Aviation Sector Report

1. This is a report for the House of Commons Committee on Exiting the European
Union following the motion passed at the Opposition Day debate on 1 November,
which called on the Government to provide the Committee with impact assessments
arising from the sectoral analysis it has conducted with regards to the list of 58
sectors referred to in the answer of 26 June 2017 to Question 239.

2. As the Government has already made clear, it is not the case that 58 sectoral impact
assessments exist. The Government’s sectoral analysis is a wide mix of qualitative
and quantitative analysis contained in a range of documents developed at different
times since the referendum. This report brings together information about the sector
in a way that is accessible and informative. Some reports aggregate some sectors in
order to either avoid repetition of information or because of the strong interlinkages
between some of these sectors.

3. This report covers: a description of the sector, the current EU regulatory regime,
existing frameworks for how trade is facilitated between countries in this sector, and
sector views. It does not contain commercially-, market- or negotiation-sensitive
information.

Description of sector
4. The UK is a global player in the aviation sector and has the third largest aviation
network in the world. It was the largest air transport system in Europe in 2015,
serving 250 million terminal passengers.12 The UK has direct connections to over 370
international destinations with at least a weekly service and nearly 200 with at least a
daily service from at least one UK airport.3 49 per cent of the UK’s adult population
flew abroad at least once in 2014.4 Aviation is a significant industrial sector in its own
right, directly contributing at least £22 billion to the UK economy in 2015.5

5. Aviation also underpins several other sectors including international trade in goods,
global business and tourism:
• International trade in goods: In 2015, goods worth £155 billion were shipped
by air between the UK and non-EU countries, over 40 per cent of the UK’s
extra-EU trade by value;6

                                                                                                                       
1
http://ec.europa.eu/eurostat/statistics-explained/index.php/Passenger_transport_statistics
2
https://www.gov.uk/government/statistical-data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport
3
A new aviation strategy for the UK: call for evidence,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/636625/aviation-strategy-call-for-
evidence.pdf
4
British Social Attitudes Survey (DfT) 2014, https://www.gov.uk/government/statistics/british-social-attitudes-
survey-2014
5
A new aviation strategy for the UK: call for evidence,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/636625/aviation-strategy-call-for-
evidence.pdf
6
HMRC trade statistics, 2015, https://www.uktradeinfo.com/Statistics/BuildYourOwnTables/Pages/Home.aspx
1  

 
  

• Global business: The UK’s geographical location and extensive aviation

network makes it a very attractive location for global business;
• Tourism: 73 per cent of visitors to the UK come here by air, 61 per cent of
which came from other EU countries.7

6. Taken together, the aviation and aerospace sectors combined provide the UK with
over half a million jobs, either directly or indirectly and often in high value roles.8
Employment in the aviation sector is spread across all regions of the UK, as shown
below:9

A Growing, Improving And Integrated Market

7. The aviation sector has seen significant growth, bringing much greater levels of
connectivity, with the UK and EU at the forefront of these trends. Since the 1990s the
trend in the aviation sector is one of global growth and the UK has been a significant
participant in this growth. In 2015 there were 3.3 billion air passengers worldwide.10
Asia and the Pacific accounted for the largest proportion of world air traffic in 2014,
representing a notable 7 per cent growth. This was followed closely by Europe and
North America who also displayed a substantial share of world air traffic.11 Overall,
the global demand for seats has grown on average by 5.5 per cent per year.12
Although airlines are still subject to restrictive ownership and control requirements in

                                                                                                                       
7
ONS, Travel trends 2015, Section 4 Overseas Residents Visits to the UK,
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/datasets/overseasresidentsvisitstothe
uk
8
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/636625/aviation-strategy-call-for-
evidence.pdf
9
Direct employment by region, excluding Northern Ireland,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/636625/aviation-strategy-call-for-
evidence.pdf
10
ICAO statistics, 2015 https://www.icao.int/annual-report-2014/Pages/the-world-of-air-transport-in-2014.aspx
11
ICAO statistics, 2015 https://www.icao.int/annual-report-2014/Pages/the-world-of-air-transport-in-2014.aspx
12
IATA, http://www.iata.org/pressroom/pr/Pages/2017-02-02-01.aspx

2  

 
  

some countries, we have seen a trend to liberalise aviation markets. The EU and its
Member States have been at the forefront of this trend, but it has also been pushed
by North American states and more recently Gulf States. This trend continues, with
southeast Asian nations (the ASEAN 10 country regional block) now forming their
own internal aviation market.

