Operation of Air Services (Amendment etc.) (EU Exit) Regulations 2018

Wednesday 21st November 2018 Grand Committee

Considered in Grand Committee

16:11

Moved by

[Baroness Sugg]

That the Grand Committee do consider the Operation of Air Services (Amendment etc.) (EU Exit) Regulations 2018.

Relevant document: 4th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)]

My Lords, these draft regulations will be made under the powers conferred by the European Union (Withdrawal) Act 2018, and will be needed if the UK leaves the European Union next March without a deal. Following the UK’s decision to leave the EU after the referendum in 2016, the Government have been working to develop a positive future relationship with the EU. This would include a comprehensive and ambitious air transport agreement.

The Department for Transport has undertaken a significant amount of work with respect to the withdrawal negotiations and to prepare for the range of their potential outcomes. The best outcome is for the UK to leave with a deal and, as noble Lords will be aware, a draft withdrawal agreement is being considered. We remain confident that this agreement will enter into force at the end of March next year but, as a responsible Government, we must make all reasonable plans to prepare for a no-deal scenario. To that extent, we have conducted particularly intensive work to ensure that there continues to be a well-functioning legislative and regulatory regime for aviation. We set out in the technical notices in September how this would work and this instrument provides the means to deliver some of those outcomes.

EU Regulation 1008/2008 provides the basis for the internal market in air services. It consolidated provisions within a number of prior regulations that had gradually liberalised the market for air services within the EU. The regulation sets out harmonised conditions for the licensing of air carriers in the EU and provides the right for any EU-licensed air carrier to operate on any route within the EU, without prior authorisation. The regulation prohibits market distortions which had historically existed in Europe, such as restrictions on pricing or the ability of air carriers to freely set air fares and lease each other’s aircraft. It also sets out common rules for the provision of public service obligations through scheduled flights to peripheral regions that would not otherwise be commercially viable.

A further element of the internal market provided for by this regulation is for wet leasing. A wet lease is when one air carrier leases an aircraft together with its crew, maintenance and insurance from another operator. EU air carriers can freely wet lease aircraft registered in the EU, provided that it would not endanger safety, but restrictions are imposed on the lease of aircraft from beyond the EU. The EU has also pursued an external aviation policy by agreeing comprehensive air transport agreements with third countries, and by seeking consistency in the provisions of the bilateral air service agreements between member states and third countries. Regulation 847/2004 establishes a procedure for member states to notify each other and the Commission, and to work together on the negotiation and conclusion of air service agreements.

The draft regulations we are considering today fix deficiencies in the retained EU regulations, alongside the preserved domestic legislation made to implement aspects of those regulations, so that the statute book continues to function correctly after exit day in the event of no deal. The effect of these fixes was described in the technical notice published in September, which set out how the UK would regulate air carriers. Many of the fixes make it clear that the retained legislation applies only to the UK. For instance, references to “Community air carrier” are replaced with “UK air carrier”. Another amendment requires air carriers to have their principal place of business in “the United Kingdom” rather than in “a member state”. Since, in the event of no deal, the UK would no longer participate in the EU’s external aviation policy and the Commission would have no authority in the UK, regulation 847/2004 would be revoked. The UK would be free to negotiate bilateral air services agreements with other countries without regard to the Commission or EU member states.

16:15

Turning to operating licences, the withdrawal Act ensures that operating licences previously issued to UK air carriers remain valid. An operating licence is required by air carriers before they can offer commercial air transport and ensures that UK air carriers are financially robust, appropriately insured and managed by fit and proper persons. A separate air operator certificate is also required and ensures that the air carrier meets essential safety requirements. While all commercial aircraft operators require an air operator certificate to show that they are safe, some will not provide air transport services—for instance, a hot air balloon offering leisure flights—and therefore would not require an operating licence.

Separate instruments on aviation safety, security and the rights of air passengers will be brought to the House in the coming weeks. UK-licensed air carriers will need to continue to meet all the substantive requirements for a valid operating licence, with one exception. The requirement in regulation 1008/2008 for air carriers to be majority owned and controlled by EU nationals would be revoked, since this is a definition that would no longer apply to UK nationals. It would also be redundant for two reasons. First, nationality requirements are routinely specified in the terms of our air services agreements. These determine the eligibility of air carriers to operate under the terms of those agreements, based on the nationality of their ownership. We expect any future aviation agreements with the EU to include that nationality requirement. Secondly, in the event of no deal, all UK air carriers would require a route licence to operate beyond the UK. There is a nationality requirement in that route licence too.

UK route licences pre-date the EU operating licence, and in many ways were superseded by it, since, through the UK’s membership of the EU, our air carriers were exempted from the requirement for a route licence for operations to the EU. Route licences serve a useful purpose. Unlike an operating licence, conditions can be attached to the licence preventing air carriers operating certain routes. For example, route licences prevent UK air carriers flying directly to Northern Cyprus, and it is the mechanism through which decisions on the allocation of scarce capacity are enforced.

Route licences are being provided for free by the CAA to any UK carrier that requires one. One of the conditions for a route licence is that the applicant should be either a UK national or an organisation controlled by UK nationals. The Secretary of State also has long-established powers to instruct the CAA to waive this requirement, which he has done historically, most recently for easyJet UK and Wizz Air UK.

As a result of this instrument, the rules for wet leasing foreign aircraft will not change. UK air carriers seeking to wet lease a foreign-registered aircraft would be required to demonstrate to the satisfaction of the CAA, as they do today, that to do so would not endanger safety. If that aircraft was registered in a country other than in the EU they would also have to demonstrate to the Secretary of State that safety standards equivalent to the UK’s would be met and that the lease is justified on the basis of exceptional needs, to satisfy seasonal capacity needs or to overcome operational difficulties. Permission might be refused if there is no reciprocity regarding wet leasing to the country in which the aircraft is registered. This instrument also makes a number of changes to reflect the fact that EU-licensed air carriers would no longer enjoy the automatic right to operate to, from or in the UK.

