Brexit: aviation and travel regulation

1. INTRODUCTION

The UK exited the EU on 31st January 2020 (Exit Day). The transition period in the Withdrawal Agreement ended on 31st December 2020. Existing EU Treaties, EU free movement rights and the general principles of EU law now no longer apply in relation to the UK. EU regulations only continue to apply in UK domestic law (by virtue of the European Union (Withdrawal) Act 2018) to the extent that they are not modified or revoked by regulations under that Act.

The final Withdrawal Agreement did not contain any guidance in relation to aviation or air travel post-Brexit. However, the Political Declaration, which supplemented the Withdrawal Agreement, contained a non-binding commitment to establish continuity in the aviation industry. The EU and the UK negotiating teams have now agreed the terms of a detailed post-Brexit Trade and Cooperation Agreement (TCA) which has been given effect from 1st January 2021. The TCA contains sections on air services and aviation safety.

In simple terms, the TCA provides for:

• continuation of air traffic services between the UK and the EU;
• removal of access for UK airlines to EU internal routes and vice versa;
• certain limitations on ownership and control of airlines designated to operate those services; and
• a framework bilateral air safety agreement for mutual recognition of certain licences, certificates and approvals.

The air transport sector is, by its nature, highly international and has been subject to considerable EU influence. The sector is made more international still by the participation of a number of non-EU Member States in the current European structure. EU law primarily impacted UK aviation through regulations governing traffic rights, aviation safety and access to routes for commercial air transport services (whether within, or to and from, the EU). However, the EU played a significant role in many other aspects of aviation. These include consumer protection and infrastructure, such as airports and air navigation services.

This article sets out the context and implications of Brexit on aviation law and regulation, now that the transition period has ended.

• The Withdrawal Act Process
• Technical regulation
• Traffic rights
• Ownership and control limitations
• Consumer protection
• Implications for airlines from outside the EU and UK
• Package travel
• Other aspects of EU aviation policy
• Aircraft Leasing
• Summary

2. THE WITHDRAWAL ACT PROCESS

• With most EU law continuing to apply in the UK for the rest of 2020, little changed on Exit Day. The UK remained a member of the European Union Aviation Safety Agency (EASA) and both UK and EU airlines continued to enjoy existing traffic rights throughout the European Common Aviation Area (ECAA) until the end of 2020. Attention during 2020 therefore focused on the long-term relationship to follow the transition period.
  
  
• For UK purposes, the EU aviation regulatory structure passed into UK law at the end of the transition period. Existing certificates issued to UK entities (whether by the UK Civil Aviation Authority (CAA) or by EASA) continue in force as UK-issued licences as part of the Withdrawal Act process – the UK will continue to operate to existing EU and EASA aviation regulatory requirements. UK Government Ministers, regulators and enforcement bodies have been substituted for their EU equivalents, so that the structure will work in the UK after Brexit. The CAA assumes all EASA functions. Licences, approvals and permits held by UK organisations and individuals under the EASA structure automatically become UK-issued licences.
  
  
• This extends to both technical and economic regulation across all parts of the aviation ecosystem, so covers safety and operational licences as well as traffic rights, aerodromes and ATM as well as operators and the supply chain. As a result, UK-based design and production organisations, MROs, AOC holders and licensed personnel can continue to exercise their privileges and functions within the UK in relation to UK-registered aircraft. However that does not automatically extend to operation of, or supply of parts or MRO services for, non-UK registered aircraft.
  
  
• The UK remains a signatory to the Chicago Convention and complies with its Standards and Recommended Practices. As such, UK-registered aircraft retain the privileges conferred under that convention.

3. TECHNICAL REGULATION

• As we said after the Referendum, we consider that the standards set by EASA are recognised worldwide on a par with the requirements of the US Federal Aviation Administration (FAA). It remains one of the two world-leading civil aviation regulatory bodies. Consequently, financiers will usually advance money on aircraft which hold an EASA type certificate and certificate of airworthiness.
  
  
• EASA's role is well established in relation to most aspects of safety regulation, including design and production of aircraft, their operation and maintenance, flight crew licensing, airports and air navigation services. Many in the industry took the view that the future UK-EU relationship should ensure continuity of the role of EASA, whether by continued membership or agreement on mutual recognition of standards.

3.1 Role of the UK in EASA

• As an EU Member State, the UK played a full part in EASA management. Countries that are not Member States of the EU are allowed to participate in the EASA processes where they have entered into agreements with the EU under which they adopt and apply EU law in the fields covered by the Basic Regulation^[1]. Such states include Norway, Iceland, Liechtenstein and Switzerland. Such participation is not a right, but a possibility, subject to negotiation. It was therefore open to the UK, as a non-Member State, to negotiate participation on similar terms to those other European countries and thereby to receive many of the benefits. If it had done so, the existing technical regulatory environment could have proceeded virtually unchanged.
  