Growth in global aviation13

8. We have seen a notable trend in the emergence of low cost carriers (in comparison
to Full Service Carriers, Legacy Carriers or Charter Carriers). In Europe, these
airlines have developed a business model based upon taking advantage of the very
liberal internal market and the ability to source labour from across the EU.

9. In 2015 air services in Europe accounted for almost 928 million passengers carried
(approximately 26.3 per cent of world traffic).14 The overall passenger growth in the
UK over the past five years is largely attributed to EU-27 destinations - see the chart
below.

10. Growth in passenger numbers has been stimulated by the steadily falling cost of
aviation since the 1990s.15

                                                                                                                       
13
ICAO, 2015 , https://www.icao.int/annual-report-2014/Pages/the-world-of-air-transport-in-2014.aspx
14
ICAO, 2016, https://www.icao.int/annual-report-2015/Documents/Appendix_1_en.pdf
15
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/278966/boc-transport.pdf
3  

 
  

International passengers at UK airports by region, 2000-201516

11. Passenger experience in the UK and EU has also been improving, driven by high
safety standards and improving air traffic management. Aviation safety has been
steadily improving throughout the world and in 2013, the EU had the lowest rate of
fatal accidents in the world.171819 In Europe average delays per flight have decreased
by 30 seconds per flight in July 2015, when compared to July 2014.20 Under the
‘Single European Sky’ a new operating concept for flight planning and the air traffic
management system has been agreed (this is detailed further in Section 2.)

12. Aviation demand correlates closely with economic growth. As an economic enabler
and vital piece of infrastructure the demand for aviation relies on the health of the
rest of the economy. This can be seen from the drop in passenger numbers at the
time of the 2008 financial crisis - see diagram below. The sector is also sensitive to
wider economic confidence as well as several macroeconomic factors such as fuel
prices and exchange rate. Passenger numbers at UK airports increased by 5.5 per
cent in 2015. This was the fifth successive year of growth following three years of
decline from 2008 to 2010.21

                                                                                                                       
16
Table AVI0105, Air traffic at UK airports, Department for Transport, https://www.gov.uk/government/statistical-
data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport
17
Figure 1, https://www.easa.europa.eu/system/files/dfu/European-Aviation-Safety%20Plan-%28EASp%29-
2014-2017.pdf
18
EASA Member States
19
Figure 2, https://www.easa.europa.eu/system/files/dfu/European-Aviation-Safety%20Plan-%28EASp%29-
2014-2017.pdf
20
https://www.eurocontrol.int/sites/default/files/content/documents/official-documents/facts-and-figures/coda-
reports/flad-july-2015.pdf
21
DfT analysis of Table AVI0101, Air traffic at UK airports, Department of Transport,
https://www.gov.uk/government/statistical-data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport
4  

 
  

Growth in UK aviation, indexed 199122

13. There has been a trend of consolidation, partnership and network integration in
parallel to the growth of low-cost, point to point travel. This has resulted in the
expansion of ‘hub-and-spoke’ networks run by major carriers and alliances at the
world’s largest airports. The three major airline alliances control half of global seat
capacity.

14. In Europe, the major hubs are at Amsterdam Schiphol, Paris Charles de Gaulle,
Frankfurt International and at London Heathrow.23 These European hubs have faced
strong competition over recent years, in particular from Middle Eastern hubs and
carriers. However, different international hubs are better placed to compete in
different markets due to their location. The image below shows the top 15
interregional transfer passenger flows in 2012.

                                                                                                                       
22
DfT analysis of Table AVI0101, Air traffic at UK airports, Department of Transport,
https://www.gov.uk/government/statistical-data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport;
Gross Domestic Product, ONS, https://www.ons.gov.uk/economy/grossdomesticproductgdp, 2016
23
Airports Commission Final Report , 2015
5  

 
  

Inter-regional transfer passenger flows for 201224

A Connected Market That Provides Multiple And Reciprocal Economic Benefits

15. Our major airports help increase the UK’s and EU’s connectivity. Heathrow is the
UK’s hub airport and one of Europe’s dominant hubs.25 For many years, Heathrow
Airport has been the busiest international airport in the world by passenger
volumes.26 Passengers travelling from North America often use Heathrow as a stop,
before transferring on to the EU. Transfer passengers benefit the UK economy
primarily through increased connectivity. Their demand has helped to make more
flights and routes viable, generating connectivity benefits to UK residents. On top of
this, they have directly contributed to revenue and employment for UK (EU and other)
airlines and Heathrow airport through their expenditure on airfares and at airport
businesses.

