To be honest the situation is so fluid that there s every chance this presentation could be out of date by the time I have finished speaking!

Transcription

1 Good Morning, it is a pleasure to be here in Geneva for the first session of IATA s global media day. I ll be briefing you on Brexit and its impact on the airline industry. To be honest the situation is so fluid that there s every chance this presentation could be out of date by the time I have finished speaking! However, I ll give you the latest from IATA s perspective, and then I will open the floor for questions. 1

2 As we ve seen this week, Brexit uncertainty remains very high. There isn t a consensus in the UK parliament about the current areement and now the government will try to re-negotiate one that would garner parliamentary approval. Unfortunately, this delay is creating more uncertainty for aviation. The deal that is being considered would create conditions for a two-year transition which is much better than a no-deal scenario. To avoid serious disruption for airlines and air travellers, the UK government and parliament needs to resolve this impasse. 2

3 In the event of a no-deal scenario, a contingency plan is essential to avoid any interruptions in air connectivity. IATA welcomes the fact that the UK government and the EU Comission have published some detail on the contingency plans. It is also positive that there have been some initial arrangements made with the US and Canada, key aviation markets for the UK. However, additional clarity and certainty are needed for airlines to adapt. We need governments to move further along with their plans. 3

4 The timeline for Brexit is currently dependent upon the UK government s ability to achieve a deal ahead of April of next year. If there is a deal, a transition period would begin in April whereas the status quo is maintained for two years and a comprehensive air services deal could be agreed after However if a deal cannot be agreed upon Britain would leave the EU in a nodeal scenario and significant disruption of air services is likely. Emergency contingency plans would need to be invoked and the timeframe of an air services deal is unknown. 4

5 To understand better the technical implications of Brexit, and expecially a no-deal scenario, IATA commissioned a study of the impact of Brexit on the airline industry from Taylor Airey, a consultancy. The graph above illustrates different areas in aviation and Brexit s level of impact of each one. According to the report there are four key issues that have a high impact on the airline industry and currently have a severe lack of clarity: Air services agreements; the safety framework; Security; and Border Management. The urgency and complexity of resolving these increases significantly in the event of a no deal Brexit. 5

6 Let s look in more detail at these four issues. In terms of air services agreements, I have already spoken a little about the fact that contingency plans are necessary. In the case of No Deal there will be no time to negotiate a comprehensive Air Services Agreement between the EU and UK. So a bare-bones agreement will need to be implemented to ensure at least a basic level of air connectivity. The degree of regulatory convergence or mutual recognition of this basic level agreement is still unclear. Significant changes of EU-UK operations could therefore be seen by March 2019, far earlier than in the transition scenario. As I said, the fact that bare bones services are in discussion is to be 6

7 welcomed. But we require much more clarity and transparency on what is being agreed. 6

8 When the UK ceases to be a member of EASA at the end of the transition period, EU rules in the field of civil aviation safety will no longer apply to the United Kingdom. This would mean: Certificates issued by EASA to holders in the UK will no longer be valid; Certificates issued by the competent authorities of the UK will no longer be valid outside the UK; Certificates issued by the legal and natural persons of the UK will no longer be valid outside the UK; Aircraft operators from the United Kingdom will be considered third country operators and will require authorization from EASA; and Aircraft registered in the UK will be required to comply with the Basic Regulation. This also applies to EU-27 operators wet leasing UK registered aircraft. In a worst-case scenario, without agreement on a level of equivalent recognition of UK standards, any aircraft manufactured or maintained in the 7

9 UK will not be able to fly under EASA s jurisdiction, nor will any aircraft possessing a type certificate associated with a UK design organization approval. Holders of EASA TCs in the UK would not be able to deliver products such as wings, engines and propellers to EU manufacturers, thereby affecting aircraft production in the EU. Our preferred solution would be for the UK to remain in EASA as a third country member, but at minimum, mutual recognition of professional licenses, standards for materials and parts, and other safety elements, should be put in place to come into effect immediately after March. It is our understanding that a temporary arrangement is under discussion, but once again, we would like to see greater transparency. 7

10 Potentially, if the UK falls out of the EU without an agreement on security, it could mean passengers and baggage need to be rescreened on flights into the EU from the UK. However, this situation can be avoided if the UK is added to the third country list, which includes the United States, Canada, Singapore and others. These non-eu member territories are recognized as applying security standards equivalent to EU standards for passenger and cabin baggage security. If added to this list, passengers arriving on an inbound flight from the UK would not go through re-screening. The UK could also be added to the recognized list for freight security through the same regulatory mechanism. There are clear precedents for the EU to recognize the UK s security procedures despite the UK no longer being an EU member state. Such recognition would not require adjustment to UK aviation security standards because of today s current compliance. There are also clear incentives for the EU to add the UK to the list as extra 8

11 screening would be detrimental to the entire European aviation industry, not just the UK. Duplication of security controls at EU-UK borders will cost tens of millions a year. A continuation of the status quo is therefore mutually beneficial. 8

12 The four freedoms of movement in Goods, Services, Capital and People within the EU, together with harmonized regulation in traded goods, currently enables airlines serving EU-UK routes to benefit from simplified border processes for both passengers and freight. Regulatory divergence and changing citizen rights are inevitabilities post- Brexit which make tighter borders unavoidable, which is likely to add further delays at borders. A wider, more comprehensive border management system will be required to deal with the 85 million passengers that travel between the UK and the EU annually. For the moment continued visa-free travel and use of e-gates may alleviate further delays. Passengers spending longer at passport control could have negative commercial implications for airlines operating into the UK as a poor passenger experience could stifle demand. The competitiveness of air freight is heavily reliant on the speed and predictability at which goods are moved across borders. Efficient border 9

13 processes are not only a concern for passengers and cargo but also the production line. The Airbus A350, for instance, has about four million parts, produced by 1,500 companies from 30 countries, trade barriers would therefore pose a serious threat to production lines. On trade, a comprehensive free trade agreement and the WTO would alleviate tariffs. But trade could still be slowed by diverging regulations and therefore extra border checks. The extent of these checks is dependent on the customs arrangement that the UK manages to secure. But no external customs union border enjoys the same seamless system, therefore, disruption to freight movement looks inevitable - but could be limited to a negligible amount if administrative delays and regulatory divergence are kept to a minimum. 9

14 The graph above illustrates the public s feeling about air connectivity in a post-brexit world. Clearly there is a consensus that regardless of the outcome of the UK s exit from the EU, governments need to ensure that air connectivity is not impacted. To that end we urge the UK and EU governments to listen to their citizens and ensure as smooth a transition for aviation as possible, whether or not a wider UK Brexit deal is agreed. Thank you 10

15 11