  
• Nevertheless, as a non-EU Member State, the UK would never have enjoyed the same level of influence within the EASA legal framework. That is for two reasons: first, the role of the Commission and other EU legislative institutions in adopting EASA recommendations and, second, the fact that a non-EU Member State does not participate in the Management Board of EASA. This would inevitably lead to a reduction in the UK's influence at the final point of agreeing EASA recommendations.
  
  
• There were indications in the Political Declaration that the UK would explore continued cooperation with EASA. However, in March 2020 the Secretary of State for Transport announced that the UK would not seek continued EASA membership after the end of the transition period.

3.2 Mutual Recognition

• Until December 2020, UK aircraft operators, manufacturers and personnel were obliged to comply with EASA safety rules and benefitted from mutual recognition of licences and rights to operate throughout the EU. In simple terms, an organisation or individual holding a licence or approval issued by the UK CAA under EASA rules can carry out that activity or exercise those privileges on any aircraft registered in the EU. Likewise, a licence holder from another EU state can operate on a UK-registered aircraft.
  
  
• Conversely, the starting point for the UK's departure from the EU and from EASA was that approvals, licences and certifications issued by the UK CAA directly or by UK approved organisations would no longer be recognised in the EU. Absent continued EASA membership or mutual recognition of licences, UK-made parts would no longer be accepted as meeting EASA standards and aircraft incorporating these parts could be grounded. Similarly, UK licence holders could not exercise privileges on EU-registered aircraft and vice versa.
  
  
• For that reason, by early 2020 some seven hundred UK businesses had sought EASA "third country" approvals in order to continue to operate and supply their products and services with EASA approval, as they did previously. However, this requires businesses to operate a dual-compliance regime, with the cost that that entails – and the UK CAA is obliged to operate on a full cost-recovery basis.
  
  
• A bilateral air safety agreement between the UK and the EU could, of course, provide for mutual recognition of licences and approvals and allow businesses and individuals to maintain the level of flexibility enjoyed before the end of the transition period.
  
  
• To that end, both the UK and the EU submitted drafts of a bilateral air safety agreement at the start of the free trade negotiations in March 2020. The first stages of that agreement have been incorporated in the Aviation Safety Title of the TCA. The TCA commits the parties to establish a Specialised Committee on Aviation Safety which is empowered to adopt Annexes for personnel licensing, ATM, aircraft operations and other areas covered by the Chicago Convention. Once agreed, each party is obliged to accept findings of compliance and certificates issued by the other party in accordance with any Annex.
  
  
• However, at present the only Annex incorporated in the TCA is on Airworthiness and Environment Certification; as the title suggests addressing:
  • airworthiness certificates;
  • environmental certificates; and
  • design and production organisations
  and testing and monitoring of civil aeronautical products and organisations. The Annex applies to new aircraft and components as well as used aircraft.
  
  
• The Annex provides processes for validation of the other party’s certification of designs, parts etc. New issue type certificates will go through a validation process detailed in technical implementation procedures and the parties will endeavour to streamline the processes. Minor changes and repairs will be accepted automatically by both parties and “non-significant” STCs, major changes etc issued by EASA will be accepted automatically by the UK. Such changes issued by the UK will be accepted automatically by EASA once the CAA has demonstrated its capability.
  
  
• However, existing type certificates, supplemental type certificates, repair design approvals and technical standard order authorisations which are issued by a UK design organisation, or issued to a UK applicant by EASA, and which were valid on 31 December 2020, are automatically deemed to have been accepted by EASA. This circumvents the problem that a type certificate or similar held by a UK organisation would no longer be lawful for use on an EU-registered aircraft.
  
  
• Similar provisions apply in reverse for such certificates issued to EU businesses for the purposes of continued use of such parts and designs on UK-registered aircraft.
  
  
• The parties are obliged to recognise each other’s production certification and oversight system, so long as it relates to products already subject to that system at as 31 December 2020. If one party chooses to extend the categories of products, the importing party may audit the exporting party’s certification and oversight system.

3.3 Mutual recognition: MRO, personnel licensing and operations

• The mutual recognition embedded in the TCA is limited to certain aspects of initial airworthiness. The Annex addresses actions to mitigate unsafe conditions but does not provide for continuing airworthiness, such as approval of Part 145 MROs, generally^[2]. The Airworthiness and Environment Certification Annex has its own Certification Oversight Board which is obliged to meet regularly to take decisions and make recommendations to the Specialised Committee on Aviation Safety, and this should drive progress in this respect.
  
