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Leaving the EU: Aviation Sector

Volume 617: debated on Friday 25 November 2016

Motion made, and Question proposed, That this House do now adjourn.—(Chris Heaton-Harris.)

The last time we sat back in our airline seats we might have asked ourselves several questions. How does this big metal tube stay in the air? Will I have to show my awful passport photo? How many gins and tonics is too many to ask for without feeling an abiding and deep sense of shame? One question we almost certainly did not ask, unless we were a Government lawyer perhaps, is whether we would even be able to go on that plane after Britain leaves the European Union.

In my constituency of Luton South that is not an academic question, as tens of thousands of local jobs depend on a successful and thriving aviation sector. Luton airport serves in excess of 14 million passengers each year and is growing at double-digit rates every year. Almost all of those people are travelling to other EU destinations. TUI Travel has a significant base in Luton and through its brand, Thomson Airways, drives a huge amount of traffic through UK airports, and easyJet, of course, is the UK’s largest airline today: a FTSE 100 company that has changed the way we fly and, indeed, think about flying. In the words of its current chief executive, it simply would not exist if it were not for the EU.

Aviation is a permissive regime, not a free-for-all. That means there must be an agreement in place between the countries we wish to fly from and to to get off the ground in the first place. The UK has agreements with some 155 countries, which vary in both their scope and specificity. Some are extremely restrictive, governing down to individual flight slots and specified airlines. Far and away the most permissive that we are signatories to are the 42 air service agreements in place through our continued membership of the EU. To make an obvious point explicit, they account for, and enable, the largest share of UK aviation traffic.

Twenty-five years ago, the deals we participated in across Europe were at the restrictive end of the scale. But, largely at the UK’s behest, these liberalised massively through the 1990s. Today, any British airline can fly anywhere it likes in the EU—that is anywhere, at any time. The EU single aviation market is separate from the single market in goods, services, capital and labour, but is no less significant in terms of the freedom it has enabled. A UK airline can sell tickets to anyone across the 28 member states without restriction; it can fly between member states, or even within another member state.

Let us consider what that means for easyJet, for example. Luton-based, it can operate flights from, say, France to Germany all day long without the aircraft ever touching down wheels at a British airport. It can operate between Milan and Naples, both of which are in Italy—I know that because I did a fact check just before the debate—with no problem whatever. As well as benefiting the local economies through direct employment, enabling connectivity and all the other benefits that aviation brings, that company’s profit today flows back into the United Kingdom.

The single market in aviation does not just benefit UK airlines; it has transformed our everyday experience of flight. Fares across Europe are down by around 40% in real terms, with greater choice and competition, and new routes across the EU opening up all the time. Britain has done particularly well under this regime, with about 1 million people in work today because of aviation. We are a world-leading nation in aviation services, and we represent a quarter, by nationality, of all European passengers. Should the Prime Minister stick to her original Brexit timetable, in a little over two years the UK will be out not just of the EU but of the European single aviation market. With no automatic fall-back for the governance of aviation rights, and no World Trade Organisation framework, there will be no legal right to operate flights to Madrid, Munich, Malaga or anywhere else in the 42 countries covered by the current EU-level framework.

It is true that we retain an experienced and capable air services negotiation team at the Department for Transport, but I must point out to any Brexiteers who are still in denial and saying, “Don’t worry about Europe; our future lies elsewhere” that the end of our membership of the EU will have a knock-on effect on many other nations as well. What could be more Brexity than leaving old Europe behind and traversing the jet stream on a flight to the United States? Well, even Concorde as she was in her heyday could not get us there after we exit the EU. Our agreement with the US is in place—yes, you guessed it—through our relationship with the rest of Europe.

The 2008 open skies agreement enables any EU or US-based carrier to fly any transatlantic route it likes. This has opened up new destinations and enhanced regional economies here in the United Kingdom. We have done particularly well under this arrangement, given our fortunate geographical location to the west of the continent. Should we be forced to fall back on our previous agreement, Bermuda II, which dates back to 1946 and was last amended more than 25 years ago, we would be lumbered with a document that considered it necessary to make regulation about flights into London airports alone. And that is not the only deficiency in that agreement or the others that are in place as back-stop provisions to the current EU agreements.

