Brexit and EU Open Skies Agreement

[cody12]

Spain has signalled that it will not accept any deals brokered between the EU and the UK which grant Gibraltar the same rights as UK mainland airports, reports the Financial Times. The stance may complicate Britain's aviation negotiations with the EU.

Spain refuses to acknowledge the UK's de-facto right to the land where Gibraltar airport is situated, claiming that it is occupied illegaly. "A deal that is applicable to the airport of Gibraltar would imply recognition of the legal right of the UK to the territory," an unnamed Spanish diplomat is reported as saying.

The London-Madrid dispute has frequently held up agreements between European Union states, with Spain insisting that Gibraltar should be excluded from any EU aviation legislation. The UK maintains that there is no legal basis to do so.

British Prime Minister Theresa May has insisted on the UK's exit from Europe's single market, but it remains to be seen if that also means the European Common Aviation Area. The UK faces either accepting EU aviation laws and guidelines, or negotiating bilateral air service or open skies agreements; these latter two having the potential to curb Britain's low cost carriers if 7th and 9th Freedom traffic rights are lost.

 

[News Guru]

Moody's: Pound drop from Brexit will shake UK airlines; Airports can withstand short term impact

Global Credit Research - 03 Feb 2017
London, 03 February 2017 -- People's revised travel choices and operating dollar costs could see UK airlines' revenues take a hit, with airports' passenger growth likely to halve over the next two years due to the resulting macroeconomic landscape following the Brexit vote, says Moody's Investors Service in a report published today.

Moody's expects that demand for air travel will be driven by weaker economic sentiment as a result of uncertainty over the shape of the UK's future trading arrangements with the EU, as well as with other major economies with which the UK has trade arrangements in place by virtue of its current membership of the EU.

Moody's report, titled "Impact of Brexit vote on UK airports and airlines: Airports to Withstand Short Term Impacts but Airlines Weakened by Fall in Sterling", is available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release.

Overall, in the short term, passenger numbers will continue to grow, albeit at a slower rate, enabling UK airports to withstand the immediate impact of the Brexit vote. This benefit will however not be felt evenly across the UK. Manchester, Luton and Birmingham airports which are dominated by outbound traffic are more exposed to weaker domestic economic prospects and sterling's depreciation, while others like Heathrow, and to a certain extent Stansted airport, are better insulated from UK economic conditions because of their higher proportion of inbound traffic. The last two also serve London, a major tourist destination so a weaker pound benefits tourists.

UK airlines will be weakened by the sterling's depreciation against the dollar, as a significant proportion of their costs are denominated in US dollars while sterling revenue is a high percentage of the total.

UK airlines will continue to suffer in 2017 on the back of a slowdown in outbound leisure travel, particularly to the US, as UK residents' put travel plans on hold as the pound's depreciation makes the cost of holidaying abroad more expensive. Also, weaker economic prospects and concerns over terrorism threats in Europe will continue to put off many US tourists from flying to the UK to benefit from the weaker pound. Long-haul carriers, such as British Airways, Plc (Baa3 stable) and Virgin Atlantic (unrated), which traditionally carry British-based leisure passengers to the US will be particularly impacted.

Post-Brexit, the UK's continued membership of the European Common Aviation Area (ECAA) is possible but cannot be taken for granted. "An exit from this single aviation market would severely disrupt UK airports and airlines, with far-reaching ramifications, including for UK-US aviation agreements. Transitional arrangements will likely be needed to avoid a sudden loss of air travel rights," says Xavier Lopez del Rincon a Moody's Vice President--Senior Credit Officer and the report's author.

Future trade and immigration arrangements between the UK, the EU and the rest of the world could also give rise to more generic risks to airports and airlines. For example, an impairment of the UK's economic growth potential would dampen outbound demand for air travel. More restrictive immigration policies could affect demand at airports, and lead to inflationary impacts on the aviation industry. London airports are also exposed to scenarios that have a substantive negative impact on the UK's financial services industry.

Subscribers can access this report via this link:

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1053602

END PRESS RELEASE

 

[Ray Finkle]

Manchester, Luton and Birmingham airports which are dominated by outbound traffic

I can understand MAN and BHX but with LTN having such a huge presence from Wizz (I've seen somewhere in the region of 6.3 million seats suggested) I'd have thought it would also have a pretty sizeable inbound market?

 

[TheLocalYokel]

It's again speculation, albeit from a respected organisation in its field. It's the sort of thing we were getting from both sides of the Remain/Leave argument. The truth is that no-one knows how the UK will leave the EU (I doubt that the UK government does at this point in time although they will undoubtedly have a preferred pathway) or how its method of leaving will affect the country, including the aviation industry.

It's interesting from a discussion perspective as something that might happen in certain circumstances.

 

[News Guru]

According to the Financial Times Spain has signaled it would block an EU air access deal with the UK unless terms exclude Gibraltar airport.

https://www.ft.com/content/a62b292a-ef99-11e6-930f-061b01e23655

 

[Aviador]

Brexit, airlines' worst fear, has become their preoccupation

"There is no shortage of metaphors for what airlines expect from Brexit: analysts talk of crosswinds, executives fear turbulence. For some, it is simply flying into thick fog with no idea where they are going to land." The Guardian

https://www.theguardian.com/busines...ines-worst-fear-preoccupation-legal-framework

I've no idea what this is going to do to the UK aviation industry nor is it clear what will happen on day one onwards post Brexit. The one thing that we can be certain of is we are not going to have the same freedom we had previously. There is absolutely no way the EU will offer the UK the same aviation privileges it had previously.

 

[Jerry]

It is an unknown but the aviation industry is big for the UK and the EU. Tourism for countries like Spain and Italy and Greece is massive and Brits make up a big chunk of that business. UK and UK bound passengers are a big part of KLMs business because of their hub model especially from regional airports. There will be a lot of people in the airline industry lobbying for any aviation deal to essentially be very similar to what it is now.