As I said, public service obligations, or PSOs, are subsidised air services that would not otherwise be commercially viable. Contracts for PSOs in the EU can be won by any EU-licensed carrier, but fixes made by this instrument would mean that only UK-licensed carriers, and carriers from countries with which the UK has exchanged the right to operate wholly within each other’s territory, would qualify for PSO contracts in the UK. As all the PSOs in force in the UK are currently operated by UK-licensed air carriers, there will be no impact on existing services.

In a similar fix relating to scarce capacity, domestic regulations currently provide for a process rarely used in cases where the frequency of operations between the UK and another country is constrained by provisions in the relevant air service agreement. If all the permitted frequencies are being operated, the UK will always seek to lift or remove the limit. In cases where the other country is unwilling to do so and another air carrier wishes to enter the market, a scarce capacity allocation hearing will be held. This instrument amends the regulations for this allocation process to ensure that only air carriers that would qualify to operate under the terms of the relevant air services agreement—rather than all EU air carriers—are eligible for the scarce capacity allocation.

All the previous points relate to domestic oversight of UK carriers. I turn now to foreign carriers. While air services are not included within the scope of the World Trade Organization, there is an international legal framework for the operation of air services— the Chicago Convention of 1944. One of its provisions is that scheduled international air services are prohibited, except with the special permission of the state concerned. The UK provides permission through the air services agreements it concludes with other countries and the issuing of foreign carrier permits by the CAA.

In the event of no deal, amendments made by this instrument would require that EU air carriers apply for a permit from the CAA before operating to the UK. This would ensure that all air carriers operating to the UK had full and proper safety oversight and that their aircraft were properly maintained and operated.

We envisage granting permits to EU carriers to continue operating to the UK. In its recent communication of 13 November, the Commission confirmed that it intends to reciprocate for UK air carriers. In addition to the announcements about visa-free travel, the Commission said that UK air carriers would still be able to fly over the EU, including Ireland, and to land in and fly back from the EU.

As I said in my opening remarks, we are working to achieve a positive deal with the EU, but this SI is an essential element of our contingency planning for a no-deal exit. It would only enter into force on exit day in the absence of a withdrawal agreement. The legislation would ensure that the UK’s licensing regime for air carriers continues to work effectively and that the aviation industry has clarity about the regulatory framework in which it would operate.

I commend these regulations to the Committee.

[Lord Foulkes of Cumnock (Lab)]

My Lords, this is really the most extraordinary debate in which I have ever taken part. I say this with no disrespect to the low key introduction by the Minister in which she explained exactly what is happening—at least the detail, but not the context of it. Sitting in this Committee Room are a number of Members of the House and officials who would be much better occupied doing something useful. We are looking at a proposal—a statutory instrument—for a no-deal situation which the Government do not want and which the vast majority of people in the House of Commons do not want. We are going to spend hours dealing with many more.

This is one of nearly 700 statutory instruments that are coming before us because of this crazy Brexit in which we are currently involved. Even allowing for all those qualifications and even if we have to, this is not a satisfactory way of doing it. This has such major implications that it would normally be in a Bill discussed on the Floor of the House at Second Reading and then in detailed consideration in Committee. We would go through all the implications, discuss them, consider amendments and work out what was wrong and what was right. Now we are expecting it to go through on the nod in this Grand Committee. I hope not to spoil these expectations—it might do. It is not a satisfactory way of dealing with the situation.

Then we get the report of Sub-Committee A of the Secondary Legislation Scrutiny Committee. This Committee has had to divide into two sub-committees. My noble friend Lord Cunningham has taken over the duty of chairing the second sub-committee to look at this in detail. They are doing a good job under very difficult circumstances. On this statutory instrument they have come up with a devastating report—one of the most devastating I have seen:

“We draw these Regulations to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House”.


It continues in paragraph 11:

“The House may wish nonetheless to press the Minister further on how, in the event of “no deal”, bilateral arrangements between the UK and individual states will be put in place before exit day to ensure there is no gap in the continuation of flights between the UK and the EU after 29 March 2019”.


The Minister dealt to some extent with that, but not fully, and I shall come to the detail of that later. Paragraphs 13 and 16 outline the additional responsibilities that the CAA will have and doubt whether it will be able to deal with them without substantial additional resources—which, again, would be better spent elsewhere instead of doing something completely unnecessary. Paragraph 22 states:

“The House may wish to press the Minister on the issues of reciprocity that arise in maintaining the current wet leasing arrangements”.


I have not previously seen a report that raises so many questions.

Look at what is happening outside the Chamber. In an excellent report by Chris Morris, the BBC’s Reality Check correspondent—thank goodness that we have people doing reality checks particularly on Brexit—he points out that if we leave with no withdrawal agreement,

“the UK would no longer be part of the EU’s single aviation market, which is the basis for flights in and out of the country at the moment, not just to the EU itself, but to other countries with which the EU has a deal—such as the United States and Canada. In all, the EU governs direct UK aviation access to 44 other countries”.

As the Minister said, and as the report states, of course, you can always negotiate new agreements,

“but access would start at a pretty low level and negotiations take time”.

We know that they will take a substantial time. He continued:

“That's why a sudden no-deal scenario is so alarming to the industry”.


That was even pointed out by the Chancellor of the Exchequer in October last year:

“The UK would no longer be governed by the regulations of the European Aviation Safety Agency, which deal with all sorts of things like maintenance and common standards”.