So before we even begin to think about the additional complicating issues, the effect of Brexit on UK airlines and export revenue alone should make us realise that we have a real headache here. Additional issues include: the need to reconfigure immigration reception at UK airports, where e-passport gates can be used only by EEA nationals; the replacement of a soft border regime by a more restrictive one; and the lengthening of process times, resulting in the need to expand Border Force staff numbers significantly. We also need to consider the role of freight. Heathrow is currently the UK’s largest port, and the customs code will add complexity and cost. Similarly, airports such as East Midlands derive much of their revenue from goods travelling on a just-in-time basis.

The UK is a leading and active member of the European Aviation Safety Agency, the rule-setting body that deals with the safe operation of civil aviation. That body has reduced costs to UK airlines, and indeed to the taxpayer, and enabled interoperability across the continent. We must also consider the significant implications for UK aerospace engineering and manufacturing. Airbus is our national project and it is showcasing some of the best that Britain can do, but it could now face uncertainty about the wings we manufacture in Wales. It certainly faces additional cost and complexity.

Let me say a word about why singling out aviation among the myriad small disasters wrought by Brexit is not special pleading, but a necessary task. Aviation agreements are different. They have always been treated separately from other trade agreements, even within the EU, because they are a prerequisite for getting such deals done in the first place. An aviation deal is a necessary first piece of the puzzle that is the process of negotiation with the rest of Europe, and it needs to be done ahead of any final settlement. The freedoms that the single aviation market have brought us are an enabler of negotiations and of trade and co-operation. This issue not only affects our relationship with the EU 27, but shapes our air routes, customers and markets in the rest of the world.

In 2015, UK airlines transported 250 million passengers to destinations around the globe and contributed £50 million to the British economy. The Government say they do not wish to pick winners, but we are first class at this. As I mentioned earlier, easyJet is not only the biggest UK airline, but the fourth biggest EU airline. Just consider that for a moment: from Luton to the world. EasyJet’s chief executive, Dame Carolyn McCall, has said:

“We are not saying there will be no agreement”,

and for the record, I take the same view. Nevertheless, she went on to say:

“We just don’t know the shape or form. We don’t have the luxury of waiting…we have to take control of our own future.”

EasyJet will never leave Luton as an operational base, but it is in the process of establishing a new and separate operation outside the UK to ensure that it can continue to fly as it does now. That is entirely understandable, and its commitment to the UK is laudable, but the uncertainty is having an effect right now.

What is to be done? First, the Government must take action, and rapidly. Aviation should be at the head of our negotiations. We have very little to fall back on, and the uncertainty is affecting us today. An agreement on the air services market should be reached early in the two-year window for article 50 negotiations, with the aim of securing maximum continuity for both UK and EU operators when we exit the European Union in spring 2019. To do so would benefit us and the remaining 27 states. It is not about cherry-picking from the single market, and it is not a trade issue that should be entangled with the wider negotiations. The deal I am describing is exactly the kind of thing the EU tries to achieve with third countries—in effect, an open skies agreement that maintains the continuity of access and equality across the UK and the EU 27.

Secondly, we need to push for a deal that is as close as possible to the one we have today, and it should include the right for UK airlines to operate between and within member states. The package we negotiated in the 1990s worked well because we worked together. The balance of rights has enriched us all, so we should be clear about the impact on UK airlines should we not achieve the aim of maintaining it.

Thirdly, we should seek to retain not only membership but influence of those bodies, such as the European Aviation Safety Agency, that set the rules and regulations for safe flying. Absolutely no one has a problem with one common set of standards across Europe when it comes to aviation safety. The EASA has benefited considerably from the UK’s expertise; we are a strong voice that should not be lost.