  
• However, the Specialised Committee on Aviation Safety is not formally obliged to take forward the process of agreeing further Annexes. While it “may” adopt Annexes on personnel licensing, air traffic management or flight operations, there is no commitment to do so. This would appear to be a matter of political will: as matters stand, beyond the Airworthiness and Environment Certification Annex, the Aviation Safety Title is simply a framework.
  
  
• As a result, many individuals and organisations have had to make a choice to secure the relevant licences from one or other authority, with the limitations on the use to which such a licence can be put, or accept the cost of dual licensing in order to maintain the same level of employability or attractiveness of their services.
  
  
• The UK has, nevertheless, confirmed that it will continue to recognise EASA-issued licences and approvals for up to two years, subject for instance to prior expiry. Validation of commercial flight crew licences issued by other EASA Member States will be made as seamless as possible.

4. TRAFFIC RIGHTS

4.1 The EU single aviation market

• Since 1993, airlines from Member States of the EU have had free access to operate commercial services throughout the EU. This market liberalisation is without doubt one of the main factors behind the successful growth of pan European airlines such as easyJet, Ryanair, Norwegian and Wizz Air.
  
  
• Access to the single EU aviation market has also been extended to airlines based in Norway, Iceland and Liechtenstein under the European Economic Area (EEA) agreement, and, subsequently, to Albania, Bosnia and Herzegovina, Croatia, Kosovo, the former Yugoslav Republic of Macedonia, Montenegro and Serbia under the ECAA Agreement (to which Norway and Iceland are also parties). Switzerland, while not a party to the ECAA Agreement, also has access to the single EU aviation market through a bilateral agreement with the EU. In recent years the EU has also entered into agreements with Moldova, Georgia, Morocco, Jordan and Israel.

4.2 The impact on UK-based airlines

• The starting point was that once the UK leaves the EU, airlines holding operating licences issued by the UK no longer enjoy automatic access to the single EU aviation market. As such, their rights to operate to, from and within the EU would need to be provided through alternative arrangements. The value placed upon such access was illustrated by the disclosure, on the day of the announcement of the result of the referendum, that easyJet had asked the UK Government and the European Commission to prioritise the UK remaining part of the single EU aviation market. Since then, easyJet has restructured its operations to retain an EU operating licence through its Austrian easyJet Europe subsidiary, thereby ensuring access to the single EU aviation market.
  
  
• The same is of course true, in reverse, for EU27/ECAA airlines’ access to the UK domestic market.

4.3 Traffic rights under a future UK-EU air services agreement

• The Political Declaration acknowledged the will to secure an agreement on traffic rights but also referred to related issues such as consumer protection:
  "The Parties should ensure passenger and cargo air connectivity through a Comprehensive Air Transport Agreement (CATA). The CATA should cover market access and investment, aviation safety and security, air traffic management, and provisions to ensure open and fair competition, including appropriate and relevant consumer protection requirements and social standards."
  
  
• At the start of the free trade agreement negotiations in March 2020 both parties tabled texts: the UK tabled a stand-alone draft while the EU included its text in the body of the overall free trade agreement. As a result those involved in the negotiation of the air services elements have described it as a somewhat unusual negotiation, because of the overlay of the broader EU/UK discussions.
  
  
• The drafts available in April did not differ greatly on the major traffic rights issues. Both proposed commercial traffic rights between the two countries (third/fourth freedoms), as well as rights of overflight for scheduled operations and landing rights for non-traffic purposes (first/second freedoms). There seemed little disagreement over tariffs, capacity or frequency: the principle that designated carriers choose their timetables, fares and capacity is well established. There were provisions for ramp safety inspections and security.
  
  
• Neither draft granted seventh or ninth freedom rights – i.e. wholly internal to the UK or the ECAA (whether wholly within an ECAA state or between ECAA states). Doubtless this was due to the relative attractiveness of each party’s domestic market. Internal ECAA routes remain the preserve of ECAA carriers and domestic UK carriage will revert to a route licence process. Although the concept of an Operating Licence is arguably irrelevant to the UK, it has been retained in the amended version of Regulation (EC) 1008/2008 (Regulation 1008)^[3] that will apply in the UK going forward^[4].