                                                                                                                       
24
Airports Commission Final Report, 2015 https://www.gov.uk/government/publications/general-aviation-
economic-value
25
Heathrow, Amsterdam, Charles de Gaulle Paris, Dublin and Frankfurt International,
http://ec.europa.eu/eurostat/statistics-explained/index.php/Air_transport_statistics, 2015
26
ICAO, 2015: Air Transport Yearly Monitor,
https://www.icao.int/sustainability/Documents/Yearly%20Monitor/yearly_monitor_2015.pdf
6  

 
  

Passenger growth at selected world hubs, 2010-201527

16. There are economic benefits for the UK and EU associated with tourism, enabled by
aviation. Levels of both inbound and outbound tourism are affected by aviation
connectivity. 73 per cent of visitors to the UK come here by air, 61 per cent of which
came from other EU countries.28 UK GDP is positively affected by inbound tourism,
with overseas residents making 37.6 million visits to the UK in 2016 and spending an
estimated £22.5 billion overall.29

17. In 2013, direct Gross Value Added (GVA) from tourism was worth £59 billion to the
UK economy, 3.7 per cent of UK GVA. Of this, England was responsible for £50.4
billion, followed by Scotland (£5.2 billion), Wales (£2.8 billion), and Northern Ireland
(£0.6 billion).30

18. Of the ten countries whose residents visited the UK the most frequently in 2016, eight
were EU countries31. Residents from Europe spent £11.7 billion on visits to the UK,
an increase of 5 per cent compared to 2015.32

19. Likewise, UK tourists flying to Europe contribute significantly to local economies and
GDP. Outbound tourism was responsible for 70.8 million trips abroad in 2016, which

                                                                                                                       
27
Table AVI0301, Major airports and airlines worldwide, https://www.gov.uk/government/statistical-data-
sets/avi03-passenger-traffic; https://www.gov.uk/government/collections/transport-statistics-great-britain
28
ONS, Travel trends 2015 Section 4 Overseas Residents Visits to the UK,
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/datasets/overseasresidentsvisitstothe
uk
29
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/articles/traveltrends/2016
30
The regional value of tourism in the UK, 2013, ONS 10 May 2016,
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/articles/theregionalvalueoftourisminth
euk/2013
31
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/articles/traveltrends/2016
32
Overseas Travel and Tourism quarterly dataset, table 3,
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/datasets/overseastravelandtourism
7  

 
  

was 8 per cent more than in 2015.33 Spain is still by far the most visited country by
UK residents (14.7 million visits in 2016), followed by France, Italy, Ireland, and the
USA.34 UK outbound spending accounted for £43.8 billion in 2016 (statistically this
outbound tourism spend is classed as a UK import from the countries visited).35 Of
these visits 53 million (75 per cent of total outbound visits) were to the EU, and
accounted for £25.4 billion spend (58% of total outbound spend).36

20. The majority of international flights to/from the UK involve European destinations.37

International passengers at UK airports38

21. This air connectivity plays an important role supporting key developing sectors in the
regions outside London. The number of routes between UK airports and destinations
in European countries is increasing. In particular, UK regions have benefited from
this improved connectivity. Manchester, Edinburgh, Birmingham and Glasgow have
all experienced growth in excess of 35 per cent in passenger numbers since 2010.39
Similarly, some regional airports in Europe are highly dependent upon the UK
aviation and outbound tourist markets.