There are a couple of ways to achieve the aims I have set out, and I hope the Minister will be forthcoming about his negotiating stance when he responds. The first step would be to become part of the European common aviation area, which extends the liberalised aviation market beyond the EU and covers 36 countries, including our friends in Iceland and Norway. The other step would be a bilateral air transport agreement, as, indeed, Switzerland has negotiated, but such an agreement would necessarily take longer to negotiate and carry its own complexities. It is essential, however, to avoid slipping back with no deal at all and having to rely on age-old agreements that are no longer fit for the times that we fly in. A series of bilateral agreements would be bad, but falling back on past agreements would not be desirable either.

Exiting the EU cannot be done without some cost to us. The price of doing business will inevitably be a loss of influence over the rules and direction of the single market, but that should be minimised to the maximum degree. Certainty is the most important thing. The Government must not use aviation as a bargaining chip; they should come out and say that a separate agreement is required and that they will seek one out on the existing terms. Whatever the reason for the UK’s voting to leave the EU, it was not to make flying more restrictive, with more red tape and at a higher price, or with less choice for the passenger. For all our sakes, with our future now dependent on our being able to trade with the whole world, we need the first deal of the post-Brexit universe to be a good one.

It is a pleasure to be here today. I congratulate the hon. Member for Luton South (Mr Shuker) on securing this debate and on speaking so passionately and strongly on behalf of Luton airport, which is in his constituency. This is a particular pleasure because we started our parliamentary careers together on the Transport Committee and here we are today discussing transport almost seven years on.

Let me start by reiterating the Prime Minister’s views on the issue. She made it clear that Members of this House will have the opportunity thoroughly to discuss how we leave the EU, and in a way that respects the decision taken by the people on 23 June. This debate is an important part of that process, as was the opportunity the House had to discuss the implications of Brexit for transport on Wednesday, when many of the themes to which the hon. Gentleman referred came up. It is also important to realise that aviation is one of the Secretary of State’s top priorities and will play a huge role in fulfilling our wider aspirations around leaving the EU: being stronger and more ambitious as a country and more outward looking and open for business. Aviation will play an even more important role in strengthening existing links with countries near and far and in building fresh links across the world.

As the hon. Gentleman pointed out, our aviation industry is world class. It underpins the UK economy and international trade. Our airports, including Luton, are our gateways to the world. We are a big global player. We have the largest aviation network in Europe and the third largest in the world. In 2015, goods worth £155 billion were shipped by air between the UK and non-EU countries—over 40% of the UK’s extra-EU trade by value. The UK’s location and extensive aviation network make us an attractive location for global business. Some 73% of visitors to the UK come here by air. The aviation sector is a significant industrial actor in its own right, directly contributing around £20 billion to the economy in 2014, including the wider aerospace sector. The CBI rightly points out that, if the UK retains its aviation market share, air traffic growth in Asia alone will create an extra £4.7 billion in exports over the next 10 years and 20,000 high-value jobs.

As the hon. Gentleman knows, we have taken the significant decision to support a new north-west runway at Heathrow, which is a clear sign of the importance that the Government place on the aviation sector and of our commitment to improving global connections. With room for an extra 260,000 aircraft movements a year, the new runway will deliver more flights, more destinations and more growth. The benefits to passengers and the economy will be worth up to £61 billion. It will bring more business and tourism to Britain and offer more long-haul flights to new markets. By expanding Heathrow, we will show that we are open for business, confident about who we are as a country and ready to trade with the rest of the world. It will also provide a key hub for connections across the UK, improving domestic connectivity, but there is more to the story than Heathrow.

In October, we announced the go-ahead for a brand new £344 million expansion programme at London City airport. That, too, will increase connections within the UK and Europe, and support business opportunities and investment, as well as improving passengers’ journeys. Furthermore, regional airports such as Manchester and Bristol have each been spending £1 billion on improvements for passengers, with the Government supporting surface transport connectivity on road and rail around those airports. Then there is Newcastle, with a £14 million redevelopment of its departure lounge, transforming facilities for passengers before they take off on their journeys.

Last month, my noble Friend Lord Ahmad, the aviation Minister, signed a deal with China that will more than double the number of flights able to operate between our two countries, boosting trade and tourism. He was also recently in Manchester, welcoming Singapore Airlines to the city—the airline is operating its first connecting route to Manchester and onwards to Houston, Texas.