4.4 The Air Transport Title in the TCA

• Broadly, this is how the air services section of the TCA provides for future air services. Each party’s airlines may operate on routes to the other party, via intermediate points and to points beyond the other party. The first to fourth freedoms are granted to each party’s designated airlines, subject to application for application for operating authorisations, but without limitation on tariffs, schedules or capacity. There is provision for individual EU Member States to agree fifth freedom cargo rights with the UK – i.e. between the Member State concerned and a third country as a continuation of services originating in the UK, and vice versa, though this is not conferred as of right. There is express provision for use of code share or other blocked space arrangements.
  
  
• Perhaps unsurprisingly, provisions in the original draft EU air services agreement expressly precluding UK airlines from access to intra-EU routes (seventh or ninth freedom rights) have been retained in the final form TCA.

4.5 Foreign Carrier Permits and Third Country Operator Approvals

• Measures are already in place for EU airlines to secure Third Country Operator permits from the UK and to be granted foreign carrier permits. Neither were necessary before and during the transition period. EU air safety legislation has however long required TCO permits for non-EU carriers and, now that the UK becomes a ‘third country’, its carriers require such permits from the EU. EASA has set up an application process.
  
  
• However, since the substance of that legislation also becomes part of UK law, EU carriers are TCOs so far as the UK is concerned, and require both that certification as well as the foreign carrier permits. The UK has made plain that since it has a high level of confidence in EASA, the initial TCO process need not be cumbersome.

4.6 Traffic to non-EU Member States

• There are 17 countries outside the single EU aviation market with which the EU has entered into comprehensive air transport agreements. UK airlines’ access to these routes arose through its membership of the EU. By leaving the EU, the UK will, for instance, cease to be a party to the EU-US open skies air transport agreement (the "EU-US Agreement"). The UK has concluded its own bilateral agreements with these countries, to take effect when UK airlines' access to those routes under the EU agreements ceases. For example, in November 2020 the UK signed an air transport agreement with the US. Such agreements are also necessary to permit airlines from those 17 countries to fly to the UK, since after Brexit the EU can no longer confer rights to fly to or from the UK on countries outside the EU.
  
  
• So far as UK airlines exercise traffic rights under bilateral air transport agreements to which the EU is not party, nothing will change on Brexit. There are over 100 countries in this category, including Brazil, China and India.

5. OWNERSHIP AND CONTROL LIMITATIONS

5.1 Generally

• Many countries around the world restrict, to some extent, foreign ownership and control of their airlines. The EU is no exception, in that EU nationals are required to have majority ownership and control of EU airlines. Examples of more stringent restrictions include the US and Japan which limit the foreign ownership of their airlines to 25 and 33 percent respectively.
  
  
• Some other countries have diluted or otherwise liberalised ownership and control requirements. India now permits full foreign ownership of its domestic airlines (subject to prior approval from the government), while certain other countries, including some in Latin America, have adopted an approach based on the airline's principal place of business, and on sufficient oversight of technical regulation, rather than insisting on majority ownership and control by its own nationals.
  
  
• The Commission's 2015 Aviation Strategy raised the issue of relaxing ownership and control restrictions for European airlines. In an initial consultation on the Aviation Strategy, respondents noted, among other issues, that rules on ownership and control of EU air carriers require clarification.
  
  
• The review of Regulation 1008 indicates some openness to an alteration of the current test, provided that the internal market is still adequately protected. This possibility was supported by Henrik Hololei, Director-General Mobility and Transport, in a speech in Washington in July 2018. On the other hand, in March 2018 the Commission announced its concern that common ownership of airlines by investment funds might harm competition.
  
  
• The UK has traditionally favoured a liberal approach to airline ownership and control, regarding nationality-based restrictions as "outdated". In December 2016 Andrew Haines, then the CAA’s chief executive, said the following:
  “In a post-Brexit environment, relaxing the ownership arrangements UK-registered airlines currently have to comply with, could present an opportunity to attract new equity from non-EU investors, which could potentially improve choice and competitiveness for consumers”.
  
  
• The ownership and control requirement is relevant not only for airlines' ability to access UK-EU routes, but also for traffic rights granted under other bilateral air services agreements. These often contain nationality clauses. Unless an airline is majority owned and effectively controlled by nationals of the relevant state, the other state party to the agreement would have no obligation to accept a designation of the airline in question.

5.2 Ownership and control post-Brexit

• The air services agreement drafts tabled in April 2020 did differ on nationality-based ownership and control. The EU draft requires each party’s designated carriers to be majority owned/effectively controlled by their respective nationals; the UK offered an agreement which was silent on ownership and control of UK airlines operating to/from the EU, but enabled EU-designated airlines to be owned and controlled by either EFTA or UK nationals. However, the EU draft did recognise the potential benefits of liberalisation and would commit the parties to explore reciprocal liberalisation of nationality-based restrictions.
  