22. Manchester Airport can be seen as the UK’s global gateway in the north of England,
offering direct flights to around 200 destinations worldwide.40 Other regional airports
in the UK also provide significant connectivity to their local areas, for instance, at
Glasgow airport there were over 9 million passenger movements in 2016, at Belfast

                                                                                                                       
33
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/articles/traveltrends/2016
34
Ibid.
35
Ibid.
36
Overseas travel and tourism quarterly dataset,
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/datasets/overseastravelandtourism
37
Table AVI0105, Air traffic at UK airports, Department for Transport, https://www.gov.uk/government/statistical-
data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport
38
Table AVI0105, Air traffic at UK airports, Department for Transport, https://www.gov.uk/government/statistical-
data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport Figures for Spain include Canary Islands.
Figures for Portugal include Madeira.
39
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/636625/aviation-strategy-call-
for-evidence.pdf
40
http://www.manchesterairport.co.uk/destinations-and-guides/a-z-list-of-destinations/
8  

 
  

International and City combined over 7.7 million, at Newcastle 4.8 million and at
Cardiff 1.3 million.41

23. Aviation connectivity may also promote the geographical concentration of economic
activity (agglomeration); for example, manufacturers with time critical supply chains
cluster around airports. Based on figures from 2011, in Scotland, Glasgow and
Edinburgh airports directly employ a combined total of around 7,500 people, whilst
Birmingham employs 7,500 and Bristol 2,700.42 Manchester airport directly employs
around 20,000 people across the north west, but the airport also supports a further
20,000 jobs through the supply chain, based in approximately 140 different
organisations.43 The existence of Manchester Airport, has enabled the ‘Airport City’
development which is estimated to have a value of £800m.44 Further examples of
such clustering are the UK technology sector, for which all of the top ten ranked
areas are located in close proximity to either Heathrow or Gatwick airports, and the
‘Aerohub’ enterprise zone established at Newquay airport targeted at aerospace
companies.

24. Similarly, air freight is playing an increasingly important role in moving goods to and
from the UK, especially to and from EU destinations. While most goods travel by
ship, there has been a growing volume of goods shipped by air in recent years. Over
the period 1975-2004, manufactured goods traded by air grew by 7.4 per cent per
year while goods traded across the ocean grew by 4.5 per cent per year.45 Aircraft
also tend to carry more valuable goods over longer distances: only 2 per cent of the
volume of our exports to the US travel by air, but they make up 67 per cent of the
value of our exports to the US.46

25. In 2015 goods worth £155 billion were shipped by air between the UK and non-EU
countries - over 40 per cent of the UK’s extra-EU trade by value.47 65 per cent of
aviation freight is handled at Heathrow, with East Midlands Airport and Stansted
being the next largest airports for freight.48 An example of the importance of air freight
is our trade with the United States, where it amounts to a total value of £44.7 billion,
or 56 per cent of the total value of goods traded.49

26. Aviation connectivity enables foreign market access to UK firms and UK market
access to foreign firms, thereby promoting trade and outward/inward investment. This
                                                                                                                       
41
Table_10_1 and Table_10_2, CAA Airport Data 2016, https://www.caa.co.uk/Data-and-analysis/UK-aviation-
market/Airports/Datasets/UK-Airport-data/Airport-data-2016/
42
New Economy (2011) Manchester Airport: Strategic Opportunities, a report for Association of Greater
Manchester Authorities http://www.neweconomymanchester.com/media/1425/manchester_airport_-
_strategic_opportunities_october_2011.pdf
43
New Economy (2011) Manchester Airport: Strategic Opportunities, a report for Association of Greater
Manchester Authorities, http://www.neweconomymanchester.com/media/1425/manchester_airport_-
_strategic_opportunities_october_2011.pdf
44
https://www.gov.uk/government/news/joint-british-chinese-partners-to-construct-new-800-million-manchester-
airport-city
45
Hummels, D. (2007) Transportation Costs and International Trade in the Second Era of Globalisation, Journal
of Economic Perspectives, 21, 3, pg131-154 https://www.aeaweb.org/articles?id=10.1257/jep.21.3.131
46
HMRC trade statistics, 2015 https://www.uktradeinfo.com/Statistics/BuildYourOwnTables/Pages/Home.aspx
47
HMRC trade statistics, 2015 https://www.uktradeinfo.com/Statistics/BuildYourOwnTables/Pages/Home.aspx
48
Table TSGB0202c (AVI0102c), Transport Statistics Great Britain 2015,
https://www.gov.uk/government/statistics/transport-statistics-great-britain-2015
49
HMRC trade statistics, 2015, https://www.uktradeinfo.com/Statistics/BuildYourOwnTables/Pages/Home.aspx
9  

 
  

in turn generates a number of benefits for the UK economy, for example it allows the
high value UK service sector businesses access to the world.

