Philip Hammond admits, to Treasury Cttee, that no deal on Brexit could have serious impacts on flights to and from UK
Chancellor Philip Hammond has become the first Cabinet minister to admit leaving the EU without an agreement could ground all flights from the UK to Europe. Giving evidence to MPs on the Commons Treasury Committee, the Chancellor said that was “theoretically possible” and a failure to reach agreement with the EU would halt air traffic between Britain and the 27 member states on March 29, 2019. However, he did not believe that would happen, and a deal on air travel would be struct regardless as it would be in the mutual interest of both sides. It would be necessary to make decisions so there is no interim period with no deal. He said: “What I am not proposing to do is allocate funds to departments in advance of the need to spend it.” All flights within the EU for the last 25 years have been governed by the “EU Internal Market for Aviation” – known as “open skies”. This allows any EU airline to fly between any two EU airports, subject to slots being available, and has worked since 1992. When the UK leaves the EU, there are no WTO rules to fall back on, and the UK would need to negotiate an entirely new treaty with the EU for any flights. All flights from the UK to the US are governed by the Air Transport Agreement between the EU and USA, and this would also need to be re-negotiated.
BREXIT: PHILIP HAMMOND BECOMES FIRST CABINET MINISTER TO ADMIT ‘NO DEAL’ COULD GROUND ALL FLIGHTS
By Simon Calder (Independent, Travel Correspondent)
Chancellor concedes it is ‘theoretically possible’ that air traffic between Britain and 27 member states could end on 29 March 2019; travel industry boss says ‘The public will be in uproar’
Philip Hammond has become the first Cabinet minister to admit crashing out of the EU without an agreement could ground all flights from the UK to Europe.
Giving evidence to MPs on the Commons Treasury Committee, the Chancellor said the eventuality was “theoretically possible” that a failure to reach agreement with the bloc would halt air traffic between Britain and the 27 member states on March 29, 2019.
But Mr Hammond insisted he did not think “anybody seriously believes that it where we will get to”, saying an air travel deal would be struck regardless.
He said “mutual interest” would ensure an arrangement would be put in place to prevent such an impasse.
“There will be points where it will be necessary to make go to no-go decisions around future programmes to be ready on day one,” he said.
“I am clear we have to be prepared for a no deal scenario unless and until we have clear evidence that is not where we will end up.
“What I am not proposing to do is allocate funds to departments in advance of the need to spend it. We should look at each area for the last point when spending can.”
It came as Mr Hammond refused to budget for a ‘no deal’ Brexit scenario, just days after Prime Minister Theresa May announced emergency plans to avoid border meltdown for businesses and travellers.
All flights within the EU for the last 25 years have been governed by the governed by the “EU Internal Market for Aviation” – more crisply known as “open skies”.
It allows any EU airline to fly between any two EU airports, subject to slots being available.
Since 1992, open skies has allowed the development of low-cost airlines, starting in the UK and Ireland with easyJet and Ryanair. In a quarter-century, the number of passengers flying within Europe each year has almost tripled to nearly one billion annually.
Once the UK leaves the EU, there are no World Trade Organisation rules to fall back on. The UK would need to negotiate an entirely new treaty with the EU for any flights to take off.
Similarly, all flights from the UK to the US are governed by the Air Transport Agreement between the EU and Washington DC.
Another treaty will be needed, and it is unclear what will happen to the dozens of flights on Norwegian to the US from Gatwick, Edinburgh and Belfast.
A large majority of the holidays sold by tour operators and travel agents involve flying people to the EU, and inbound passengers from Europe are the most numerous inbound tourists to Britain.
Mark Tanzer, chief executive of Abta, the travel association, told The Independent the grounding of flights is a “theoretical and technical possibility”, but said: “I’m very confident that through the negotiations another structure will be put in place before that ever happens.”
“Clearly there are benefits on both sides to be able to fly to and from the UK.”
