Leaving the EU: Aviation Sector

Lilian Greenwood Excerpts

Wednesday 31st October 2018 Westminster Hall

[Mike Kane]

We are doing that now at my own airport. I will be going to the inaugural flight from Manchester to Mumbai next week. We now have direct connectivity to Beijing and Hong Kong, and shortly we will announce direct connectivity to Shanghai as well. Airports are increasingly going from point to point, and that seems to be the way of the future.

[Lilian Greenwood (Nottingham South) (Lab)]

I wanted to come in at that point, because my hon. Friend is talking specifically about those connections between Manchester airport and China. I want to touch on air freight, because Manchester has seen a £300 million increase in air freight exports to China in the last two years. To have that thriving air freight sector requires further work to be done. Does he agree that the UK needs to be doing better, given that we are outside the top 10 on the air trade facilitation index and outside the top 20 for electronic freight processing?

[Mike Kane]

The Manchester Airports Group includes East Midlands airport, which is close to my hon. Friend’s constituency, and Stansted. East Midlands is a huge hub for freight leaving the UK, and has huge expansion potential. I am concerned that the Government are not ready to use the opportunity, as we leave the EU, to prepare the aviation sector for the next, crucial five to 10 years.

The welcome that we give to those who visit us is also part and parcel of creating a truly international Britain after Brexit. It is how we tell the world that we are open for business and how we encourage tourists to come to see us time and time again.

Lots of questions still need answering, and there is a risk that questions are not being answered in good time. I am sure we were all concerned by the recent National Audit Office report on our state of preparedness for a no-deal scenario. Airports across the country have repeatedly reported problems of under-resourcing, queues at the border and a total dissatisfaction with the targets that Border Force works to. The Government have continued to cut funding for Border Force, while passenger numbers have grown, so can we really expect a proper service at our borders? I hope the Minister will tell us what the Government are doing to work with airports and Border Force to put in place a realistic, long-term plan to ensure our borders are adequately resourced into the future.

Finally, as I said, the aviation sector is a huge employer in its own right, and millions more are employed in related industries, such as the visitor economy and the logistics sector, which my hon. Friend just mentioned. Across the country, tens of millions of EU nationals make a valuable contribution to those industries. Although I am hopeful that arrangements will be put in place to ensure that people can remain employed in those sectors, we need to think seriously about what happens post Brexit. We must ensure we have the skills and training to support and grow the aviation sector in the years ahead. We have the opportunity to get this right through the industrial strategy process to ensure that Britain is known around the globe for delivering world-class service and hospitality, as well as for having a slick, efficient transport system.

As I have outlined, aviation is an essential component of an outward-looking Britain. It must continue to play a pivotal role in our economy and our social and cultural future, but the question is, how will we harness that potential? How will we use the sector to drive growth through enhanced trade and investment in tourism? How, on a more basic level, will we ensure that consumers continue to enjoy the choices they enjoy today? If we are serious about creating a balanced and truly international Britain, we must prioritise this sector now, during and after our exit from the European Union.

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[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.

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[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

I congratulate my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) on this timely debate. It is only a shame that there are not more Members here to listen to the good contributions being made. Let me put on the record that before being elected, I was proud to work in aviation for ABTA for many years, working with large tour operators, airlines and airports. I am also vice-chair of the all-party parliamentary group on general aviation, which looks after airfields and small airports very proudly.

Brexit is a testing time for all parts of our economy. Whether hon. Members think Brexit is the best thing since sliced bread or a national disaster, we can all agree that the uncertainty created by Brexit is bad for business and bad for our country. For aviation, in particular, uncertainty is eating away at confidence in the investment and business decisions that are vital to its continued success in the UK. In that spirit, I hope my remarks will create some more clarity on Brexit and aviation.

If we are to mitigate the impacts of Brexit—or maximise the opportunities, depending on the side of the debate—we must look at the detail of aviation. How does it work, how are people employed, how are planes maintained—we just heard about that—and flown, and how will business investment continue? That requires an understanding of the detail of international agreements, but that involves a level of detail I have not really seen since I was elected to this place. Parliament is unaccustomed to dealing with that level of detail at scale, so I welcome this debate as a chance to get stuck in.

Sadly, my time with the hon. Member for Nottingham South (Lilian Greenwood) on the Transport Committee has just come to an end. When I left, I said I would continue to talk about transport and aviation, and I regard this speech as continuing that promise. It is worth talking about aviation in the UK because it is a global success story. We are really good at it, and we need to maintain that success. We have the largest aviation sector in the EU and the third largest in the world after the United States and China. We have direct connections to more than 370 international destinations, and more than 284 million passengers passed through a UK airport in 2017—a record number. Whether people are flying for business, for leisure or to visit friends and relatives, they all make a contribution to our economy. We must recognise that we get benefit from people not only flying in but flying out.

[Lilian Greenwood]

My hon. Friend made a great contribution to the Transport Committee. He will remember that the Committee was told repeatedly by the Transport Secretary that he is optimistic about a deal with the European Union on air transport. He told Parliament in November 2016 that he was

“absolutely in no doubt that we would secure in good time and effectively the agreements that our aviation sector needs”.—[Official Report, 23 November 2016; Vol. 617, c. 953.]

We are now five months away from the exit, and we still do not know what it means for our access to the European common aviation area or international agreements such as the open skies to the US; how it will affect our nine freedoms to fly and air traffic control, including our participation in the Single European Sky regime; and whether the UK will remain part of the UK-Ireland functional airspace block. Do those questions not need answering now?