27. The table below shows the value of UK services exported to foreign countries (£
billion) and the number of seats available from Heathrow in 2010.

Value of UK services exported to foreign countries (£ billion) and the number of seats
available from Heathrow, 201050

Wider Aviation Markets Benefits

28. There are also wider benefits to the economy from aviation connectivity. For
example, multinational businesses operating in the UK recruit from a global pool of
talent in IT, creative industries, financial services, advanced engineering and many
other sectors. For their employees the ability to return home easily is an important
part of the package that adds to the UK’s competitive advantage. The same
considerations apply to UK businesses posting staff to important overseas markets.

29. Further benefits generated by aviation for the UK economy include:

● Development of economies of scale from exports: by increasing the scale
of production to serve foreign markets, UK firms achieve a reduction in their
unit cost of production;

                                                                                                                       
50
Airports Commission, Discussion Paper 2: Connectivity and the Economy
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/138162/aviation-connectivity-and-
the-economy.pdf
10  

 
  

● Increased competition: from imports and inward investment, leading to

lower prices and higher productivity in the UK;
● Specialisation benefits: aviation connectivity allows the UK to focus on the
production (and export) of goods/services that can be efficiently produced in
the UK and to import those goods/services that can be more efficiently
produced by our trading partners;
● Dynamic productivity effects: once UK firms start accessing a foreign
market, knowledge of that foreign market improves, meaning that UK firms
can take advantage of business opportunities that were previously unknown
to them; and
● Access to foreign technological knowledge and methods of production:
local UK firms can exploit to raise their productivity.

30. General Aviation (GA) activity (covering private business flights, as well as leisure
flying) is an important part of the aviation sector. GA economic activity in 2013 has
been estimated at about £3 billion, supporting over 38,000 jobs, 9,700 directly related
to flying and the remainder to manufacturing.51

The current EU regulatory regime

31. The EU aviation acquis establishes the rules which the UK has signed up to as a
member of the EU internal aviation market. EU aviation rules govern three key areas
and detail on these is set out below:
● General internal market measures and external relations;
● Safety – European Aviation Safety Agency (EASA); and
● Air Traffic Management – Single European Sky.

32. There is further EU legislation which governs:

● Ground handling – Regulation 96/67;
● Airport charges Directive – Directive 2009/12;
● Allocation of take-off and landing slots at busy airports – Regulation 95/93;
● Passenger rights – Regulation 261/04 (cancellation/delay compensation)
Regulation 1107/06 (disabled passengers), Directive 2015/2302 (Package
Travel);
● Noise management - Regulation 598/2014; and
● Security – The common basic standards are set out in Regulation 300/2008
with more detailed requirements in Regulation 2015/1998.

General Internal Market Measures

33. The internal aviation market has liberalised access for community airlines flying
between points within the EU provided that they have a licence that meets EU
conditions. The primary economic framework for air transport in the EU is contained
in Regulation 1008/2008, which harmonises rules on operating licences, market
access, aircraft registration and leasing, public service obligations, traffic distribution
and pricing.
                                                                                                                       
51
York Aviation, 2015, The Economic Value of General Aviation in the UK, for the DfT,
https://www.gov.uk/government/publications/general-aviation-economic-value
11  

 
  

Safety
34. The Civil Aviation Authority (CAA) is the UK’s independent aviation regulator. It levies
a charge on the aviation industry to fund its regulatory activity. Safety (and some
environmental) regulation is set by the European Aviation Safety Agency (EASA).
The Warsaw and Montreal Conventions govern international carriage by air and
provide for air carrier liability in the event of death or personal injury, destruction or
loss or damage to baggage or cargo, and damage arising from delay.

35. EASA was created in 2003 and reached full competency in 2008 through the
introduction of Regulation 216/2008 which sets out common safety rules and
objectives for civil aviation in Europe. EASA has competence (either full or shared)
over:
● Initial, additional and continuing airworthiness certificates of aircraft and
products;
● Air crew and flight limits;
● Air operations;
● Third Country Operator Authorisations that certify compliance with safety
requirements for foreign aircraft;
● Prohibiting unsafe airlines;
● Safety oversight in Air Traffic Management and Air Navigation Services;
● Air Traffic Controller licences and certificates;
● Airspace and airborne collision avoidance; and
● Administrative procedures related to aerodromes.