  
• By contrast, the EU contingency measures to cover the first six months of 2021 required UK carriers to be majority owned and effectively controlled by UK and/or EEA nationals, provided that where EEA nationals were required to meet the 50% interest in a UK carrier, that carrier had to have held an Operating Licence immediately before the end of the transition period.
  
  
• In the event, the Air Services Title in the TCA requires:
  
  • EU-designated carriers to be majority owned and effectively controlled by EU or EFTA nationals;
  • UK-designated carriers holding an Operating Licence at the end of the transition period to be majority owned and effectively controlled by UK and/or EU or EFTA nationals; and
  • Any newly-designated UK carriers to be majority owned and effectively controlled by UK nationals.
    
    
• The TCA does, however, recognise the potential benefits of liberalisation of ownership and control. The parties have agreed that the Specialised Committee on Air Transport will examine options for reciprocal liberalisation during 2021 and thereafter within 12 months of a request by one of the parties.
  
  
• Moreover, the liberal UK approach has been implemented in the amended version of Regulation 1008 that will apply in the UK after the end of the transition period^[5]: there are no nationality-based ownership and control requirements for the issue of a UK Operating Licence. That will not, however, affect such airlines’ ability to access EU routes under the air services provisions of the TCA.
  
  
• As mentioned above, the UK and the US have signed a new Open Skies agreement, so as to continue UK-US operations when the UK loses the benefit of the EU-US Agreement. Provisions contained within this deal ensure continuity by preserving the rights of EU nationals to own UK based airlines. After Brexit, UK airlines will need to show that “substantial” ownership remains vested in UK, EU and EEA shareholders rather than by UK nationals alone. Changes which bring about “significant” third country ownership or a “substantial” increase in control by third country interests are prohibited. It avoids the need, for the purposes of US traffic rights, for UK airlines to reduce levels of EU investment.

6. CONSUMER PROTECTION

• There has always been a question as to how far Brexit might affect consumer protection; especially passengers' rights to compensation and care in connection with delayed and cancelled flights pursuant to Regulation 261/2004. It is no secret that the airline industry generally believes that the burden placed on airlines is too high, especially with regards to delays and cancellations caused, for example, by technical defects outside the control of the airline. Other examples include Regulation 1107/2006 on rights of disabled persons and persons with reduced mobility when travelling by air.
  
  
• While the UK was a member of the EU, UK airlines were automatically bound by these regulations, whereas third country airlines, in principle, are only bound by Regulation 261 on flights from an EU country. As part of the EU law acquis, those regulations remain part of UK law after the end of transition period. That is the case unless they are amended by the UK, but the UK has never indicated that it intends to reduce the impact of Regulation 261 materially.
  
  
• The original EU draft trade agreement called for the UK to ensure consumer protection to the same standard as applies under EU law. However, despite the UK’s historical support for high consumer protection standards, that commitment must have been unattractive to those for whom the UK’s power to make its own rules is a key objective of Brexit, and would rarely appear in a normal bilateral air services agreement.
  
  
• However, it is clear that a commitment to exactly the same standards as apply in the EU was not a “red line” for the EU in the context of the overall TCA. The final wording commits both parties to a high level of consumer protection and to cooperate to that effect. Nevertheless, the text specifically calls out assistance to disabled passengers, to compensation for denied boarding, cancellation or delays – exactly the scope for Regulation 261 - and efficient procedures for handling complaints. There is a commitment to consultation on planned measures relating to consumer protection.
  
  
• UK law on issues such as air carrier's liability in the event of accidents, and the obligation to carry appropriate insurance, currently derives from EU law. The relevant EU regulations will apply in any event as part of the acquis of EU law, but additional secondary legislation applies in the UK. We do not however see any material likelihood of divergence from what the EU requires: in the case of air carrier's liability the UK has already ratified the Montreal Convention which is the standard imposed by the EU Air Carrier Liability Regulation.

7. IMPLICATIONS FOR BUSINESSES OUTSIDE THE EU AND UK

• Generally, the implications for non-EU airlines operating to the UK under existing bilateral air services agreements will be minor. Those airlines would already comply with ownership and control requirements imposed by those agreements. However, as mentioned above, the UK/US air services agreement does not require UK-designated airlines to be majority owned and controlled by UK nationals. EU (or EEA) ownership suffices. This has the effect of minimising disruption to investment in UK airlines. If the UK continues a comparable policy in negotiating bilateral air services agreements with other non-EU countries, we would expect increased requests for reciprocity.
  