As the report states, we would have to undertake the responsibility of dealing with those ourselves—again, extra expenditure:

“The UK Civil Aviation Authority could … take on all the same rules, and hire lots of new staff to implement and oversee them, but it would”,


then have not only the extra expenditure, but,

“have to convince other international regulators to recognise it—another time-consuming process”.

So we would have to go round to convince all the other regulators that they should recognise our approach. As the Reality Check correspondent said,

“if you're following EU aviation rules in full, you basically have to accept a role for EU courts like the European Court of Justice as well”.

According to the Prime Minister, we will no longer be subject to the European Court of Justice, but it will be involved in this, according to the BBC report. All of this makes it difficult for airlines that are already selling tickets for flights after the planned Brexit, which many of us here hope will not go ahead. The report continues:

“‘Right now we will continue to sell in the hope and belief that when a conclusion comes to the Brexit scenario, common sense will prevail and people will realise the need for intra-Europe travel’, said Roy Kinnear, the chief commercial officer of FlyBe. ‘The biggest fear has to be if at the eleventh hour and fifty-ninth minute there is a complete cessation and breakdown, and a shutdown of air travel between the UK and Europe”.


It is being predicted that they could be a total shutdown of traffic between the United Kingdom and Europe.

The International Air Transport Authority is worried. IATA states:

“The UK government’s papers on the air transport implications of a “no deal” departure from the EU clearly exposes the extreme seriousness of what is at stake and underscores the huge amount of work that would be required to maintain vital air links”.


Its director-general said:

“While we still hope for a comprehensive EU-UK deal, an assumption that ‘it will be all right on the night’ is far too risky to accept”.


That is what the Government are accepting: it will be all right on the night. We have heard them say something equivalent to that so many occasions.

I could go on at great length; I have lots more to say.

16:30

[Noble Lords]

Oh!

[Lord Foulkes of Cumnock]

Well, the Minister is encouraging me to do that. Lots more could be said.

The development of low-cost airlines, which we and—I was going to say “our” constituents—the constituents of Members of the other place have all taken advantage of, has been based on arrangements agreed within the European Union, which we have been part of.

I have a specific question for the Minister. Access to the EU’s internal market for air transport could be retained by the UK joining the European common aviation area. Membership is not restricted to EU member states. However, membership would require the UK to accept EU aviation laws and may be incompatible with the stated desire of the UK Government to be extricated from the jurisdiction of the Court of Justice of the European Union. Given the awful prospect of no deal, which almost all of us pray will not happen, will we consider joining the ECAA and therefore accept the jurisdiction of the Court of Justice?

The question of leasing was also raised by the committee. At present, aircraft owned by or leased to nationals of, or companies with their principal base of business or registered office in, the EEA and the Commonwealth, may be registered in the United Kingdom. Will this ability to register aircraft on the UK aircraft register be open to EEA entities post Brexit?

The airlines have made various comments. Michael O’Leary, the outspoken chief executive—I do not think that he has been got rid of yet—of Ryanair, said that a no-deal Brexit was now more likely and that, in such a scenario, flights would be grounded. IAG, which owns British Airways, Iberia and Aer Lingus, was more positive in its assessment. Willie Walsh—wee Willie Walsh—said in March that he firmly believed that the issue of flying rights would be resolved. Well, what I understand it to have done to resolve it is move its headquarters out of London to Madrid—that is a strange way of resolving it—like many others are moving out of London because of Brexit.

This is a total disaster. I hope that the Minister will answer the questions. I hope that she will try hard to give some reassurance, although I do not think she can. However, if there is no such reassurance, I shall not be prepared to accept this statutory instrument today.

[Lord Berkeley (Lab)]

My Lords, following on from my noble friend’s excellent summary of where we are, I recall a couple of weeks ago in debate on an Oral Question in the Chamber suggesting to a Minister that the safest way would be for the Government to advise people not to buy package holidays that started on or after 30 March, because there is no compensation at the moment and the planes might not fly. The Minister thoroughly rejected that idea, as of course he would.

I hope that the Minister will respond to my noble friend’s reference to the comments in the Secondary Legislation Scrutiny Committee’s report. I do not want to repeat them, but they are highly complex. For the CAA to have to give out route licences as well as operating licences looks to be a recipe for not having enough people and, as my noble friend said, for grounding. The same applies in respect of paragraph 16, so I shall not go on to that.

I am very disappointed with what is listed under “transport” in the political declaration that came out last week. As somebody else has said, it is a series of statements without verbs. It states that the parties intend to have a comprehensive air transport agreement. Well, they might do, but they have a lot of work to do. It refers to:

“Comparable market access for freight and passenger road transport”,


and acknowledges the intention of the UK and other member states,

“to make bilateral arrangements for cross-border rail”.

That is all on rail; there was nothing else on it at all. It also says that the maritime transport sector would be underpinned by,

“the applicable international legal framework, with appropriate arrangements for cooperation on … safety and security”.

When will we see the SIs covering these other sectors that we have not seen already? We will want to have a pretty detailed debate on them.

My noble friend mentioned safety and maintenance. They are extremely important. I will raise the question of standards across the various sectors. I wrote to the Minister a couple of weeks ago on railway standards. She kindly replied today so I have not been able to circulate her reply around, but I will do so. It exposes quite a significant difference of approach between different parts of the Department for Transport. The Minister’s response on railway standards is basically that, although the Government would like to be able to have their own standards for domestic traffic, they would do this only after substantial consultation with the industry. That sounds fine. The industry, which I will not quote now, is very much in favour of staying in the European railway agency because of the international need to have one common set of standards across the world for ease of manufacturing and exporting as much as anything.

