................32

5.2.4 Most likely outcome .................................................................................................................35

5.2.5 Implications for airlines doing business ................................................................................35

5.3

AIR TR AF F IC M AN AGEM E N T AND T HE RO L E O F TH E S IN G LE EU ROPE AN SK Y FR AM EW ORK ..........36

5.3.1 Background ..............................................................................................................................36

5.3.2 Brexit impact.............................................................................................................................38

5.3.3 Implications for airlines doing business ................................................................................40

6 B O R D E R M A N A G E M E N T ......................................................................................................................42

6.1

SECTION OVERVIEW ............................................................................................................................42

6.2

PASSENGER FACILITATION .................................................................................................................42

6.2.1 Border processes .....................................................................................................................42

6.2.2 UK visa scheme/ European Travel and Information System (ETIAS) ..................................45

6.2.3 Passenger Data Exchange.......................................................................................................46

6.3

MOVEMENT OF GOODS .............................................................................................................................49

6.3.1 Background ..............................................................................................................................49

6.3.2 Brexit impact.............................................................................................................................50

6.3.3 Implications for airlines ...........................................................................................................53

7 A V I A T I ON S E C U R I T Y ............................................................................................................................55

7.1

BACKGROUND ......................................................................................................................................55

7.2

BREXIT IMPACT ....................................................................................................................................56

7.3

IMPLICATIONS FOR AIRLINES ..............................................................................................................57

8 GROUND HANDLING ...................................................................................................................................58

8.1

SECTION OVERVIEW.................................................................................................................................58

8.2

BACKGROUND.......................................................................................................................................... 58

8.3

BREXIT IMPACT ........................................................................................................................................59

8.4

POTENTIAL OPTIONS.................................................................................................................................60

8.5

MOST LIKELY OUTCOME ............................................................................................................................60

8.6

IMPLICATIONS FOR AIRLINES DOING BUSINESS .............................................................................................61

9 S L OT S .........................................................................................................................................................62

9.1

BACKGROUND.......................................................................................................................................... 62

9.2

BREXIT IMPACT ........................................................................................................................................63

9.3

IMPLICATION FOR AIRLINES DOING BUSINESS ...............................................................................................64

10 PASSENGER RIGHTS ..................................................................................................................................65

10.1

SECTION OVERVIEW .................................................................................................................................65

10.2

CONSUMER PROTECTION ..........................................................................................................................65

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10.2.1 Background ..............................................................................................................................65

10.2.2 Brexit impact.............................................................................................................................66

10.2.3 Implications for airlines doing business ................................................................................67

10.3

FARE TRANSPARENCY ..............................................................................................................................67

10.3.1 Background ..............................................................................................................................67

10.3.2 Brexit impacts...........................................................................................................................68

10.3.3 Most likely outcome .................................................................................................................68

10.3.4 Implications for airlines doing business ................................................................................69

10.4

PASSENGERS WITH REDUCED MOBILITY (PRM) ..........................................................................................69

10.4.1 Background ..............................................................................................................................69

10.4.2 Brexit impact.............................................................................................................................70

10.4.3 Most likely outcome .................................................................................................................71

10.4.4 Implications for airlines doing business ................................................................................71

11 ENVIRONMENT.............................................................................................................................................72

11.1

SECTION OVERVIEW.................................................................................................................................72

11.2

BACKGROUND.......................................................................................................................................... 72

11.3

POTENTIAL OUTCOMES BEFORE 2021 ........................................................................................................74

11.4

POTENTIAL OUTCOMES AFTER 2021...........................................................................................................78

11.5

SUMMARY ...............................................................................................................................................81

12 LABOUR MARKET .......................................................................................................................................82

12.1

SECTION OVERVIEW.................................................................................................................................82

12.2

BACKGROUND.......................................................................................................................................... 82

12.3

BREXIT IMPACT ........................................................................................................................................83

12.4

POSSIBLE OPTIONS ..................................................................................................................................84

12.5

MOST LIKELY OUTCOME ............................................................................................................................84

12.6

IMPLICATIONS FOR AIRLINES DOING BUSINESS .............................................................................................85

This report was prepared for IATA by Taylor Airey, in conjunction with Frontier Economics.

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A study of the effects of the UK leaving the EU on airlines flying to and from the UK

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EXECUTIVE SUMMARY

Context

On the 23rd June 2016, the United Kingdom (UK) voted to leave the European Union (EU). In March 2017 the UK government triggered Article 50, announcing that it would be invoked on 29th March 2019, marking the UK's exit from the EU (`Brexit').

Since June 2017, negotiations between the parties have continued and discussions have been ongoing throughout the course of this study. As this study concludes however, future relationships after the UK's exit remain unclear. The UK has the largest aviation industry in Europe1, and the UK's geographical position in the network is key, with around 80 per cent of all North Atlantic traffic passing through the UK or Irish controlled airspace.2 Changes to the relationship between the UK and the EU could potentially have considerable implications for all players in this important market.

Numerous stakeholders in the aviation sector continue to call for greater political certainty to enable contingency plans to be developed. As the representative trade body for the interests of 290-member airlines across 120 countries.

Other studies have sought to assess the potential trade or economic impacts for the sector of the UK exiting the EU. However, in support of its role, IATA's Industry Affairs Committee (IAC), now wishes to better understand the consequences on day-to-day operations for airlines flying between the UK and other countries/ regions in a post-`Brexit' environment.

Approach

In response to the IAC brief, this paper considers a number of topics that are critical to airlines successfully `doing business' as follows:

? Flight operations and safety ? safety and security framework - the future role of EASA, Air Traffic Management and the Single European Sky (SES);

? Air Services Agreements ? future EU-UK and UK-Third country agreements; and

? Border Management ? Customs and Immigration processes at the EU/ UK border;

? Aviation Security ? future recognition of common standards;

? Ground Operations ? market competitiveness at UK airports;

? Slot Process ? future slot management rules;

? Consumer Protection ? passenger rights, fare transparency, and, Passengers with Reduced Mobility (PRMs);

? Environment and the EU Emissions Trading Scheme (EU-ETS);

? Labour Market ? cross-border movement of aviation skills.

To identify the potential implications to airlines, the study has used a combination of:

1 HM Government. April 2018. Beyond the Horizon ? The Future of UK Aviation 2 NATS. `Nat News' .2016. Accessed July 2018.

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A study of the effects of the UK leaving the EU on airlines flying to and from the UK

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