  
• So far as airworthiness is concerned, as a ‘third country’, the UK is free to conclude bilateral agreements on mutual recognition with individual states. The UK has agreed BASAs with each of the United States, Canada, Brazil and Japan to take effect at the end of the transition period.

8. PACKAGE TRAVEL

8.1 The impact of EU law

• EU law has had a significant bearing on sales of holidays and other travel products in the UK. Much derives from the 2015 EU Package Travel Directive (PTD2) which imposes duties on organisers of package holidays and those selling or facilitating linked travel arrangements (LTAs). However, as with the Air Travel Organisers’ Licensing (ATOL) scheme, which deals with insolvency protection requirements, UK implementation of PTD2 was largely achieved by secondary legislation which will continue in its current form with some limited changes, now that Brexit has occurred.
  
  
• The Package Travel and Linked Travel Arrangements Regulations 2018 (2018 Regulations) implemented PTD2 in the UK and continue to apply. The 2018 Regulations protect consumers buying package holidays or LTAs through mechanisms for refunds and repatriation in the event of insolvency as well as imposing obligations on the organisers of package holidays. These obligations provide consumer protection as they require those organising or selling these products to provide, at the point of sale, information to consumers on whether they have bought a package holiday or an LTA, since the regulations offer different levels of protection. As is well known, organisers of package holidays remain responsible for performance of their subcontractors such as airlines or hoteliers.

8.2 Insolvency protection and no EU mutual recognition

• Under the 2018 Regulations, organisers of package holidays and traders facilitating LTAs must have insolvency protection. The higher burden on package holidays requires ATOL protection. For LTAs, ATOL protection is optional, but some insolvency protection may be required, such as insurance cover, a bond or a trust fund.
  
  
• The ATOL scheme implements the obligations imposed under PTD2 (and its predecessor) to have insolvency protection in place. UK-based companies selling package holidays must have security in place against the organiser's insolvency. If the organiser goes into insolvency while the consumer is overseas, the fund established by the scheme and managed by the CAA will ensure the consumer can return home. If the business goes into insolvency before the consumer travels abroad, they will be able to draw on the fund for a refund. Although LTAs are outside the scope of the ATOL scheme, ATOL protection is sometimes offered as a marketing tool to bolster consumer confidence. Furthermore, there are elements within an LTA which may require ATOL protection or are subject to other insolvency requirements.
  
  
• As outlined above, mutual recognition was a hot topic in the context of Brexit. One of the key elements of PTD2 was that Member States must recognise protection put in place to protect against insolvency of organisers established in other Member States. In other words, a trader established anywhere in the EU may rely on insolvency protection put in place in its own country, wherever in the EU it sells package holidays or LTAs. As a result, traders established in the UK, but selling throughout the EU, benefit from reciprocal recognition of insolvency protection in the EU, and vice versa.
  
  
• Now, after Brexit, there is no obligation on remaining EU Member States to recognise the insolvency protection of UK organisers that sell to European customers. ATOL will continue to protect bookings that have already been made, but any further sales made by UK companies into EU countries will need to meet local requirements for insolvency protection.
  
  
• Equally, the UK (via the CAA) is no longer obliged to recognise EEA- based insolvency protection schemes of EU-based organisers which sell to UK customers. The UK has implemented a statutory instrument (SI) under which EU traders actively selling package holidays or LTAs to UK customers will be required to comply with the UK insolvency protection rules; in other words obtain an ATOL licence. The SI will not, however, have any effect on traders that are not targeting business activities in the UK. Therefore, UK consumers may be at risk if they purchase package holidays from EU-based traders and should enquire about applicable insolvency protection prior to purchasing.
  
  
• For UK travel agents selling packages organised by EEA-established organisers, it will no longer be possible to sell (in the UK) such packages solely as an agent of that organiser. These UK travel agents will need either to ensure that the organiser holds its own ATOL, or the agent itself will need to obtain an ATOL to cover those sales.
  
  
• For EEA-established businesses selling into the UK, the CAA has said that until the end of March 2021 the CAA does not expect to actively pursue enforcement action against businesses which apply for an ATOL and make adequate progress towards obtaining it and whose UK sales are covered by insolvency protection that meets the standards applicable to consumers in their own country.
  