The same applies to the road sector with automotive manufacturing. The CEO of the SMMT, Mike Hawes, gave some very interesting evidence to the House of Lords EU Internal Market Sub-Committee recently, saying:

“The major regulatory powerhouses tend to be the EU, especially around the environment but also safety, and the US”,

but they are very different and demonstrate very different approaches to policy, particularly on safety and the environment. He says that the EU is highly influential. The same comments could equally apply to air. I am interested to see what the sub-committee says when it reports.

However, last week the Secretary of State said when he gave evidence to the same sub-committee that breaking away from the EU will mean that the UK can rip up the rulebook and set its own standards for sectors such as rail. He sees no reason why the country should be made to abide by European regulations. He told the sub-committee that there was no need to remain part of the European rail regulatory body as the country’s rail systems vary in a vast number of ways from that of continental Europe, but the only example that he could give was station platform heights, which is just crazy. Station platforms for HS2 might need to be a little bit different, but there are many more stations that HS2 trains will go into that will not be affected. Presumably the Secretary of State has the same views on other sectors, such as road and air. Why does he have that view? The Minister’s statement now and her letter to me seem to have a much more balanced approach to standards, recognising that all the industry sectors in transport want to keep close alignment with the standards for very good safety, exporting and general manufacture reasons.

I also have one or two questions on the regulations themselves. The first is on the PSOs, which the Minister mentioned. It is good that they want to continue with the use of PSOs but will there be a similar need for regulations for other modes such as the bus, rail and maritime sectors in this country? If so, when will we see those and if not, why not?

Paragraph 2.5 of the draft Explanatory Memorandum, as the Minister said, says:

“The Regulation will now reflect … that”,


the legislation,

“applies only within the UK”.

How will air carriers from outside the UK be able to apply for licences to operate either into or within the UK? Who do they apply to and how long is it going to take to operate?

My noble friend talked about British Airways and IAG. I have a big problem with IAG because I tried to fly to Madrid on Friday and I was denied boarding at Heathrow—the wonderful new terminal 5. It was particularly galling when I had got up at 4 am to get to the airport. The point was that I could not check in on the web because I had bought the ticket through Iberia, which along with British Airways is part of AIG, and it said online, “Go to the British Airways check-in” because it was a British Airways flight. So I went there and it said, “Go back to Iberia”. I did that three or four times and swore, then I left it and went to the airport, where they said the flight was full. I said “Well, I’ve got a ticket”, so they sent me to the gate and it was still full. It is so nice in terminal 5 because you cannot come back from its satellites by train; you have to walk through a long tunnel.

I got the standard European compensation very quickly and was promised a refund of the fare, because the next flight would have been too late. I said, “Could you cancel my flight back in the evening?”. She said, “You’re on an Iberia flight—I can’t cancel it”. Now this is one company. I do not know whether the company will be based in London, Madrid or Timbuktu, but if it cannot get its act together when it is one of the biggest operators out of the UK, heaven help us. I certainly shall not fly with it in the run-up to Brexit, if I can avoid it. I hope that other people will not have the same problem and that it will be all right on the night.

Paragraph 7.7 of the draft memorandum refers to:

“The discretion given to EU Member States to regulate the distribution of traffic rights and impose measures”.


Who does that? It is yet more extra work, maybe for the CAA or the Government. Paragraph 7.9 refers to,

“a permit in order to perform aerial work”.

I find the definition of aerial work slightly confusing. Is it about running a drone, aerial photography or what? Again, that seems to be a bit more work for the CAA. Finally, the Committee may be glad to hear, paragraph 7.11 refers to when operating air services to the EU is revoked and says that,

“all air carriers operating international air services from the UK will require a route licence”.

That is what we said before; who is going to negotiate the route licences and operating licences?

As my noble friend said, this will end in chaos. We are pretty well there. There seems to be no agreement even between different parts of the Department for Transport and the Ministers, and I share my noble friend’s view that the only solution is to stay within the EU.

16:45

[Baroness Randerson (LD)]

My Lords, when I put forward my Private Member’s Bill—excitingly entitled the Open Skies Agreement (Membership) Bill—immediately after the last election it never occurred to me that, nearly 18 months on, my concerns would still not have been answered. My concerns related to the international air agreements that make international air travel possible. We are members of those agreements by virtue of our membership of the EU. The sad, chaotic situation that the Government have got themselves into in their Brexit negotiations is threatening many people’s plans for the future and threatening companies’ ability to trade in the future, because they cannot rely on air services.

This SI in preparation for a no-deal scenario is far from reassuring. Rather, as the noble Lord, Lord Foulkes, said, it reminds us all of what is at stake and how far we are from a solution. The report of the Secondary Legislation Scrutiny Committee points to a number of unanswered questions. I am grateful to the committee, as I am sure we all are, for its work and I am glad that the Explanatory Memorandum has been updated. Being rather a keen student, I read the original—even the updated one has a lot of complexity and leaves a lot of questions unanswered, but the original one was not as good as it should have been. If there is no deal, UK and EU airlines will lose, as the Minister said, the automatic right to operate services between the UK and the EU without the need for permission from individual states.

The DfT has stated that it expects to grant permission for EU carriers to fly to and from UK airports and expects that to be reciprocated. That is a lot of expecting. What discussions have the Government already had? The Minister said that a lot of work has been done on it, but are we in a position where the whole thing could be more or less rubber-stamped if Brexit arrangements were sorted out? Would everything else slot into place quickly, or are we at an earlier stage in the process? If there is no deal, the Government have said that they intend to make bilateral agreements with individual states. These would obviously need to be in place by the end of March if there is to be no gap in services. It might not be technically possible to sign them until that day, but they have to be fully agreed and worked up. Specifically, what progress has been made so far in these draft agreements on developing the understanding with the other 27 EU countries? Are we negotiating with all the rest of the EU as individual states or just taking the most important ones in terms of the level of traffic?

