Leaving the EU: Aviation Sector

Gavin Shuker Excerpts

Friday 25th November 2016 Commons Chamber

[Mr Gavin Shuker (Luton South) (Lab/Co-op)]

The last time we sat back in our airline seats we might have asked ourselves several questions. How does this big metal tube stay in the air? Will I have to show my awful passport photo? How many gins and tonics is too many to ask for without feeling an abiding and deep sense of shame? One question we almost certainly did not ask, unless we were a Government lawyer perhaps, is whether we would even be able to go on that plane after Britain leaves the European Union.

In my constituency of Luton South that is not an academic question, as tens of thousands of local jobs depend on a successful and thriving aviation sector. Luton airport serves in excess of 14 million passengers each year and is growing at double-digit rates every year. Almost all of those people are travelling to other EU destinations. TUI Travel has a significant base in Luton and through its brand, Thomson Airways, drives a huge amount of traffic through UK airports, and easyJet, of course, is the UK’s largest airline today: a FTSE 100 company that has changed the way we fly and, indeed, think about flying. In the words of its current chief executive, it simply would not exist if it were not for the EU.

Aviation is a permissive regime, not a free-for-all. That means there must be an agreement in place between the countries we wish to fly from and to to get off the ground in the first place. The UK has agreements with some 155 countries, which vary in both their scope and specificity. Some are extremely restrictive, governing down to individual flight slots and specified airlines. Far and away the most permissive that we are signatories to are the 42 air service agreements in place through our continued membership of the EU. To make an obvious point explicit, they account for, and enable, the largest share of UK aviation traffic.

Twenty-five years ago, the deals we participated in across Europe were at the restrictive end of the scale. But, largely at the UK’s behest, these liberalised massively through the 1990s. Today, any British airline can fly anywhere it likes in the EU—that is anywhere, at any time. The EU single aviation market is separate from the single market in goods, services, capital and labour, but is no less significant in terms of the freedom it has enabled. A UK airline can sell tickets to anyone across the 28 member states without restriction; it can fly between member states, or even within another member state.

Let us consider what that means for easyJet, for example. Luton-based, it can operate flights from, say, France to Germany all day long without the aircraft ever touching down wheels at a British airport. It can operate between Milan and Naples, both of which are in Italy—I know that because I did a fact check just before the debate—with no problem whatever. As well as benefiting the local economies through direct employment, enabling connectivity and all the other benefits that aviation brings, that company’s profit today flows back into the United Kingdom.

The single market in aviation does not just benefit UK airlines; it has transformed our everyday experience of flight. Fares across Europe are down by around 40% in real terms, with greater choice and competition, and new routes across the EU opening up all the time. Britain has done particularly well under this regime, with about 1 million people in work today because of aviation. We are a world-leading nation in aviation services, and we represent a quarter, by nationality, of all European passengers. Should the Prime Minister stick to her original Brexit timetable, in a little over two years the UK will be out not just of the EU but of the European single aviation market. With no automatic fall-back for the governance of aviation rights, and no World Trade Organisation framework, there will be no legal right to operate flights to Madrid, Munich, Malaga or anywhere else in the 42 countries covered by the current EU-level framework.

It is true that we retain an experienced and capable air services negotiation team at the Department for Transport, but I must point out to any Brexiteers who are still in denial and saying, “Don’t worry about Europe; our future lies elsewhere” that the end of our membership of the EU will have a knock-on effect on many other nations as well. What could be more Brexity than leaving old Europe behind and traversing the jet stream on a flight to the United States? Well, even Concorde as she was in her heyday could not get us there after we exit the EU. Our agreement with the US is in place—yes, you guessed it—through our relationship with the rest of Europe.

The 2008 open skies agreement enables any EU or US-based carrier to fly any transatlantic route it likes. This has opened up new destinations and enhanced regional economies here in the United Kingdom. We have done particularly well under this arrangement, given our fortunate geographical location to the west of the continent. Should we be forced to fall back on our previous agreement, Bermuda II, which dates back to 1946 and was last amended more than 25 years ago, we would be lumbered with a document that considered it necessary to make regulation about flights into London airports alone. And that is not the only deficiency in that agreement or the others that are in place as back-stop provisions to the current EU agreements.

So before we even begin to think about the additional complicating issues, the effect of Brexit on UK airlines and export revenue alone should make us realise that we have a real headache here. Additional issues include: the need to reconfigure immigration reception at UK airports, where e-passport gates can be used only by EEA nationals; the replacement of a soft border regime by a more restrictive one; and the lengthening of process times, resulting in the need to expand Border Force staff numbers significantly. We also need to consider the role of freight. Heathrow is currently the UK’s largest port, and the customs code will add complexity and cost. Similarly, airports such as East Midlands derive much of their revenue from goods travelling on a just-in-time basis.