36. EASA prepares draft rules for consideration and adoption by the European
Commission. Member States’ National Aviation Authorities (NAAs) then implement
the adopted rules with monitoring from the Agency. The UK’s NAA is the CAA. EASA
also has a number of executive tasks, for example the initial airworthiness
certification of new and modified products (e.g. specific models of aircraft and
engines) and the certification of organisations based in third countries. The
Department for Transport and UK stakeholders are currently involved in more than
50 rulemaking activities within EASA and the UK is one of the NAAs that contributes
the most technical expertise to these working groups.

37. The system is underpinned by the set of common safety rules which are designed for
uniform application across the EU. Those rules apply both to the air transport
industry, individuals, organisations and products and to the NAAs themselves.

38. All regulations that derive from the EASA Basic Regulation (EU 216/2008) are
currently subject to a vote by the EASA Committee as part of the comitology
process.52 As a member of the EU, the UK is represented at the EASA Committee,
which is the EU comitology committee on aviation safety, and has a seat on the
EASA Management Board, which is the Agency’s management body. While third
countries are able to propose regulations and shape their development at EASA,

                                                                                                                       
52
Comitology refers to a set of procedures through which EU countries manage how the European Commission
implements EU law.
12  

 
  

they do not have a vote at this stage. However, they do have observer status in the
EASA Committee. In practice, regulations proposed by EASA as the technical
advisory body are rarely voted against by Member States on safety policy grounds,
as they prepared on a consensus-based approach.

39. Norway and Switzerland participate in the EU’s safety systems through their
agreements with the EU. Norway and Switzerland are both associate members of
EASA and both make a financial contribution to the running of the organisation.

Air Traffic Management (ATM)

40. ATM is a broad term that describes the technical communication, navigation and
surveillance systems and operational procedures that ensure the safe separation and
expeditious flow of air traffic through controlled airspace. States are obligated to
provide an ATM system and arrangements for air navigation in a way that facilitates
the international nature of air travel.

41. NATS is the UK’s en-route air navigation service provider (ANSP) providing air traffic
control services handling 2.4 million flights and 250 million passengers in UK
airspace each year.53 It is regulated by the CAA under a license covering en-route
services and services provided in a portion of the North Atlantic. Many elements of its
economic and safety regulation are governed currently by EU regulations set under
the Single European Sky legislative framework.

Single European Sky (SES) Legislative Framework

42. The key objectives of the SES legislative framework are:
• To restructure European airspace as a function of air traffic flows;
• To create additional airspace capacity; and
• To increase the overall efficiency of the ATM system.

43. The SES consists of four Basic Regulations (numbers 549/2004, 550/2004, 551/2004
and 552/2004 – SES I package) that cover the provision of air navigation services,
the organisation and use of airspace, and the interoperability of the European Air
Traffic Management Network. The SES I package was revised in 2009 by a further
package of legislation, SES II, which included economic and performance regulation
and a framework for developing and deploying new concepts for air traffic
management developed as part of Single European Sky ATM Research (SESAR)
programme.

44. SES legislation requires that all Member States work together to make improvements
to the organisation of airspace and delivery of air navigation services with a focus on
air traffic flows rather than being limited by national borders, for example by forming
Functional Airspace Blocks (FABs). All EU States were obligated to form FABs by
December 2012. EU legislation encourages third country participation in FABs so
some countries which border EU Member States, for example Norway and

                                                                                                                       
53
See NATS website: https://www.nats.aero/about-us/what-we-do/atc-explained/
13  

 
  

Switzerland, are part of FABs with EU Member States. There are nine FABs and the
UK is a member of the FAB with Ireland. Work is collaboratively undertaken between
the UK and Irish civil aviation authorities and air navigation service providers to
optimise airspace, articulate performance plans and deliver performance targets at
the FAB level.

EUROCONTROL
45. EUROCONTROL, the European organisation for the safety of air navigation, is an
inter-governmental organisation set up by its Member States to facilitate collaboration
and ensure safe and seamless ATM across Europe. It currently has 41 member
states, including non-EU States such as Turkey and the Ukraine.54 EUROCONTROL
provides the operational co-ordination of the European air traffic system, technical
expertise and legislative assistance to the Commission, industry and
EUROCONTROL member states. Operationally, EUROCONTROL ensures that air
traffic is planned daily against available airspace capacity. It works to minimise
delays in the event of crisis situations or strikes. The UK is a signatory to the
EUROCONTROL convention in its own right, independent of its membership of the
EU.