These regulations are yet another example of the steady increase in the amount of bureaucracy that is being heaped on individuals and companies as a result of Brexit. Last week—or was it the week before?—we were here discussing hauliers permits, trailer registration and international driving permits. This week it is the requirement for UK licensed air carriers to have both a route licence and an operating licence to provide services outside the UK. Although the DfT has been proactive in contacting carriers about this and we can therefore, I assume, count on the fact that air carriers across the EU are aware of it, and although awareness is clearly higher than in the case of the hauliers, who are largely completely unaware of what is going to hit them very soon, nevertheless it puts an additional burden on the airlines, as well as putting further responsibility on the CAA. I have remarked here before on the burden on the CAA of a wide group of responsibilities. We expect it to deal with space travel and failing airlines and to modernise airspace, and now we are expecting it to provide additional licences for air carriers. Can the Minister give us details of the additional resources being allocated to the CAA to deal with the more complex air services market that we will now face?

If there is no deal, all foreign carriers, including those from the EEA, will have to apply for a foreign carrier permit. Already the CAA processes thousands a year, but clearly it will have to process very many more in the future. What happens if a carrier does not apply? The DfT says that it expects EU carriers to make applications in good time, so what is the timescale? Using a parallel with haulage permits again, we discussed this not much more than a week ago. The hauliers have to apply by the end of the month, or certainly the beginning of December, in order to have a hope of getting their permits by January. There is a huge rush in that case. Is the system similar for the CAA? Is it fully geared up and are the airlines all ready to apply?

[Lord Berkeley]

Does the noble Baroness agree that the system for selecting who gets the permits for haulage that we discussed, as she says, a couple of weeks ago involves either drawing names out of a hat or seeing which haulier provides the best value for money for the country? Does she see that as an appropriate way of dealing with these air licences?

[Baroness Randerson]

My disappointment with the SI that we had a week or so ago was definitely with the lack of certainty about which criteria the Government would use. The Government adroitly managed to give themselves the broadest possible set of criteria and we are no nearer knowing how exactly those permits will be applied. The industry is worried as a result.

There has already been a degree of reorganisation within the aviation industry as airlines previously registered in the UK have moved abroad for their registration, with the inevitable drift of at least some jobs abroad. It is important that we bear in mind that this additional bureaucracy—the additional requirements as a result of Brexit—will put our expertise in such an important aviation market at a disadvantage.

The Secondary Legislation Scrutiny Committee raised the issue of wet leasing, which, as the Minister explained, is when an airline releases an aircraft and its crew and so on. This is usually done at busy times or in exceptional circumstances. If the aircraft is not registered in the UK, the airline has to satisfy certain safety criteria. The airlines are concerned that this should be the subject of a reciprocal agreement with EU countries. Can the Minister explain what progress the Department for Transport has made in its discussions on this?

Public service obligations apply when a service would be uneconomical but is needed for economic and social reasons. They usually apply to far-flung places such as the Scottish islands. In future, such services could be operated by UK carriers and by others with cabotage rights—although, to be honest, that would be unlikely with no deal. These are sensitive and complex issues of state aid. As someone from Wales, I know that there has been a long debate on why rights are granted on some Scottish routes but similar rights were not granted in Wales. Could the Minister give us a little more detail on this?

State aid rules were previously adjudicated by the European Commission. This is a complex and controversial area, but the distance of the European Commission in power terms from the decisions that it made neutralised the issue to a large extent. Those powers will now be given to the CMA. What resources will it be given to deal with this? I also warn the Minister that those things are likely to become much more sharply controversial.

Paragraph 7.10 of the Explanatory Memorandum deals with the allocation of scarce capacity. The 2007 regulations dealt with air service agreements between EU members and third countries. Scarce capacity occurs when there are restrictions on the frequency of flights. The Explanatory Memorandum includes a political declaration that the UK Government will always seek to lift or remove such a cap but will hold a hearing to allocate frequencies if that is not possible. What is the legal force of that statement? It seems that it is simply a political declaration. It is a statement of intent by the current Government, but they cannot bind their successors. I would like some clarification on that.

Finally, it would be helpful, as we sit here week after week wading our way through dozens of these SIs, to be able to see the full context of where we are on air services. Maybe the Minister can tell us what other air services SIs we are waiting for.

[Lord Rosser (Lab)]

I thank the Minister for explaining the purpose and content of these regulations, which set out the contingency measures for the licensing and oversight of flights to and from the UK in the event of no deal with the European Union. UK carriers will require a route licence, as well as the operating licence that is currently required under EU law, for operations beyond the UK. Air carriers from the European Economic Area will also have to obtain a foreign carrier permit to operate in the UK.

In the event of there being no deal with the European Union, UK and EU airlines will no longer have the automatic right to operate air services between the UK and the EU without the need for advance permission from individual states. In this scenario, the Government expect to grant permission to EU carriers to operate to UK airports and for this to be reciprocated by EU states granting permission to UK air carriers to operate to points in the EU. Failing such a multilateral agreement, the Government’s intention would be to seek bilateral arrangements with individual states. I know that this point has been raised before but I raise it again: why do the Government believe that such bilateral arrangements between the UK and individual states could actually be put in place in the short time left even between now and 29 March 2019, let alone between early or mid-December and the end of March 2019?