 

[Aviador]

It is an unknown but the aviation industry is big for the UK and the EU. Tourism for countries like Spain and Italy and Greece is massive and Brits make up a big chunk of that business. UK and UK bound passengers are a big part of KLMs business because of their hub model especially from regional airports. There will be a lot of people in the airline industry lobbying for any aviation deal to essentially be very similar to what it is now.

It's a tough one for the EU to be honest. They know they can't offer a great deal because it will send the wrong impression to other EU country members toying with leaving the idea of leaving the EU. On the other hand countries like Spain rely on a huge amount of inbound tourists for its huge tourism industry. Having said that, Spain only last week issued a warning about any deal saying it must exclude Gibraltar or Spain will veto any deal. So for the moment it certainly appears there is no appetite to work with the UK to strike a deal. #brexit #AviationIndustry #EuropeanUnion

 

[Jerry]

It's a tough one for the EU to be honest

Yes it is a tough one for them but in the the potential of economic harm to the airline industry and tourism industry should mean some common sense will eventually kick in! Or am i being naive to expect common sense from politicians! As for Spain it isn't really a change in Gibraltar's situation as they only have flights to the UK and Morocco.

 

[TheLocalYokel]

There is always a degree of posturing in such matters, as there is any business negotiations. Both sides intimate there is a line in the sand beyond which they won't cross. But they do. There will always be a degree of give and take in the end.

There might not be quite the freedom that airlines and their passengers currently enjoy but both 'sides' have a great interest in securing some sort of mutually acceptable Brexit deal and that includes aviation.

 

[Dobbo]

Something of interest to all of us. It seems that a group of pro-EU MPs are trying to frustrate Theresa May's government's objective of a hard Brexit.

This includes retaining UK membership of the common market, Euratom and... Open Skies.

 

[Jerry]

Something of interest to all of us. It seems that a group of pro-EU MPs are trying to frustrate Theresa May's government's objective of a hard Brexit.

This includes retaining UK membership of the common market, Euratom and... Open Skies.

Whatever happens with Brexit i do think Open Skies will remain. I think there is too much to lose on both sides of the channel for it not to.

 

[Dobbo]

@Jerry i very much agree. The UK and EU need to get this resolved reasonably quickly in time for the S19 scheduling.

 

[Land23R]

Do we know what Air Agreements with countries outside the EU are with the EU and not the UK, if any?
I suppose I'm thinking particularly of the US. I was assuming it was between the UK and US, but is this the case?

 

[Dobbo]

I think the position is that EU open sky members are also included in EU-US open skies.

I don't know how it affects open skies with other nations, but I suspect it is a fairly similar basis (if what I say is correct).

 

[Aviador]

Brexit: UK Airlines ‘Secretly S**tting Themselves’ As EU Carriers Conspire To Exclude Them
http://www.huffingtonpost.co.uk/2017/09/01/brexit-eu-airlines-cabotage-rights_n_17885512.html

 

[Jerry]

Brexit: UK Airlines ‘Secretly S**tting Themselves’ As EU Carriers Conspire To Exclude Them
http://www.huffingtonpost.co.uk/2017/09/01/brexit-eu-airlines-cabotage-rights_n_17885512.html

And what UK carriers operate on the continent? Easyjet now has an EU airline and the others tend to operate UK to EU. Ryanair isn't British it's Irish, Jet2 do the odd charter in the winter maybe, Thomson is TUI UK and operates as a UK airline, BA doesn't do inter-EU routes, Monarch operates UK to EU, Thomas Cook tends to operate UK to EU while Condor covers Germany and Thomas Cook Scandinavia acts as a Scandinavian Airline and Norwegian has a UK airline and Flybe dropped it's inter-EU routes and only operates on behalf of SAS. In fact i'd imagine the likes of KLM/Air France would be very worried as they could lose access to 16 UK airports and the UK passengers, like me, that use them to fly longhaul. Same with Aer Lingus and other EU airlines.

 

[Aviador]

And what UK carriers operate on the continent? Easyjet now has an EU airline and the others tend to operate UK to EU. Ryanair isn't British it's Irish, Jet2 do the odd charter in the winter maybe, Thomson is TUI UK and operates as a UK airline, BA doesn't do inter-EU routes, Monarch operates UK to EU, Thomas Cook tends to operate UK to EU while Condor covers Germany and Thomas Cook Scandinavia acts as a Scandinavian Airline and Norwegian has a UK airline and Flybe dropped it's inter-EU routes and only operates on behalf of SAS. In fact i'd imagine the likes of KLM/Air France would be very worried as they could lose access to 16 UK airports and the UK passengers, like me, that use them to fly longhaul. Same with Aer Lingus and other EU airlines.

Point to point traffic between the UK and Europe shouldn't be affected. If no agreement is put in place as the UK leaves the EU, it will be flights operated by UK airlines between two EU cities, or by EU airlines operating between two UK cities. The UK will also drop out of the Open Skies Agreement by default so this could affect flights from the UK to further afield. Frankly, this is a very difficult subject, even bipartisan when you try to tackle it from a non political point of view, it's still very hard to get your head around it because there's so much involved.

 

[Jerry]

This may be of interest to some people. The government has released a Brexit Aerospace Sector Report which is 19 pages long.
http://www.parliament.uk/documents/...yses/1-Sectoral-Analyses-Aerospace-Report.pdf

 

[TheLocalYokel]

Interesting breakdown of total aerospace jobs in the UK which gives an indication of those areas with the most to lose if Brexit proves 'hard'. These are the four areas with the largest concentrations:

South West 19%
East Midlands 16%
North West 14%
Wales 13%