46. Although it is not an EU agency, the EU has designated EUROCONTROL to carry

out certain functions under the SES legislative framework, for example: administering
regulations; assisting the Commission’s work in the Performance Review Body; and
the Network Manager, which centralises responsibility for tasks including airspace
design and flow management with a view to improving the network.

Devolution, Overseas Territories And Crown Dependencies

47. Aviation is primarily a reserved matter, although certain aspects of economic

regulation of the sector, for example Air Passenger Duty, are devolved.55

48. The Crown Dependencies are the Bailiwick of Jersey, the Bailiwick of Guernsey and
the Isle of Man. Crown Dependencies have their own directly elected legislative
assemblies, administrative, fiscal and legal systems and their own courts of law.
Principal legislation made by the Islands’ legislatures requires Royal Assent or
sanction. The Ministry of Justice examines such legislation to ensure that there is no
conflict with international obligations (including European Convention on Human
Rights compliance) or any fundamental constitutional principles. UK legislation rarely
extends to the Crown Dependencies

49. Due to the nature of the Crown Dependencies’ legislative arrangements there is
freedom to choose the regulatory frameworks that are implemented. For example,
Jersey has chosen to participate in the EASA system as a third country but follows
UK rules on other aviation matters such as security. Each of the Crown
Dependencies has an airport.

                                                                                                                       
54
https://www.eurocontrol.int/about/member-states
55
Air Passenger Duty is devolved to Scotland and devolved to Northern Ireland in relation to long-haul flights.
14  

 
  

50. Unlike other Overseas Territories, Gibraltar is part of the EU. The Government of
Gibraltar is responsible for implementing the relevant applicable EU legislation. The
UK Government is working closely with the Government of Gibraltar to ensure the
best possible agreement for the UK and Gibraltar.

51. Crown Dependencies and Overseas Territories have their own aviation safety
regimes. For the purposes of Air Service Agreements (ASAs), the Crown
Dependencies and Overseas Territories are considered part of UK territory. For
Crown Dependencies, Overseas Territories and Devolved Administrations,
connectivity to global, domestic and European destinations will continue to be
important.

Existing frameworks for how trade is facilitated between countries

in this sector
52. The arrangements described in this section are examples of existing arrangements
between countries. They should not be taken to represent the options being
considered by the Government for the future economic relationship between the UK
and the EU. The Government has been clear that it is seeking pragmatic and
innovative solutions to issues related to the future deep and special partnership that
we want with the EU.

53. The Prime Minister has set out that the UK is seeking an ambitious arrangement with
the EU which builds on our unique position of regulatory alignment. We should seek
a set of arrangements which is in the best interests of citizens and businesses - both
in the UK and across the EU.

54. International air services are not covered by WTO rules but governed by ASAs
between individual countries (or regional blocs) which determine levels of market
access.56 ASAs are part of the international framework of air transport that has
developed from the 1944 Chicago Convention. ASAs will set out the access between
two states, and might also stipulate the number of carriers, provisions for freight
traffic and a range of other aviation related business.

55. The UK has bilateral ASAs with 111 countries (including, for instance, Brazil, Russia,
India and China). Our access to EU Member States, and some third countries, such
the US and Canada, is currently derived from our membership of the EU. In total, this
accounts for access to 44 markets which include some of our major trading partners
and together they account for around 85 per cent of international passenger
movements to and from UK airports57

56. Since the privatisation of the commercial aviation industry in the UK, and following
the removal of commercial restrictions within the EU internal aviation market during
the 1990s, the UK has actively sought to liberalise and deregulate its ASAs, aiming,
                                                                                                                       
56
Air traffic rights and services directly related to air traffic are exempted from the General Agreement in Services
57
Table AVI0105 https://www.gov.uk/government/statistical-data-sets/avi01-traffic-passenger-numbers-mode-of-
travel-to-airport
15  

 
  

on a reciprocal basis, to allow carriers to operate competitively, on a level playing

field, and within an appropriate regulatory framework.

