Written evidence submitted by the Airport Operators Association (OBJ0105)

 

Introduction

 

  1. Founded in 1934, the Airport Operators Association (AOA) is the national voice of UK airports. We are a trade association representing the interests of UK airports, and the principal such body engaging with the UK Government and regulatory authorities on airport matters. The AOA’s members include over 50 airports and more than 160 Associate Members, made up of companies representing a wide range of suppliers in the aviation industry.

 

  1. We welcome the opportunity to respond to the House of Commons Exiting the EU Select Committee inquiry on the “UK's negotiating objectives for withdrawal from EU”.

 

Overview

 

  1. Aviation is one of the UK’s success stories: the UK has the largest aviation market in the EU and the third largest aviation market in the world, after the USA and China. A 2014 Oxford Economics report, commissioned by the AOA and partners, calculated that aviation contributes nearly a billion a week to UK GDP (around 3.5%) and employs around one million people, or 3.3% of total employment. This rises to nearly 5% of both GDP and employment, if the catalytic contribution from UK tourism is included.

 

  1. Following the UK’s EU referendum result, the AOA and its members are clear that maintaining and enhancing connectivity is crucial for the EU after Brexit. Excellent connectivity is a precondition for economic growth for the UK and across the EU27. Aviation is the most important part of that connectivity and crucial enabler of trade to and from the UK, with a particular focus on high value and perishable items. From Scottish salmon and fashion to machine parts and medication, aviation is the transport of choice for 40% of the UK’s trade by value. Put simply, it is the infrastructure that enables trade in goods and services to flow. In terms of visitors to the UK, VisitBritain’s 2015 Snapshot shows 73% of them travel to the UK by air.

 

  1. The AOA would therefore like to ensure that the UK government negotiates for a vision of UK aviation that recognises it is vital the UK continues to benefit from open access to important international markets. Our airports are seeking to maintain our access to the Single Aviation Market and the EU’s multilateral air services agreements (also known as ‘Open Skies’ agreements) that have allowed the aviation industry to grow, deliver cheap fares and open up new destinations at home and abroad.

 

EU and market access

 

  1. Aviation is legally unique: it is separate from trade agreements and does not form part of the World Trade Organisation (WTO) system. Instead, countries negotiate bilateral or multilateral air services agreements to provide airlines with the legal rights to fly to certain places. These can be very restricted (e.g. one flight a week to a specific airport only) or very liberal (anytime, anywhere). The European Single Aviation Market and related external aviation agreeements, discussed below, have been very liberal and have been very beneficial in creating greater connectivity for the UK economy.

 

  1. Within the EU, air services fall under the Single Aviation Market. This single market for aviation was created in the 1990s. Air transport had traditionally been a highly regulated industry, dominated by national flag carriers and state-owned airports. The UK was a leader in the drive to liberalise this market within the EU, with success: the internal aviation market has removed all commercial restrictions for airlines flying within the EU, such as restrictions on the routes, the number of flights or the setting of fares. All EU airlines may operate any route within the EU, including domestically within another EU country (cabotage rights). The Single Aviation Market also covers EEA countries.

 

  1. There is an external dimension to the Single Aviation Market, which has seen external air services agreements negotiated by the EU. Of those, most important for the UK is the EU-US Open Skies Agreement that enables any EU or US airline to fly any transatlantic route. Access to UK airports, particularly the largest airports in the South East, were one of the main drivers for the US to conclude the agreement, as it is the most important hub for North Atlantic traffic to and from the EU. While EEA countries form part of the Single Aviation Market, only one EU multilateral air services agreement has been extended to EEA countries – the EU-US Open Skies Agreement – by mutual consent of both signatories.

 

  1. The benefits for consumers of the Single Aviation Market have been profound: prices have fallen significantly, new business models appeared (e.g. low-cost carriers) and impressive progress has been made in areas such as the choice of routes on offer. Airports across the UK have benefitted from this liberalisation, with many flourishing as a result of the new airlines and routes.

