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Regulatory changes in the horizon: How Brexit will impact the aviation industry

Now just a few months away from the United Kingdom’s official exit from the European Union, many industries are left reeling, wondering how exactly Brexit will impact their sector and trying to figure out ways to prepare. How will Brexit change the airline industry? How do you prepare? Let’s take a closer look.  

According to a study by leading global management consulting firm, Oliver Wyman, Brexit stands to add an excess of $35 billion in new expenses, across all industries in the United Kingdom.

This number is closer to $41 billion for the 27 nations that will remain once the UK exits. The study found that among the top five most affected industries was the aerospace industry, in which the estimated cost of Brexit lands somewhere in the ballpark $3 billion annually when you look at the combined impact on the UK-EU aerospace industry.

The extent of these impacts has to do with whether or not Britain can reach agreements with Brussels before their exit from the European Union, set for March 29, 2019. With only 9 months to go, Prime Minister Theresa May has publicly announced plans to prepare for a no-deal scenario, in the event that no agreements can be made. 

Uncertainty remains  

Following suit are a number of companies and authorities. Among them, The Civil Aviation Authority (CAA), which is busy readying itself for the event that they’re excluded from the European Aviation Safety Agency, EASA. With agreements yet to be made between the CAA and EASA, the full impact of Brexit on the aviation industry is yet to be known.

»Today, a lot of the issues surrounding Brexit are a bit of an unknown. There’s no certainty at the moment of what the impact will be on aviation and until the political position resolves itself, we don’t know where we’re going,« says Steve Horton of the CAA’s Brexit planning team.

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He notes that the CAA’s aspiration is to stay within the EASA. The CAA has consistently taken the stance that the most positive and mutually beneficial outcome would be to remain within Europe’s safety body. As such, the government is in pursuing routes to make this a possibility. At the same time, though, they’re making preparations in case it’s not. 

»As a good regulator, we’re actually planning for the worst scenario. We plan for the hard Brexit scenario,« he explains. 

With a lack of clarity on what Brexit will mean for the aviation industry, major players are left with the question: what does the worst scenario look like? We got a chance to sit in on a talk featuring Policy Specialist from the Civil Aviation Authority (CAA), Steve Horton, who spoke about the potential implications of a no-deal Brexit. Here are the takeaways.

Brexit changes in the horizon, how will it impact the aviation industry.

Licenses and approval in the event of a hard Brexit

One of the more pressing concerns of a no-deal Brexit is the state of licensing and approvals.
 

As it is today, when the CAA issues licenses and approvals for aerospace manufacturers, aircraft operators, maintenance providers, crew members and training organisations, they are issued under EASA regulations and are recognised throughout the EU, as well as non-member states, such as Norway or Switzerland, which are part of the EASA.

A no-deal Brexit, though, would mean CAA-issued licenses and certifications are no longer valid. The UK government has taken the stance in the case of a no-deal scenario, it would still intend to recognise EASA certificates, whether issued by the CAA or other EASA member state, for a transitional period of up to two years.

At the end of two years, a new certificate would have to be issued by the CAA under UK legislation. If a certificate expired within the two-year transition period, it would need to be renewed under the new processes.

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While the UK intends to build a two-year grace period into processes, in order to ease the transition, this – so far – doesn’t seem to be the EU’s intention.

According to the EASA’s website: »certificates previously issued by the CAA before exit day would no longer be automatically accepted in the EASA system after 29 March 2019.

As of the 2nd of October 2018, the EASA has begun to process some applications for third country (non EU) approvals from existing UK approval holders. 

The need to apply for multiple approvals, though, would only be in the event of a no-deal Brexit, and since terms are not yet known, it may seem like an overkill to apply for two sets of approval but in event of a hard Brexit these multiple approvals will be imperative for business continuity.

If an agreement is reached by 29 March, and added approvals are deemed unnecessary, the EASA website states:

»Fees or charges will be levied by EASA in accordance with Commission Regulation (EU) 319/2014 on the fees and charges levied by the European Aviation Safety Agency.«

Rights to fly: The need for new bilateral agreements

Another main concern for airlines is the rights to fly between countries. Currently, the UK benefits from air transport agreements, such as the EU’s Open Skies agreement with the United States, which allows for unrestricted flight between any point in the United States and the EU.

Steve Horton of the CAA’s Brexit planning team has this to say about the situation:

»Whichever scenario we’re in next year, whether we’re still part of the EASA system, or we’re in a hard Brexit situation, the current EU bilaterals don’t apply. So the UK is actively going out and actively putting in place that the bilateral needs to replace those currently with the EU. Today we’re currently working with the FAA, the Canadians and the Brazilians. Those are the three major ones that we definitely need in place.«

It’s currently unclear what future agreements would look like, but one thing is clear: this will have major implications for the aviation industry, but the effects may also trickle into other industries dependent on aircraft to freely move between countries.