57. The 1944 Chicago Convention also established the International Civil Aviation
Organisation (ICAO), a UN special agency that develops international aviation
guidelines and standards. ICAO has 191 state members. The UK is a permanent
representative on ICAO’s Council - ICAO’s main executive body – independent of its
membership of the EU. The EU is an ad-hoc observer in many ICAO bodies and at
ICAO Council the EU is represented based on an ad-hoc invitation.58 ICAO has no
ability to set regulation or enforce its rules, compliance is drawn from members’
domestic legislation. The UK and the EU have developed their aviation regulatory
framework on the basis of ICAO’s global standards.

58. Summarised below are examples of frameworks which facilitate aviation between the
EU and non-EU countries.

European Common Aviation Area Agreement

59. The UK is currently part of the European Common Aviation Area (ECAA) by virtue of
its membership of the EU.59 The ECAA agreement sets out the framework for an
integrated aviation market, and aims to extend the EU’s internal aviation market to
several non-EU countries.60 The level of market access granted is linked to the
degree to which countries adopt the aviation acquis. For example, Norway is part of
the ECAA through its membership of the European Economic Area (EEA). It has
adopted the full aviation acquis, and has full and open access to the European single
aviation market. The Former Yugoslav Republic of Macedonia has not completely
aligned its aviation regulations and has more limited market access.

60. The EU-Switzerland Air Transport Agreement is a bespoke bilateral agreement which
predates the ECAA. It is one of seven bilateral agreements between the EU and
Switzerland which stand or fall as a package. Switzerland agreed in 2002 to adopt
and implement the aviation acquis in full. Switzerland has been granted liberalised
access to the internal market, though its traffic rights do not extend to the ability to fly
between two destinations within a Member State.

EU Multilateral Agreements With Third Countries

US Open Skies Agreement
61. The EU has concluded liberal agreements with third countries. The EU-US Air
Transport Agreement is an example of this. It offers liberal market access for the EU
and US, with air carriers being able to fly an unlimited number of frequencies on any
route between the US and EU Member States. Prior to this agreement, transatlantic
routes were restricted in the points that could be served, the carriers that could

                                                                                                                       
58
https://ec.europa.eu/transport/modes/air/international_aviation/european_community_icao_en
59
European Common Aviation Area: includes the EU countries, Albania, Bosnia and Herzegovina, the former
Yugoslav Republic of Macedonia, Iceland, Montenegro, Norway, Serbia and the United Nations Interim
Administration Mission in Kosovo.
60
ECAA Agreement: http://ec.europa.eu/world/agreements/downloadFile.do?fullText=yes&treatyTransId=3421
16  

 
  

operate them and at what frequency. The agreement encourages principles of

competition and regulatory cooperation.

Neighbouring Countries Multilaterals (Inc. Israel, Morocco, Moldova, And Jordan)

62. Several countries neighbouring the EU have concluded agreements with the EU. The
terms of these agreements differ from the other but none of these countries have
been granted the right to operate flights within the EU. They are distinct from the US
agreement in that they extend to regulatory alignment, meaning that the respective
third countries have agreed to adopt and implement some, most of or all of the EU
acquis as it applies to aviation. There is a close correlation in these relationships
between the level of liberalisation in the agreement and the extent to which the third
country agrees to implement the acquis.

EU Canada Air Transport Agreement

63. EU and Canada Transport Agreement was signed in 200961. The agreement aims to
promote competition within the aviation marketplace with minimum government
interference and regulation. The EU-Canada agreement grants EU and Canadian
carriers the right to fly between any point in Canada and any point in the EU, as well
as points beyond, on services originating in the EU or Canada.

64. The agreement emphasises the need for parties to work collaboratively. This is
particularly emphasised on areas such as security and safety. Parties are
encouraged to exercise mutual recognition of security arrangements and reciprocal
acceptance of safety certificates and licences. Where there are reasonable grounds,
and/or a contracting party departs from the agreement, parties can act to suspend,
limit or revoke the arrangements.

Sector views
[This information was provided by the Government to the Committee, but the Committee has
decided not to publish this section]

                                                                                                                       
61
Canada EU Transport Agreement:
https://ec.europa.eu/transport/sites/transport/files/modes/air/international_aviation/country_index/doc/canada_fin
al_text_agreement.pdf
17