 

  1. The Single Aviation Market has seen the introduction of EU-wide regulation (a schedule of that regulation is attached, courtesy of our European trade association ACI EUROPE). With regards to airports, this includes the Airport Charges Directive that applies to all airports handling more than 5m passengers and to the largest airport in an EU Member State.

 

  1. The UK participates in numerous technical programs to facilitate the movement of both passengers and cargo. This includes Single European Sky (including the Single European Sky ATM Research programme) and the European Aviation Safety Agency (EASA), an EU agency that took over the functions of the Joint Aviation Authorities in 2008. Among other tasks, EASA certifies airplane technology and undertakes safety inspections and enforcement action. Returning these tasks to the CAA would be severely disruptive for the UK aviation sector.

 

  1. Closely linked to the Single Aviation Market are specific competition rules. An Aviation Guideline was adopted at the EU level in 2014. This Guideline set out the conditions under which Member States and local authorities can grant state aid to airports and airlines in the EU, which has had an impact on the UK Government’s ability to designate Public Service Obligation routes, for example.

 

Exiting the European Union & future UK-EU aviation relations

 

  1. As set out in the previous section, the EU currently provides the legal framework for air services. Without the UK’s membership of the EEA or a new EU-UK air services agreement and new agreements to replace the EU’s multilateral air services agreements, airlines will lose the legal framework for flying between EU and UK airports as well as between the UK and the US, Canada and other third countries covered by the EU multilateral air services agreement. UK airlines that currently fly between and internally in EU27 countries would also lose their ability to continue to operate those flights, unless they establish operations that are owned and controlled by nationals from an EU27 country.

 

  1. There is no WTO fall-back option. Furthermore, while the UK has had bilateral air services agreements with most (but not all) EU27 countries, these date from a different era and are no longer fit for purpose. There is also a question over whether they are still legally valid since the creation of the Single Aviation Market superseded them. The same applies with the UK’s bilateral agreements with non-EU countries where there is now an EU-level air services agreement, like the US.

 

  1. The failure to agree a new air services agreement would seriously disrupt important trade and tourism links for the UK, the EU27 and countries like the US. This is why aviation is treated separately from trade agreements: comprehensive air services agreements are the pre-condition for the success of trade agreements.

 

  1. It is therefore paramount for the continued success of the UK airports sector that a new UK-EU air services agreement is negotiated as a matter of priority. It should aim to maintain continued access to the Single Aviation Market and the EU’s multilateral aviation agreements or replace these with new agreements that replicate the existing provisions. Failure to do so could severely limit UK aviation’s, and by extension the UK economy’s, ability to generate the jobs and economic growth. It could also result in increased costs to the consumer and risk more limited connectivity, particularly from smaller airports.

 

  1. There are other issues where our airport members would like to see continued close cooperation between the UK and EU, such as the European Aviation Safety Agency (EASA), Single European Sky, security and future border and visa arrangements. Aviation is by its nature an international sector and benefits from common global standards.

 

  1. Based on the experience of EEA countries and Switzerland, advanced traffic rights (e.g. cabotage rights) are likely only to be granted if the UK continues to accept the EU’s aviation regulation. Similarly, countries that form part of the European Common Aviation Area (e.g. the Western Balkans) have had to accept regulatory convergence in return for increased access to the Single Aviation Market. Meanwhile, the Euro Mediterranean Agreements with countries like Israel accept regulatory equivalence but the end goal is not full market access. Lastly, it is currently unclear to what extent the acceptance of free movement of people is a pre-condition for advanced market access: the Swiss bilateral aviation agreement that grants advanced but the full market access currently enjoyed by the UK is conditional on a separate agreement in which Switzerland accepted free movement of people.

 

  1. The UK has been a driving force in European aviation regulation and has favoured pragmatic, risk-proportionate regulation. With the UK no longer having full voting rights at an EU-level, there is the potential for a more interventionist, less light-touch regulatory approach. This would be a concern should EU regulation continue to be (partly) applicable to the UK as part of continued participation in the Single Aviation Market under a new air services agreement. The AOA and our members would favour a new arrangement in which the UK can continue to exercise its voting rights in, for example, the EASA.