  
• As for UK-established businesses selling packages into EEA countries, the CAA is not contemplating transitional measures. This is because the UK is no longer a member of the EEA, so no longer benefits from mutual recognition, and the authorities in those countries are no longer obliged to accept ATOL protection. Sales by UK-established businesses will need to be protected by means that were acceptable under the legal framework of the country into which they are selling, as is the case for businesses established in all other non-EEA countries. The CAA will continue to extend protection to bookings that were made under ATOL prior to 1 January 2021.
  
  
• UK travel businesses have two options: either adopt a country-by-country approach so that the business complies with travel regulations (and insolvency protection requirements) in each of the jurisdictions into which it sells packages or LTAs; or create a new EU hub so that it can continue to benefit from the mutual recognition insolvency arrangements across the remaining EU Member States. Both options have pros and cons, but one option must be chosen if businesses want to continue to actively sell to consumers in an EU Member State.

9. OTHER ASPECTS OF EU AVIATION POLICY

• The range of areas within aviation affected by European regulation is broad: this summary has not addressed wider environmental protection or the Single European Sky project. The UK will contribute to Single European Sky projects through its commitment to EUROCONTROL.
  
  
• During the transition period from 1 February to 31 December 2020 the UK remained a full participant in the EU Emissions Trading Scheme (ETS). As such, UK operators participating in EU ETS are required to submit their Verified Annual Emissions Report for 2020 emissions by 31 March 2021, and surrender equivalent allowances by 30 April 2021. As of 1 January 2021 holders of accounts in the UK sections of the Union Registry will no longer have access to these accounts.
  
  
• On 12 November 2020 the UK published The Greenhouse Gas Emissions Trading Scheme Order 2020 which lays out the Government’s plans to achieve the target of net zero emissions by 2050. Part of this will involve the establishment of the UK ETS following the expiration of the Brexit transition period. The scope of the UK ETS is the same as currently in place under the EU ETS, however the details of how the UK ETS will be run have not been included in the 2020 Order nor have they been made publicly available yet.
  
  
• Occurrence reporting and accident and incident investigation, aviation security and obligations with respect to advanced passenger data are all presently subject to EU regulation and will continue to apply via the Withdrawal Act process or specific UK implementation.
  
  
• In a number of areas of economic regulation, such as availability of ground handling services, airport charges or landing slot allocation, UK law draws heavily on EU policy, but UK policy may naturally be more liberal. Brexit offers the UK an opportunity to set its own policy in these areas, but this will be subject to level playing field requirements.
  
  
• This has of course been a major issue in the context of the TCA as a whole: the Air Services Title has its own article imposing a commitment to non-discrimination and to eliminate all discrimination which would “adversely affect the fair and equal opportunity of the air carriers of the other Party to compete” in the exercise of the transport rights conferred under the TCA. Air transport is also subject to the general level playing field requirements – which are as lengthy as the air services and aviation safety provisions, including the airworthiness annex. It should also be seen in the context of relatively recent – albeit as yet unused – EU legislation providing for measures against non-EU airlines where practices distorting competition cause, or threaten, injury to EU airlines.
  
  
• Commentators have noted that the potential UK waiver, as a result of the COVID-19 pandemic, of the “80:20” rule for grandfather rights for landing slots for the Summer 2021 season, may be one of the first examples of UK setting its own policy. Of course it would have to be carried out in a way that does not create barriers to competition – but that must be seen in the context of the current EU proposal to reduce the 80% utilisation threshold to 40%.
  
  
• Personal data protection has long been an important element of EU policy generally which is often in tension with security and criminal law. Airlines have been subject to obligations to provide passenger data in advance for security purposes, subject to restrictions on how and for what purposes they can process that data. Part Three of the TCA, which deals with law enforcement and judicial co-operation , contains an entire Title on transfer and processing of passenger name record data, regulating the basis on which EU carriers may transmit PNR data to the UK, and how UK authorities must handle that data.

10. AIRCRAFT LEASING

10.1 Approvals required under existing EU regulation

• Regulation 1008 has long required operating licence holders to have aircraft at their disposal, whether by ownership or dry lease. It required various approvals for leases: wet leases to EU operating licence holders and all dry leases all require approval under EU or national law on aviation safety. Intra-EU wet leases are permissible except where it would endanger safety.
  
  
• Wet leases by EU operating licence holders from carriers located in a third country are subject to economic regulation: in general it is only permitted in exceptional circumstances (which is limited in duration to seven months with the possibility of a seven month renewal) or for seasonal capacity requirements or other operational requirements where capacity is not available within the EU. Authorisation may be refused if there is no reciprocity with the state of registration.

