Leaving the EU: Aviation Sector

Jim Shannon Excerpts

Wednesday 31st October 2018 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Hollobone. It is not often that I get called first, so I appreciate the opportunity. I congratulate the hon. Member for Wythenshawe and Sale East (Mike Kane) on securing the debate, and I thank him for the cohesive way in which he put forward his point of view. His speech was constructive, and he looked forward with some positivity to our exit from the EU on 29 March next year.

I am delighted to have the opportunity to speak on this matter. In my constituency, I have Bombardier, which is involved in the production of planes, and Belfast City airport is not that far away, so domestic connectivity is very important to us. The hon. Member for Nottingham South (Lilian Greenwood) referred to air freight. We have some of the largest air freight connections in the domestic market through Belfast International airport. It is surprising how much air freight goes through the airports of the United Kingdom, and Northern Ireland in particular.

I hope I will be able to bring a bit more positivity to the debate. Of course, the ongoing Brexit negotiations are complex and difficult, but leaving the EU was never going to be quick and simple. If only that were the case. It will not come as a surprise to hon. Members that I think Brexit is a fantastic opportunity, including for our aviation sector, and I hope to expand on that point of view.

Although hon. Members have different points of view about Brexit, we are united by the need to have a thriving aviation sector in the UK after we leave the EU. I believe that it will thrive. The hon. Member for Wythenshawe and Sale East put forward that view very eloquently, and I support that.

The UK has the second largest aerospace sector in the world, behind that of the United States, and the largest in Europe. We must not underestimate the importance of our aviation sector to the EU or the importance of the EU’s sector to the UK. We both need each other. I often say in this House that we are better together. In this case, we are parting, but there is no reason why we should not be able to work together.

It is in both our interests to secure the best deal to allow the liberalisation of air transport to continue. The UK is currently a member of the European common aviation area, which allows registered airlines to have a base in one member state and operate on a cabotage basis—to use the terminology that they use—in other member states. It is an arrangement that works well.

The latest European Council negotiating guidelines aim to maintain connectivity between the UK and the EU through an air transport agreement. The Minister will respond to this debate in some detail, and we look forward to his comments. Naturally, at this stage it is unclear what that agreement might be. It might involve an open skies arrangement like the one the UK currently has with the US, or it might involve negotiating a single bilateral agreement with the EU as a whole, if member states give it a mandate to negotiate on their behalf.

Given the value of the industry to the United Kingdom and the EU, I am confident that we will get a good deal for our aviation sector and for future air travel between the UK and the EU. We need each other to succeed in this sector. London remains the world’s best connected and most attractive destination.

Although it is a while off, and there are hurdles to overcome, the third runway at Heathrow should be an even greater draw to London. It will improve our connectivity across Europe and with the rest of the world. My party and I fully support the third runway at Heathrow, and we would like to see it happen sooner rather than later.

In 2016, the chief executive of the Civil Aviation Authority said that the UK is a key player in aviation, and he was not wrong. We have the third best developed aviation network in the world, just behind the US and China. The figures show why the UK is such a vital player in the sector. It is not surprising that some airlines are already applying for licences to operate in the UK in the event of no deal. I suggest that that shows the confidence that people outside the United Kingdom have in the UK’s aviation sector. Although I am confident that we will secure a good deal—it has always been my intention that we will, and hopefully the Prime Minister will be successful in that—it is good that airlines are preparing for any eventuality. It is also welcome that, despite people’s warnings, airlines have every intention of continuing to fly to and from the UK. Life will not end when we leave the EU on 29 March. Indeed, it will get better. That has got to be good.

As well as liberalisation, we should also consider our membership of the European Aviation Safety Agency, which develops common safety and environmental rules at the European level. The Government have explicitly stated that they want to negotiate some sort of ongoing membership of EASA after Brexit, and there is widespread agreement that continued membership would benefit both the UK and the EU.

In a speech in 2016, Andrew Haines highlighted that the UK and France provide two thirds of the rule-making input on European safety regulation, and that together we undertake close to 90% of EASA’s outsourced activities. Again, that indicates EASA’s importance to the United Kingdom. Mr Haines set out four principles for the UK to consider during the Brexit negotiations. The third principle, which relates to competition, could present a real opportunity for the UK post Brexit. It relates to airline ownership rules, which are currently very outdated. Perhaps the Minister will comment on that. If the UK relaxed the ownership arrangements that UK-registered airlines currently have to comply with, that could present an opportunity to attract new equity from non-EU investors, which could improve choice and competitiveness for consumers.

Haines also referred to the EU slot regime, which requires that 50% of new slots are allocated to new competitors at a particular airport. I believe, however, that restricting such a large proportion to new entrants has been a barrier to strong competition, and changing our rules could be one advantage of leaving. That shows a lack of future planning from the EU, which could be to our benefit. The UK will have the opportunity to develop a new and more competitive slot regime—there are enormous possibilities.