 

  1. Gibraltar Airport, an AOA airport member, is also deeply concerned about any attempts by other EU Member States to exclude them from current and future arrangements between the UK and EU.

 

The impact of leaving the EU on the UK border regime

 

  1. Aside from the concerns airports have as employers who would like to see continuing flexibility in the UK labour market, allowing airport operators to recruit the best-qualified staff, regardless of their background or nationality, we would highlight the impact of changes to migration policy on the effective operation of the UK border. As airports are the principle point of entry for nearly three-quarters of visitors to the UK, changes to migration policy is something that will have a disproportionate impact on airports.

 

  1. Currently, EEA and Swiss nationals are subject to a “soft border” regime, focused on the verification of identity. Citizens of other countries face a “hard border” regime, which involves Immigration Officers asking additional questions regarding the purpose of the visit. The automated e-passport gates are part of the soft border approach and can only be used by EEA nationals. Importantly, the e-passport gates are viewed by the Home Office as being one of the main ways in which Key Performance Indicators (KPIs) for passenger processing can be maintained in the face of reduced Border Force funding.

 

  1. Border Force operates maximum waiting time targets. These KPIs are 25 minutes for EEA visitors compared to 45 minutes for non-EEA citizens. Border Force resources are already stretched to breaking point: airports across the UK have seen significant increases in queue lengths at passport control in recent years, including more regular breaches of the maximum waiting times – as has been widely reported in the media over the past few years. The primary reason is that Border Force’s budget simply hasn’t kept up with passenger growth. In 2012-13, the budget was £617 million while in 2016/17 it is £558.1m – a 10% reduction[1]. Over the same period, passenger numbers increased by 15%, according to the Civil Aviation Authority.

 

  1. In 2015, there were 36m visitors to the UK, according to VisitBritain, 67% of whom came from other EU destinations. If EEA and Swiss nationals were to be subject to full border checks, this would be highly disruptive for passengers, airlines and airports alike.

 

  1. Requiring EEA and Swiss visitors to enter the UK under a hard border regime would have two main impacts. First, it would require Border Force to commit significantly more resources to processing these travellers. Second, even if significant new resources are allocated, queuing times for European visitors would still almost double under the current KPI regime.

 

  1. This increase in passport checks and processing times would act as a deterrent to visitors from the EU as it would make the UK seem like an unwelcoming destination. It would, for example, reduce the UK’s competitiveness in the pan-European tourism market by increasing the inconvenience of travelling to the UK. This would be damaging for the UK’s reputation abroad at a time when we want to demonstrate to visitors from abroad that the country is open for business. The economic impact of hold-ups at the border is likely also to be considerable, though we do not have exact figures at present as there is too much uncertainty over the exact nature of a future border regime.

 

  1. There would also need for additional space to be allocated to immigration control operations in airports and at other ports of entry. The cost of those building works would run into the millions of pounds. This cost would be borne by airports and port operators, who cannot invest that in increased connectivity and improving the passenger experience.

 

  1. In the short term, this uncertainty is already having an impact on airports. Some of those who are redeveloping their terminals, or plan to shortly, have been asked by Border Force to make changes to their plans to safeguard space for changes in the border halls. This is costing those airports tens of millions of pounds in additional development costs without it being clear if they will ever need to be used.

 

  1. The AOA has asked the Government to ensure the current UK/EEA/Swiss-passport channel at airports can be kept in place, as well as maintain the current regulations on what people can bring with them (goods, cash, etc.) when travelling from and to the EU.

 

Opportunities

 

  1. In terms of the opportunities following the UK leaving the EU, the AOA has identified the following:

 

 

 

December 2016

[1] https://hansard.parliament.uk/commons/2016-04-20/debates/16042035000002/BorderForceBudget2016-17