Looking wider than aviation for a moment, there are also extremely positive signs for investment in the wider transport industry in the UK. Since the referendum, we have seen several major companies announce major investments. In August, Bombardier in Derby received an order for 665 new pieces of rolling stock, delivered for Greater Anglia, which is great news for jobs and skills in the east midlands—as rail Minister, that gives me particular pleasure. Siemens, too, has committed itself to railway rolling stock manufacturing in the UK, as has Spain’s tram manufacturer CAF. In addition, Hitachi Rail’s new rolling stock manufacturing and assembly plant in Newton Aycliffe will create 730 new jobs. We also have Nissan’s commitment to investment, which is great news for not just the north-east but the British economy and the automotive sector as a whole.

I can understand that the referendum outcome has caused some uncertainty in the aviation industry, but the future of aviation does look bright for the UK. By expanding Heathrow, we will open up new opportunities at airports throughout the country. We should be incredibly proud of our UK airlines; they are among the best and most innovative in the world. More people fly with British airlines each year than fly with carriers from any other country, outside the US and China.

Other countries want to do business with us, our airlines and our airports, and I do not believe that that will change after we have left the EU. We must not lose sight of the momentous opportunities there will be for aviation. Aviation remains the top priority for the Department for Transport in the negotiations that will now ensue.

We are working hard across Government to ensure that our exit strategy addresses the priorities of the aviation industry. To do that we have been engaging proactively with our aviation industry to fully understand its views. Just last week, Lord Ahmad and the Secretary of State for Exiting the European Union had a very constructive roundtable with the aviation industry, including senior representatives from airports, airlines, industry bodies and regulators. That was part of a series of roundtables to allow our industry to express its views directly to Ministers and to discuss the risks, but also the opportunities, that Brexit has created.

We have released a joint statement with Airlines UK that reinforces just how important the aviation sector is in the upcoming negotiations—a point reiterated by the Secretary of State for Transport when he attended and spoke at the Airport Operators Association conference earlier this week. We remain focused on securing the right arrangements for the future, including with Europe, so that our airlines can continue to thrive and so that passengers will continue to have opportunities, choice and attractive prices.

Other areas of critical importance are the efficient regulation of safety, security measures and a seamless air traffic management system. We are considering the implications for our continued participation in the European Aviation Safety Agency system, to which the hon. Gentleman referred, and the single European sky. However, until we leave the EU, it is worth bearing in mind that EU law will continue to apply, alongside national rules.

Leaving the EU will give us more freedom to make our own aviation agreements with other countries far beyond Europe. It is vital that we seek to quickly replace or amend our EU agreements with countries such as the US and Canada. The Secretary of State for Transport has already held positive discussions with his counterpart in the US, and the aviation Minister has met numerous airlines that already operate into the UK from outside the EU. We are confident of reaching an early agreement and we will continue to engage with the industry on those issues throughout the coming months.

Alongside our preparations for Brexit, we are developing a national aviation strategy to address industrial concerns. The strategy will seek to champion the benefits that the third largest aviation market in the world already brings to this country. It is a long-term framework, covering airports, safety, security, competitiveness, consumers, regulation and capacity, and it will help to maximise the opportunities presented by our exit from the EU, along with the benefits of emerging technologies. Although it is at an early stage, we will look to have full, frank and constructive engagement with the industry and other partners in the aviation sector.

As Members know, the Government are not going to give a running commentary on aviation negotiations with our European partners, however tempting that prospect might occasionally be to Opposition Members. I can assure the House, however, that our negotiating position will be informed by our continued engagement with the aviation sector, as well as with colleagues who have an interest in it. The hon. Member for Luton South said that aviation has always been treated differently in such negotiations, and I see no reason for that to change in the immediate future. I assure him and the House that the views of all Members will be taken very seriously—not just on aviation, but across all sectors—for ultimately we are working hard to achieve the best possible outcome for our aviation industry and for Britain as a whole.

Question put and agreed to.

House adjourned.