Brexit: what impact on the air traveler?

The fateful date is coming and everything suggests that we are heading for a no-deal Brexit. A situation that, even if it does not last, will not be without impact on the airline industry and passengers.

And since what is going to happen as well as why remains a mistery for many people, let’s try to see it more clearly.

Passengers will not be much affected by the Brexit

Travel between the United Kingdom and the rest of the European Union was subject to an immigration check, as the former did not belong to the Shenghen area. In other words, the logic of a control already existed, the only thing that could change was the admission requirements. In other words “visa or not visa”. The need to obtain a visa before leaving would have been very problematic and the option of a “visa on arrival” issued at the airport of disembarkation would have dramatically lengthened the waiting lines.

Faced with this real risk, the European Commission has decided to take a step forward by proposing to not to impose visas on the British for stays of less than three months in the absence of an agreement, provided that reciprocity applies. And it even suggests, in case of agreement, to apply this principle during the transitional period.

One can believe that there is a relative consensus on both sides of the Channel and that this will be the easiest point to unblock. However, nothing has been decided yet and as our neighbors are change their minds very easily, we must continue to keep our fingers crossed.

We are still waiting for the British answer even if Theresa May is in favor of it and this proposal must still be adopted by the European Parliament and the Council of Europe.

What’s the point of being able to go to a country without transportation to get there?

So a priori everything is fine. At least for the passenger, but it is the travel industry, and not only the airline industry, that faces the biggest problems. In other words, since I can’t imagine people swimming to England, we have to keep flying planes. And this is where it gets complicated.

To understand where the problem lies is that British airlines benefit from a number of certificates and authorizations due to its membership in the European Union.

When British Airways flies to a non-European country it does so under an open skies agreement negotiated between Europe and the country in question. With the exit of the Union, the British airlines will no longer be able to take advantage of the agreements to which Europe is a signatory and will therefore have to negotiate bilaterally with each country. It has already done so with the United States, for example. But restoring full ability to fly anywhere in the world can take time.

What about flights between Europe and the UK? More fear than harm. In principle, it will be simple to set up an approval of flights on so-called connectivity flights (direct flights) between France and the United Kingdom, by the very will of the governments. In other words, your Nice-London flight is not in danger. So much for France. Because, on the British side, it will be necessary to find a similar modus operandi with each of the 27 countries of the union.

The importance of capital ownership in European airlines

On the other hand, the Brexit signals the death of cabotage, in other words the fact that a British airline can offer flights between two EU countries (otherwise known as ^5th and ^7th freedom flights) such as Paris-Lisbon. Of course we can immediately see the impact that this would have on EasyJet for example: it would be a mortal blow.

The solution? Become European airlines! In other words, by operating these flights with a subsidiary located in the European Union! Nothing could be easier! Easyjet has set up a subsidiary in Austria and has based 130 aircraft there, which it has of course registered. Enough to see the future even if it will freeze the growth of the airline for some time.

The opposite is true for Ryanair, which had a European license (Republic of Ireland) and has just obtained a British license for its new subsidiary Ryanair UK.

So everyone is saved? Well, no!

In addition to being located in the European Union, the subsidiary must be majority owned by European capital.

Ryanair gets scared

This seems to be the case for EasyJet in Austria. But no luck for Ryanair: 40% of its capital is held by Irish shareholders, 20% by British and the rest by American investment funds. This does not make it a European airline! To solve the problem the airline is considering restricting the voting rights of its non-European shareholders (at least they treat their shareholders as badly as their customers) to force them to sell their shares to Europeans.

And then you say to yourself that the main issues are settled. Well, no: you’re forgetting the most unfair victim of the Brexit: Iberia and its subsidiary Vueling, which could find themselves grounded once a no-deal Brexit takes effect. Why ?

Iberia is actually 100% owned by IAG (International Airlines Group), like British Airways, and IAG is a Spanish company based in Madrid and listed in Madrid and London.So everything is fine? Not at all.

Iberia banned from flying in Europe in case of Brexit.

Iberia and British merged to create IAG. Each of them took a share in the capital of the holding company, the holding company becoming a 100% shareholder of the airlines. For reasons of sovereignty, an arrangement has been devised that dissociates voting rights from capital ownership. In short, the majority of the voting rights of Iberia are held by Spaniards and the capital by IAG.

And who owns IAG? Some small investors and Qatar. With the exit of British Airways from the Union, 80% of the capital is in non-European hands.

A dialogue of the deaf with Brussels ensued: one spoke in terms of voting rights, the other in terms of capital. But for the European Union things are clear: as a wholly owned subsidiary of IAG, Iberia will no longer be European on the night of Brexit. It will not even be able to operate domestic flights in Spain! The same applies to its subsidiaries Air Nostrum and the low cost airline Vueling.

So that’s it, are we done? Not at all!

The passenger has the right to travel, on the whole we are going to make it with flights (even if the cases of Ryanair, Iberia and Aer Lingus are really very hot), so everything is fine. Well no, we still have to fly the planes and put pilots in them.

What about safety certificates and pilot licenses?

As far as the aircraft are concerned, the safety authorizations will become obsolete. Since the United Kingdom and the European countries will become “third part countries”. It will therefore be necessary to re-issue authorizations on a case-by-case basis. This should not be a technical problem but may take some time. Europe is working on a pre-agreement to extend the authorizations until everything is clear but for the moment nothing is done.

Another consequence of Brexit: the United Kingdom will logically leave the European Aviation Safety Agency (EASA). An aircraft or a pilot’s license certified anywhere in the EASA area can be used anywhere on the planet. As a result, pilots’ licenses and aircraft issued by the British Civil Aviation Authority (CAA) will no longer be recognized elsewhere. Until such time as the latter and its procedures are recognized by other civil air forces worldwide, British airlines will only be able to use EASA-certified aircraft and spare parts, and British pilots will only be able to fly on aircraft registered in the United Kingdom.

Good news: the United Kingdom has stated that it will continue to recognize EASA certifications. The bad news is that the Europeans do not want to engage in reciprocity today.

Eurocontrol preserved

Finally, there is some good news: Eurocontrol, the European air traffic control authority, will not be impacted because it is an independent organization of Europe. The United Kingdom will therefore remain a member.

Everything can be solved, provisional deals can be put in place to continue to function, good will and intelligence can finally start to prevail in this file but the more time passes the more we will be in emergency mode and the hypothesis that we find ourselves in front of a huge mess at the end of the month is not to be excluded. In any case, let’s not expect everything to work as it did before an not all at once.

This explains why, for example,Air France-KLM reserves the right to back out of its stake in Virgin Atlantic.

I was talking about air transport but I doubt that Eurostars are not subject to questions of certification of equipment as well as drivers… So I find Guillaume Pepy very optimistic when he says that the Eurostar will run as before in case of a no-deal Brexit.

And you, how do you feel about this Brexit?

Photo : Brexit by kostasgr via Shutterstock