17:00

Since in a no-deal situation, UK airlines will need a route licence as well as an operating licence to operate air services to the EU, the regulations require UK-licensed air carriers to have both licences to operate air services outside the UK. Is there any restriction on the number of route licences that will be available? I know that this point has been asked before but I ask it again: what additional burden workload-wise will the issuing of route licences to airlines which need them prior to next day impose on the CAA? What increase in applications for route licences is expected and how long, on average, does it take to process and make a decision on such an application and then, if agreed, to issue that licence?

In the event of no deal, EEA airlines will need to apply for a foreign carrier permit to operate in the UK. What additional workload will this impose on the CAA between now and exit day? Once again, how long will it take to process and make a decision on whether to agree to a foreign carrier permit and, if agreed, to issue such a permit? How many such applications are expected between now and exit day, and against what criteria will decisions be made on whether to issue a foreign carrier permit?

EU law currently provides for an internal market, as the Minister and others have said, in the wet leasing of aircraft, and harmonises restrictions on the leasing of aircraft from third countries. The current regime of approvals for UK carriers wishing to lease aircraft is maintained under these regulations but, as has been said, the market access arrangements for the wet leasing of aircraft, as set out in paragraph 7.6 of the Explanatory Memorandum, will not be reciprocal with the EU. I know this has been asked already but I simply ask again: what are the implications for carriers of potentially not being able to benefit from the same arrangements in EU states after exit, in the light of our maintaining the current wet-leasing arrangements?

I am conscious of what the Minister said. I think she was referring to the part in paragraph 6 of the revised draft Explanatory Memorandum which states:

“The Secretary of State can withhold approval if there is not a reciprocal level of market access with the country from which the carrier proposes to lease an aircraft”.

However, in what circumstances would the Secretary of State withhold that approval, in the light of the fact that there does not automatically seem to be reciprocity in the regulations?

On page 11, the Explanatory Memorandum refers to the widening of the scope of certain criminal offences, which are in the Air Navigation Order 2016, through the regulations. The effect would be that all foreign carriers operating to the UK, whether from the EEA or beyond, would be subject to the same legal requirements. How many non-EEA foreign air carriers per year currently fall foul of the criminal offences in question, which are being widened in scope in these regulations to cover EEA air carriers in the event of no deal?

Finally, although I appreciate that I have been briefer than other noble Lords, which is not an adverse comment as they made most of the points that need to be made, I would be grateful for an answer to this. I think the Minister referred to the communication of 13 November that we have had from the Commission about preparing for the withdrawal of the United Kingdom from the European Union on 30 March. It has a section on transport, which says that if there is no agreement it,

“would lead to abrupt interruptions of air traffic between the United Kingdom and the European Union, due to the absence of traffic rights and/or the invalidity of the operating licence or of aviation safety certificates”.

As the Minister knows, the document then goes on to set out what the Commission would do in that situation on traffic rights, aviation safety and certain other issues.

Can she confirm that the document to which I have referred is the one that the EU would seek to apply in the event of no deal—that is, that what it says about traffic rights and other issues is what it seeks to negotiate with us on aviation in the event of no deal? If I am right in thinking that—I should be grateful for confirmation that I have understood it correctly—would what the Commission proposes in this document be acceptable to the UK in the event of no deal?

[Baroness Sugg]

My Lords, I thank noble Lords for their consideration of these draft regulations. A wide array of issues has been raised but I will limit my responses to those directly related to the SI that we are discussing, given the time and the number of questions. I agree with the noble Lord, Lord Foulkes, that issues around aviation and Brexit are incredibly important and it is important that we get them right. However, this SI is not about our negotiating position, which is being discussed extensively elsewhere; it is purely correcting the regulations to ensure that we have a functioning statute book should we leave with no deal in March.

I am not quite sure that I agree that this is one of the most devastating reports from the SLSC that I have seen. The committee often quite rightly draws SIs to the special attention of the House, and I and the rest of the Government are very grateful for its work on that. I am also grateful to the noble Lord for reading out the BBC report, which is quite right in its facts. I hope I can provide some further assurances as we go through the questions.

I turn to the points raised by the SLSC, to which many noble Lords referred in their questions. I shall take each point in turn. First, on how, in the event of no deal, we will ensure that bilateral arrangements are in place to ensure that there is no gap—the noble Baroness, Lady Randerson, is quite right to point out that it is important that there is no gap—we remain confident that we will get an agreement on a broader deal. However, if that is not possible, our first option will be to consider a multilateral agreement between the UK and the EU. The Commission has also proposed this, with suggestions for a bare-bones agreement in the event of no deal. The noble Lord, Lord Rosser, is right to point out that the statement from the Commission on 13 November is its latest position on that in the negotiation, and it will form part of the conversation as we go through the detail. In the meantime, in the event of no broader deal and no multilateral deal, both of which we fully expect to reach, we have also reached out to counterparts in individual member states to reach a shared understanding on a bilateral basis of what arrangements would apply between our two countries.

The second issue specifically raised by the SLSC is the resources that the Government are providing to the CAA. The CAA is already the licensing authority for UK airlines. It provides regulatory oversight and has the resources in place to ensure that it can continue to do so. All the holders of type A operating licences—that is, operators of aircraft with more than 20 seats—already have a route licence. All the holders of type B operating licences have been individually contacted and invited to apply for a route licence free of charge, as I mentioned before, from the CAA. Some of those companies operate exclusively domestic services and do not need a route licence, but we are confident that those that need a route licence will be issued one.

[Lord Foulkes of Cumnock]

I have just realised the implications of something the Minister said a couple of minutes ago. As well as a multilateral agreement with the EU, we are negotiating bilateral agreements with all 27 countries—is that right? Could the Minister explain if this is what we are doing?