Paul Carter, chief executive of Hotelplan — which includes tour operators such as Inghams, Explore and Inntravel — said: “This is a negotiating tactic between our Government and Brussels, and the public will be in uproar if this doesn’t go through. So I don’t think it will happen.”
UK-based airlines told to move headquarters to Europe after Brexit or lose intra-European routes
The EU has warned airlines including easyJet and Ryanair that they will need to relocate their headquarters or sell off shares to European nationals, if they want to continue flying routes within continental Europe after Brexit. Executives at major airlines have been reminded during recent private meetings with EU officials that to continue to operate on routes between European airports, they must have a significant base on EU territory and that a majority of their capital shares must be EU-owned. This will mean they will need to act to restructure, with economic consequences for the UK, including a likely loss of jobs. Theresa May is due to trigger Article 50 next week. If the EU takes a tough line, it may result in the UK reciprocating with its own rules, which would leave EU-owned airlines facing equivalent choices. Some might establish their own British subsidiaries, as the demand for air travel in the UK is high and there is money to be made. EasyJet flies many routes within Europe (not from UK) and that is part of its business model. Ryanair is based in Ireland, but has some UK shareholders it will have to replace with Europeans. BA does not fly intra- European flights, and IAG is based in Spain. IAG is likely to need to disinvest shareholders in order to be majority EU-owned, and allow its other EU-registered carriers to continue to operate across Europe. The overall impacts on the UK will not be known for some time.
easyJet, IAG and Ryanair woes over the UK Brexit vote and hit to their businesses
Shares in easyJet have lost value since the Brexit vote, and the airline said its profits would be hit by Britain’s decision to leave the EU. There would be continuing economic and consumer uncertainty, partly about the membership of UK airlines in the single European aviation market. easyJet expected its profits to be £28 million lower than earlier expected, in the third quarter of 2016, and revenue in the second half of 2016 would be lower. Revenue per seat might be 8.6% down in the third quarter of 2016. easyJet said the weaker £ against the € and the $ would make foreign trips more expensive for Brits, and the low cost airlines would have to cut fares in order to attract them. That means cutting airline profits. Carolyn McCall, easyJet CEO, is urging the European Commission to prioritise British airlines remaining part of the EU aviation area “given its importance to trade and consumers”. (ie. given its importance to airline profits). The value of IAG shares fell on the Brexit result, and they issued a profit warning, as the economic slowdown likely in the UK would reduce air travel demand. Ryanair’s share priced also fell. It says it will not deploy new aircraft on routes to and from the UK next year, following the Brexit vote, and will instead focus on the European Union. At present, UK passengers are about 40% of Ryanair’s total. They expect the period of “considerable uncertainty” to last for many months.
Lord Adonis: Hard Brexit could halt Heathrow runway plans, as investors won’t risk the money in UK
National Infrastructure Commission chairman, Lord Adonis, says UK must maintain ties with EU to save key projects such as Heathrow 3rd runway and HS2. He said a hard Brexit would spell the end for the 3rd Heathrow runway. Heathrow airport was keen, before the referendum in 2016, for the UK to remain in the EU. While Heathrow, since the referendum, has argued that Brexit makes its 3rd runway ever more important, Andrew Adonis said private investment in infrastructure would be off the table unless Britain could maintain ties with the EU. He said that a host of major projects including HS2, Crossrail 2 and HS3 rail links between northern cities, as well as universal broadband and mobile services, would be under threat but particularly those that rely on private funding. “These decisions on Brexit have a crucial bearing on infrastructure. Business will not invest for the long term if they think Britain is going down the tube. It’s as simple as that.” And “If we were to go for a hard Brexit which severs Britain’s trading ties with the continent I think we could be heading for a calamity as a country.” The cost of the expansion at Heathrow would be about £17.5 billion (with Heathrow only paying about £1 billion towards surface access). They are trying to find cost savings. The money needs to come from its range of foreign investors, the biggest two of which are a Spanish Ferrovial (25%) consortium and Qatar’s sovereign wealth fund (20%).