10.2 UK amendment of Regulation 1008 after Brexit

• These requirements are largely retained in the UK application of Regulation 1008^[6] after the end of the transition period. However, even though EU27 states amount to ‘third countries’ for UK purposes, the UK retains the presumption that aircraft registered in an EU Member State will be sufficiently safe that wet leasing to a UK carrier does not automatically require prior approval (although if in fact safety is endangered this would prohibit the wet lease). UK carriers may, therefore, continue to wet lease EU-registered aircraft, and must look to capacity available in the EU before turning to non-EU markets for capacity to meet, for example, seasonal needs.

10.3 Provisions on leasing in the TCA

• The Air Transport Title of the TCA confirms the right of designated airlines to dry lease aircraft from any lessor. Consistent with the positions set out above, UK airlines may wet lease from other UK or EU carriers, and EU carriers may wet lease from other EU airlines. The UK will be considered as a ‘third country’ for the purposes of ongoing application of Regulation 1008 in the EU, so although the reciprocity point is satisfied, UK carriers will have to go through the same process as other non-EU airlines if seeking to wet lease to EU carriers.
  
  
• Wet leasing from other airlines – i.e. from outside the EU, or by EU carriers from UK airlines – requires justification on grounds of exceptional needs, seasonal capacity requirements or operational difficulties, and is only permissible for so long as those requirements apply. In all cases compliance with those conditions or with applicable safety requirements may need to be demonstrated.

11. SUMMARY

• At 23:00 hrs GMT on 31 December 2020, UK connections with the EU and EASA ended completely. UK airlines lost automatic access to and within the ECAA, and EU airlines lost automatic rights to fly to or within the UK. The vast majority of the substantive EU aviation law and regulation became part of UK law, although the UK remains a participant in ICAO and a signatory to the Chicago Convention.
  
  
• An air services agreement, as part of the Trade and Cooperation Agreement, preserves traffic rights for UK and EU carriers between the UK and the EU.
  
  
• After the referendum, we anticipated that the principle of operations between the UK and EU27/ECAA countries, without capacity or tariff limitations, by airlines respectively owned and controlled by UK or EU nationals, could readily be agreed, and the positions on air services bear this out. However, the obvious change was always likely to be cabotage (or seventh and ninth freedom) services for UK carriers wholly within the EU. Those carriers conducting significant operations of that type have established ongoing EU operating licence holders to continue these operations.
  
  
• Had the UK been willing to pursue continued EASA membership, it would have been open for the UK to seek a position in a post-EU world which would enable civil aerospace business, and technical regulation, to continue much as it did in the years leading up to the referendum. Nevertheless, the UK's influence to determine the overall European policy direction and the detail of much of the legislation would have been diminished.
  
  
• On the other hand, departure from EASA and the absence of a bilateral air safety agreement is likely to make life more complex for UK-approved aerospace businesses and individual licence holders. While the aviation safety section of the TCA provides for mutual recognition of design approvals, type certificates, repair approvals and production oversight, and provides a framework for enhanced co-operation in other areas, many businesses and individuals will have to pursue dual-compliance models in the medium term to maintain the full marketability of their products or services.
  
  
• Many other aspects of EU aviation and travel law and regulation, including consumer protection, airport charges, slot allocation, air carrier’s liability and accident investigation, continue in force in the UK. The UK's own policy freedom could increase in these areas, but there has been no indication of a desire for wholesale change. Indeed a number of these policies were based on principles well established in the UK or internationally before they were incorporated into EU law.

[1] Regulation (EU) 2018/1139 of the European Parliament and of the Council of 4 July 2018 on common rules in the field of civil aviation and establishing a European Union Aviation Safety Agency https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32018R1139&from=EN

[2] Contrast how the original contingency measures implemented by the EU in March 2019, before the Withdrawal Agreement was signed, allowed for some non-EASA maintenance releases to continue to be accepted for a limited period, although the contingency measures proposed in December 2020 did not extend beyond a number of type certificates and repair approvals.

[3] Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the Community (Recast) (Text with EEA relevance) https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32008R1008

[4] See, generally, The Operation of Air Services (Amendment etc.) (EU Exit) Regulations 2018, SI 2018/1392, Art. 7 and Schedule 2 https://www.legislation.gov.uk/uksi/2018/1392/contents/made

[5] Art 4(f) of Regulation (EC) 1008/2008 has been deleted: see The Operation of Air Services (Amendment etc.) (EU Exit) Regulations 2018, SI 2018/1392, Schedule 2, para 6(d) https://www.legislation.gov.uk/uksi/2018/1392/schedule/2/made

[6] The Operation of Air Services (Amendment etc.) (EU Exit) Regulations 2018, SI 2018/1392, Schedule 2, para 14