[Baroness Sugg]

As I said, our firm preference is for a wider deal, providing for a comprehensive air services agreement with the EU. Failing that, we have the option of a multilateral agreement and, failing that, bilateral agreements with member states. As the noble Lord would expect, we are speaking to member states about a wide range of issues.

[Lord Foulkes of Cumnock]

Is a Minister—either the noble Baroness or one of her colleagues—or some of the officials flying out to these countries to discuss it, or are they coming here? An astonishing range of what I hope is unnecessary activity is taking place. Could the Minister confirm that that is exactly what is happening?

[Baroness Sugg]

As I said, to make responsible preparations it is important to consider all the different options available to us. Of course we are having conversations with the Commission and the member states about a wide range of issues. I am not able to give further detailed information at this moment but our preference is very strongly for a broader deal which will provide a liberalised agreement with the EU, though there are other options available to us. I hope this provides reassurance that we will continue to see flights between the UK and the EU. We will continue to work towards this as we move towards exit day.

[Lord Rosser]

On bilateral discussions, the European Commission document that we have had—which I appreciate extends across the whole gamut and does not apply just to aviation—says:

“In the same spirit, Member States should refrain from bilateral discussions and agreements with the United Kingdom, which would undermine EU unity”.


It may be that this particular sentence does not apply to air transport. Is it then the case that we are having bilateral discussions in the apparent teeth of opposition from the European Union?

[Baroness Sugg]

Our first point of contact is with the EU Commission to agree a wider deal. It has been widely reported that the Secretary of State has written to other member states to discuss the potential bilateral agreements. We are working very hard to get that wider deal. That is our focus but, should that not happen, then of course we are making sure that we are as prepared as possible to ensure that we do not have any disruption in services come 29 March.

[Baroness Randerson]

I made the point that our worldwide agreements on air travel are made as a member of the EU. So we have to be convinced that we will have an agreement with the rest of the world beyond the EU by the end of March. How are these negotiations going, for example with the USA?

[Baroness Sugg]

I will come on to that. As the UK, we have 111 bilateral agreements with the rest of the world in our own right. The noble Baroness is quite right to point out that we have bilateral agreements through our membership of the EU.

The next issue raised was on the basis of our expectations, how we are working with EU carriers to make sure that we have no gap in services and the assurances we can give that the CAA has the capacity and resources in place. Our expectation is that EEA carriers would require advance permission before operating to the UK. This is founded on international law. I already spoke about the 1944 Chicago Convention and that that treaty expressly prohibits scheduled international air services.

In anticipation of the increased volume of permit applications from EEA carriers, the CAA has already upgraded its systems for permit processing and recruited additional staff. All scheduled permits are issued on a seasonal basis. The next summer season starts on 31 March 2019, so there is a predictable increase in workload for this. We are expecting 100 to 150 seasonal permit applications. The CAA currently issues around 3,000 ad hoc permits a year. It is preparing to be able to process at least double that if necessary.

[Lord Foulkes of Cumnock]

How many additional staff have already been recruited to the CAA and how many more does the Minister expect to be recruited?

[Baroness Sugg]

I do not have those specific numbers, but we are reassured that the CAA is fully prepared. We have already allocated it some funding from the Treasury to ensure that it has the proper resources in place.

17:15

A number of noble Lords brought up wet leasing. Just to clarify, reciprocity will count for EEA members, by virtue of the EEA agreement, as well as EU members. Maintaining the current wet leasing arrangement is the right thing to do for the industry as a whole and for passengers. We are making every effort on this, as well as on other areas, to minimise disruption. Maintaining the current system for wet leasing foreign aircraft is part of that effort. As I said, we expect reciprocity on that.

The future partnership agreement that has been published contains a provision for a comprehensive and ambitious air transport agreement. The noble Lord, Lord Berkeley, rightly highlighted that there is more detail to come on that. It is the overarching aim and there is lots of detail to come below that. The noble Lord, Lord Foulkes, asked about the direct jurisdiction of the CJEU. We have been clear that we will no longer be subject to direct CJEU jurisdiction after the UK has left the EU, but there are models that already allow non-EU countries to participate in the EU aviation acquis. Any disputes could be resolved through a joint committee, for example. That is the model we will be looking at.

As I have said, the majority of our bilaterals are already done in our own right. Where market access beyond Europe is currently determined by EU-negotiated agreements, we are already working with the countries involved to make sure that we can continue those services. We are confident that these arrangements will be in place before the UK leaves. The Department for Transport has a very experienced and able team in aviation negotiation that has been doing this on separate bilaterals for many years.

Specifically on the US, it is again absolutely our aim to maintain liberal market access arrangements between the UK and the US. Discussions are ongoing about post-Brexit air services and really positive progress has been made. We continue to discuss this with the US Government and I hope to be able to update noble Lords in the future.

Turning to some of the questions raised by the noble Lord, Lord Berkeley, there are certainly more SIs to come. We have already discussed some aspects of roads, aviation and maritime and will do so again, as well as on rail, in the coming weeks and months. These will be discussed in time for exit day. On the specific question of how many SIs remain on aviation, of the 14 in total, six have been laid. Those still to come cover safety, air service competition, security, air traffic management, aviation statistics, passenger rights, noise and slots. Those are coming and we can all look forward to them.

On standards, we will absolutely discuss standards throughout the SI programme. The noble Lord pointed out that I wrote to him on that and he is quite right that our approach differs across modes. That will be discussed as the specific SIs come up. Where relevant, any EU regulations on PSOs and other modes of transport will be retained through the withdrawal Act. The changes that will be needed will be made through SIs so that, irrespective of the outcome of negotiations, the essential bus, rail and maritime services can continue to operate.