The UK is a leading and active member of the European Aviation Safety Agency, the rule-setting body that deals with the safe operation of civil aviation. That body has reduced costs to UK airlines, and indeed to the taxpayer, and enabled interoperability across the continent. We must also consider the significant implications for UK aerospace engineering and manufacturing. Airbus is our national project and it is showcasing some of the best that Britain can do, but it could now face uncertainty about the wings we manufacture in Wales. It certainly faces additional cost and complexity.

Let me say a word about why singling out aviation among the myriad small disasters wrought by Brexit is not special pleading, but a necessary task. Aviation agreements are different. They have always been treated separately from other trade agreements, even within the EU, because they are a prerequisite for getting such deals done in the first place. An aviation deal is a necessary first piece of the puzzle that is the process of negotiation with the rest of Europe, and it needs to be done ahead of any final settlement. The freedoms that the single aviation market have brought us are an enabler of negotiations and of trade and co-operation. This issue not only affects our relationship with the EU 27, but shapes our air routes, customers and markets in the rest of the world.

In 2015, UK airlines transported 250 million passengers to destinations around the globe and contributed £50 million to the British economy. The Government say they do not wish to pick winners, but we are first class at this. As I mentioned earlier, easyJet is not only the biggest UK airline, but the fourth biggest EU airline. Just consider that for a moment: from Luton to the world. EasyJet’s chief executive, Dame Carolyn McCall, has said:

“We are not saying there will be no agreement”,

and for the record, I take the same view. Nevertheless, she went on to say:

“We just don’t know the shape or form. We don’t have the luxury of waiting…we have to take control of our own future.”

EasyJet will never leave Luton as an operational base, but it is in the process of establishing a new and separate operation outside the UK to ensure that it can continue to fly as it does now. That is entirely understandable, and its commitment to the UK is laudable, but the uncertainty is having an effect right now.

What is to be done? First, the Government must take action, and rapidly. Aviation should be at the head of our negotiations. We have very little to fall back on, and the uncertainty is affecting us today. An agreement on the air services market should be reached early in the two-year window for article 50 negotiations, with the aim of securing maximum continuity for both UK and EU operators when we exit the European Union in spring 2019. To do so would benefit us and the remaining 27 states. It is not about cherry-picking from the single market, and it is not a trade issue that should be entangled with the wider negotiations. The deal I am describing is exactly the kind of thing the EU tries to achieve with third countries—in effect, an open skies agreement that maintains the continuity of access and equality across the UK and the EU 27.

Secondly, we need to push for a deal that is as close as possible to the one we have today, and it should include the right for UK airlines to operate between and within member states. The package we negotiated in the 1990s worked well because we worked together. The balance of rights has enriched us all, so we should be clear about the impact on UK airlines should we not achieve the aim of maintaining it.

Thirdly, we should seek to retain not only membership but influence of those bodies, such as the European Aviation Safety Agency, that set the rules and regulations for safe flying. Absolutely no one has a problem with one common set of standards across Europe when it comes to aviation safety. The EASA has benefited considerably from the UK’s expertise; we are a strong voice that should not be lost.

There are a couple of ways to achieve the aims I have set out, and I hope the Minister will be forthcoming about his negotiating stance when he responds. The first step would be to become part of the European common aviation area, which extends the liberalised aviation market beyond the EU and covers 36 countries, including our friends in Iceland and Norway. The other step would be a bilateral air transport agreement, as, indeed, Switzerland has negotiated, but such an agreement would necessarily take longer to negotiate and carry its own complexities. It is essential, however, to avoid slipping back with no deal at all and having to rely on age-old agreements that are no longer fit for the times that we fly in. A series of bilateral agreements would be bad, but falling back on past agreements would not be desirable either.

Exiting the EU cannot be done without some cost to us. The price of doing business will inevitably be a loss of influence over the rules and direction of the single market, but that should be minimised to the maximum degree. Certainty is the most important thing. The Government must not use aviation as a bargaining chip; they should come out and say that a separate agreement is required and that they will seek one out on the existing terms. Whatever the reason for the UK’s voting to leave the EU, it was not to make flying more restrictive, with more red tape and at a higher price, or with less choice for the passenger. For all our sakes, with our future now dependent on our being able to trade with the whole world, we need the first deal of the post-Brexit universe to be a good one.