As negotiations continue, there will be difficulties and we must plan for every eventuality, but it is also important to see the potential opportunities that Brexit could bring to the industry, especially regarding competition, which can drive prices down and keep air fares low. We should also consider the way that the industry has responded to date; according to ADS Group’s 2017 figures, the sector directly employed 120,000 people, with a further 118,000 employed indirectly—enormous employment figures. In 2017, the sector had a turnover of £31.8 billion, which was up 39% in five years. If a sector is growing, and probably outgrowing every other sector, it is the aviation sector of the United Kingdom of Great Britain and Northern Ireland.

While productivity growth in the general economy between 2010 and 2016 was just 3%, it was 19% in the aviation industry. Not only that, but so far, the UK's decision to leave the EU appears to have had no financial impact on the industry, which is perhaps another positive indication of where we are. In fact, according to ADS Group’s 2017 figures, 73% of companies were planning to increase investment—an indication of their confidence in the future. In Northern Ireland, Bombardier secured a deal in May this year with the Latvian carrier airBaltic, for up to 60 Belfast-made jets, which is another indication of how well our aviation sector is doing and how it benefits all regions of the United Kingdom.

Of course, airlines are concerned and, given the uncertainty, that is not surprising. It is important to consider the value of the sector to the UK and to the EU; to realise that Brexit can provide positive change and opportunity for the UK; and to realise that little has changed since the referendum. Moreover, aerospace is an important part of the Government’s industrial strategy: a number of initiatives have been set up to boost research and investment, and to guarantee exports. The Aerospace Growth Partnership and the Aerospace Technology Institute have both been set up in recent years as a collaboration between Government and the industry, to build on past success and look forward to the future success.

[Lilian Greenwood]

Like the hon. Gentleman, I am very concerned about the implications of leaving the European Union for our aerospace sector. The chief executive of Airbus said that there will be “severe negative consequences” to withdrawing from the European Union, and that they will be particularly severe if there is a hard or no-deal Brexit. Does he agree that it is essential that the Government address those issues to protect high-skilled and high-paid engineering jobs in our aerospace industry?

[Jim Shannon]

I thank the hon. Lady, but for the record, I do not share her concerns about leaving the EU in relation to the aviation sector. Maybe I did not make that clear enough, so let me make it quite clear: I believe that we should look forward to a very positive future. That has been demonstrated in my own constituency, where Bombardier have secured a fairly substantial and significant contract, and by aviation authorities and the airlines, which have indicated their confidence in the direction of the country over the last five years. It has been a fact that we are going to leave the EU for a year and a half of that time, and that has not slowed the industry. Government’s central theme of support, focus and strategy for the aviation sector indicates to me that good times are just around the corner. Hopefully, after 29 March 2019, the good times will come back, and those who have doubts about that just have to look at how the aviation sector is growing in anticipation. I put on record that I hope that the Prime Minister secures a deal for the UK, but in the event that she does not, the aviation authorities are well aware of their options in that scenario.

[David Simpson (Upper Bann) (DUP)]

I sincerely apologise for being late, Mr Hollobone; I had another meeting. Does my hon. Friend agree that if we can get the Government to look at air passenger duty, we would see a significant change in the aviation industry? In the Republic of Ireland, numbers have soared above 13 million passengers because the air passenger duty has been abolished. If that could be achieved in the UK, we might see even better days within the aviation industry.

[Jim Shannon]

I thank my hon. Friend and colleague for his intervention. I am glad that he has reminded me to mention air passenger duty. We feel that abolishing APD would benefit Northern Ireland, as well the rest of the United Kingdom of Great Britain and Northern Ireland, and that we would gain from that collectively. In the Republic of Ireland—Northern Ireland’s next door neighbour—Dublin airport has grown in leaps and bounds because it is more competitive. I have highlighted the different advantages of competition, which we need to drive prices down and drive the numbers up, and we will soon have that opportunity.

Brexit is a once in a lifetime opportunity and a chance to reduce unnecessary regulation and red tape, both in aviation and across other sectors. It is also an opportunity to continue working closely with our EU counterparts—we have to—to ensure that safety and environmental standards are met and continue to improve, which is to everyone’s advantage. I am interested to hear what the Minister has to say about that, and I look forward to his comments, as well as those of the shadow Minister.

Given the global nature of the airline industry and the need to be connected to one another, I am confident that a good deal will be secured; one that is in the interests of both the United Kingdom of Great Britain and Northern Ireland and of the EU. There are many sectors where close co-operation and mutual interest will play a role, but none more so than aviation and aerospace.