I am sorry to hear about the experience that the noble Lord, Lord Berkeley, had at Heathrow. I know that code sharing can cause some issues, but the changes that this SI makes will ensure that all holders of a valid UK operating licence will continue to be UK licensed carriers, and that includes BA. Airlines have been closely engaged throughout the development of this SI and all the other SIs.

As for route licences, these are issued by the CAA to air carriers wishing to operate internationally. Currently a route licence is required only for those air carriers that operate beyond the EU/EEA, but in a no-deal scenario all UK carriers operating internationally, including to EU member states, will need one. Most airlines already have a route licence—the CAA issues them for free, as I said—and the CAA already has people processing those licences. Everybody who needs one will have one by March.

On the powers to distribute traffic rights and impose measures that would be revoked by this instrument regarding aerial workers’ services such as aerial photography, flying, advertising banners and parachute drop shots, the CAA already issues those permits to non-EU aircraft.

On the question from the noble Baroness, Lady Randerson, on the PSO/state aid point, the CMA will take the function previously carried out by the Commission with an appropriate allocation of resources. On scarce capacity, hearings are provided for in the Civil Aviation (Allocation of Scarce Capacity) Regulations 2007, but the noble Baroness is quite right: it is a statement of government policy that we will try to lift any cap on bilateral frequencies in our air service agreements.

Aviation is crucial to the UK economy. We are of course committed to getting the best deal. We are positive that we will not see any disruption in flights. I think that is evidenced by our technical notices publication, these SIs and the comments from the President of the European Council back in March saying that he is determined to avoid any disruption of flights. The latest publication from the Commission last week says that it is absolutely in both our interests that flights between the UK and the EU continue; there were over 160 million of them in 2017. The noble Baroness, Lady Randerson, is right to point out that we need all this to be in place by 29 March. We are genuinely confident that it will be.

I will be brief on the question of the CAA and give a few more details about permits. Happily, there are no limits to these permits. We issue several types of permits—the seasonal ones that I mentioned and the ad hoc charters. I talked earlier about when they will be up for issuing, but we will continue to process them as quickly as possible and do not expect any delays. The CAA expects to process between 100 and 150 seasonal permits and, as I said, it currently issues 3,000 ad hoc permits a year. We do not know exactly how many more will come but it will be able to process at least double that number if necessary. The CAA has been working intensively to ensure that it has the right capacity in place.

On this specific SI, there are two provisions in the instrument that impact the CAA: air carrier licensing and foreign carrier permits. As I said before, only a small number of air carriers do not hold route licences. The system for consideration is being upgraded and it is not a new capability. The provisions in this instrument are estimated to cost the CAA around £100,000. As I alluded to before, last year the Secretary of State provided £2.7 million on an exceptional basis to fund the CAA’s costs to avoid imposing an additional burden on the aviation sector.

The Government remain confident that we will reach an agreement with the EU. Of course it is important that we prepare for the unlikely outcome that we leave the EU without a deal. I appreciate noble Lords’ interest that we get Brexit right for aviation and, believe me, I share that interest, as does the department, as I hope is evidenced through the detailed SIs and technical notices that we are putting forward. This SI is part of that. It is essential to ensure that a crucial part of the regulatory framework for civil aviation continues to work effectively in the UK from day one after exit. It is part of our preparations for the unlikely scenario of no deal and we hope it provides industry with clarity and stability in regulatory oversight.

[Lord Rosser]

Before the Minister sits down, if the document that we have had from the European Commission, specifically the section on air transport, represents the Commission’s stance in the event of no deal—as I understand it, the Minister said we were in discussions with it—what is the latest date by which something has to be agreed so that it is effective from 29 March? Presumably what has been listed here by the European Commission as its position cannot be agreed the day before, and presumably it has to be agreed before then to come into operation on 29 March. So what is the latest date, realistically, by which something has to be agreed?

[Baroness Sugg]

The noble Lord will know that there are many positions on the negotiations. As I said, that is the Commission’s latest position. We are continuing to negotiate with it on the broader future partnership arrangements. Alongside that, we are of course talking to it about no deal too. There is no specific latest date. That is why we need to do this no-deal preparation, so that if it goes close to the date of exit the industry understands what the alternatives are. We are very keen to provide industry with certainty as early as possible.

We have the European Council on Sunday and I expect that there will be an outcome from that. We will then look at what next steps need to be taken. We are very hopeful that the deal is done and will be agreed by Parliament so that we reach our implementation period on 29 March and the industry has that certainty. Should that not be the case, we will of course continue the discussions with the Commission to provide certainty as early as we possibly can. I am very aware, in my many meetings with the aviation sector, of the importance of providing that certainty. That is what this no-deal planning and our continued negotiations with the Commission are about. I beg to move.

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

The Question is that this Motion be agreed to.

[Lord Foulkes of Cumnock]

Not content.

[The Deputy Chairman of Committees]

My Lords, I must remind the Grand Committee that the Motion before it is to consider—I emphasise the word “consider”—the regulations, not to approve them. Whatever happens here in the Grand Committee, the Government will need to table an approval Motion in the Chamber, where any Member concerned can properly register disagreement. I also remind the Grand Committee, as contained in paragraph 3.13 on page 29 of the Companion, that we cannot have a vote in Grand Committee. With that in mind, I put the Question again. The Question is that this Motion—I emphasise, the Motion being to consider the regulations—be agreed to.

[Lord Foulkes of Cumnock]

Not content.

[The Deputy Chairman of Committees]

I am sorry, my Lords, we cannot have a vote within the Grand Committee. The Motion is therefore negatived.

Motion negatived.