Horton, though, is confident that once the groundwork is in place, agreements will quickly be made.»Once we get those three out of the way then I think the rest will fall into place very quickly,« he states.

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Planning and forecasting for the future Is getting complicated

With so much still up in the air, many players in the aviation industry are finding it difficult to stay up to date with the latest and are at a loss in terms of how to prepare for the future. According to Horton, this is especially true for engineers: 

»We have a dedicated website and weekly we get figures for what pages are looked at and who’s looking at them. At the moment, engineer licenses are the top subject and have been for the last couple of weeks. So the engineers are more interested – or worried – as to what we’re actually doing,« he says. 

Engineers, who currently hold a Part 66 Aircraft Maintenance Licence—recognised by both the CAA and the EASA—in the event of a hard Brexit, may be in need of holding two sets of licenses, as the EASA only recognises Part 66 licenses issued by member states. 

The resounding need for engineers and players in the aviation industry at large is for more information. What’s the best way to stay up to date and ensure compliance? 

Horton urges you to check the CAA and EASA websites for regular informational updates. You can track the progress of negotiations by visiting the Task Force’s official web pages

Ultimately, though, he states: »we don’t own the risk, it, unfortunately, rests with the individual businesses to actually look at what they want to do, and where they want to go.«

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New capacities: The CAA would have a broader scope 

According to Horton, the CAA’s ideal outcome would be remaining in the EASA and while they’re preparing in the event that this is not possible, they also – for the time being – plan to retain EU aviation safety legislation to be applied as UK domestic law.

»We’re already putting the entire area regulation package into UK law and that goes to parliament before Christmas, so we will have the same set of rules as we do today,« he says.

The idea is that even if no deal is reached, the system would work the same as it does today. In order for this to happen, though, the CAA would have to fulfil regulatory functions independently of the EU. This would require capabilities to take over functions that are currently carried out by the EASA, and would require new hires and new competencies that could take years to build. 

The UK government has asserted that the CAA has maintained their capabilities and is actively building their resource pool to take over and sufficiently perform a broader function.

Brexit 3

Horton explains, though, making new hires and finding these new competencies is not exactly a simple task. 

»It’s a challenge because people are looking at us and wondering where we’ll be in a month’s time. At the moment, we’re not getting the volume of applicants that we would perhaps like. We're getting the numbers - but not the levels that we need,« he says.

Potential opportunities of a more powerful CAA

Along with the many challenges that could arise from a no-deal Brexit, there are also potential opportunities that could arise from the CAA gaining a greater scope of authority. Traditionally, regulators in the UK have been thought of as rather progressive, a split from the EASA would give them the chance to evaluate policies and make changes once not possible.

»We’ve already had a lot of enquiries from other states around the world to link up with them going forward, so there’s good work that could be done,” says Horton of opportunities for change and continues:

»We have a very active consultancy element to the CAA and that is really picking up, especially in the Far East and also the Middle East. We have the groundwork already there, so now it’s about whether we can take that and build on it. There are opportunities.«

Some potential areas of influence may be with regard to data laws. Horton has this to say about it:

»Data is a big issue within Europe because of the change in regulation, and the jury is still out on that in terms of what we have access to and how we can cooperate. Some of that data is not owned by us, it’s owned by Europe. Some of it is open source. It very much depends on where that data sits who owns it.«

The main concern for many, though, is being able to move forward with harmonisation, in order to reduce complexities within the industry. The CAA seems confident that this can be accomplished.

»We’re an active player in ICAO. I think I can say we’ve got someone on virtually every panel in ICAO. We will still try to communicate, link up and work with European partners. We’re finding all the individual states rather receptive,« says Horton.

Brexit and the aviation industry moving forward

As of today, it is clear that the implications of Brexit in the aviation industry are still not fully known, and the best thing you can do to prepare is to try and stay informed.

In the words of Horton: 

»If you are operating a UK-registered aircraft at 23:00 UK time on May 29, it can still fly. The agreements will be in place for it to fly to Europe and back again. Everything will be in place from a UK point of view.«

From an EU point of view, though, the jury’s still out. 

Stay up to date on EASA’s dedicated Brexit page and the CAA UK website

Disclaimer: None of the views and information expressed in this article reflect the official policy or position of Satair or Airbus.

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This blog is driven by Satair Marketing & Communication with input from both internal and external contributors.