EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

The United Kingdom submitted on 29 March 2017 the notification of its intention to withdraw from the Union pursuant to Article 50 of the Treaty on European Union. This means that, if the Withdrawal Agreement is not ratified, the Unions’ primary and secondary law will cease to apply to the United Kingdom from 30 March 2019 (‘the withdrawal date’). The United Kingdom will then become a third country.

International air transport cannot take place without the explicit consent of the States involved; this is a consequence of their complete and exclusive sovereignty over the air space above their territory. It is customary for States to organise air transport between them by means of bilateral Air Services Agreements (ASA) which lay down the specific rights mutually granted and the conditions of their exercise. Traffic rights and services directly related to their exercise are expressly excluded from the scope of the General Agreement on Trade in Services.

Within the Union, the freedom for the Member States' air carriers (Union air carriers) to provide intra-EU air services exclusively stems from 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, which also lays down the rules for the licensing of those carriers.

In the absence of any provisions to the contrary in a withdrawal agreement, air services between the United Kingdom and the Member States would cease to be governed by the said Regulation upon withdrawal. Moreover, certain air carriers, by reason of their holding an operating licence issued by the United Kingdom, or their principal place of business being located in the United Kingdom, or their being majority owned or effectively controlled by the United Kingdom or its nationals, would cease to meet the conditions laid down in the said Regulation to qualify as Union carriers.

It follows that, in the absence of provisions to the contrary in a withdrawal agreement, as from 30 March 2019 there would be no legal basis for the provision of air services between the United Kingdom and the Member States by the respective carriers. The carriers in any of the situations described above would lose their Union operating licence and, as a consequence, no longer enjoy the right to provide intra-Union air services.

Direct air transport services between the United Kingdom and the Member States are almost entirely in the hands of United Kingdom and Union air carriers. The loss by those air carriers of their right to provide air services between the United Kingdom and the Member States would therefore result in serious disruption. Most, if not all, air routes between the Union and the United Kingdom would cease to be served. In contrast, intra-Union routes no longer served by United Kingdom carriers following withdrawal would remain fully accessible to Union carriers.

In a no-deal scenario, it is expected that the consequences for the respective economies would be severe, as described further down: air travel time and costs would significantly increase as alternative routes are sought, and so would pressure on the air transport infrastructure within those alternative routes, while air transport demand would fall. As a result, not only the air transport sector, but also other sectors of the economy which are largely dependent on air transport would be hit. The resulting barriers to trade would hinder business in distant markets as well as business (re)location. The disruption of air transport connectivity would represent the loss of a strategic asset for the Union and the Member States.

In its Communication ‘Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan’ of 13 November 2018 the Commission announced its intention to propose measures to ensure that air carriers from the United Kingdom are allowed to fly over the territory of the European Union, make technical stops (e.g. refuelling without embarkation/disembarkation of passengers), as well as land in the European Union and fly back to the United Kingdom. Those measures would be subject to the condition that the United Kingdom applies equivalent measures to air carriers from the European Union.

The present proposal thus has the objective to lay down provisional measures to govern air transport between the Union and the United Kingdom following the latter's withdrawal from the Union (Article 1). These measures are intended to maintain basic connectivity for a short transitional period (Article 12).

In the first place (Article 3), the proposed Regulation provides for the unilateral grant of first, second, third and fourth freedom traffic rights to United Kingdom air carriers so that these can continue to overfly and make technical stops in Union's territory, as well as serve direct routes between the respective territories. No distinction is made between passenger and cargo operations, or scheduled and non-scheduled services. Consistent with the proposed Regulation's objective to ensure basic connectivity, the capacity which United Kingdom air carriers will be allowed to offer is frozen at pre-Brexit levels expressed in number of flights ("frequencies"). None of the usual operational flexibility devices (such as cooperative marketing arrangements, leasing of aircraft, change of gauge or co-terminalisation) have been foreseen for United Kingdom carriers to provide air services under the Regulation.

The rights granted to United Kingdom carriers being subject to a principle of “reciprocity”, the proposed Regulation (Article 4) lays down a mechanism to ensure that the rights enjoyed by Union carriers in the United Kingdom stay equivalent to those granted to UK carriers under the proposed Regulation. If that is not the case, the Commission is empowered to adopt the necessary measures to correct the situation by means of implementing acts, including the limitation or withdrawal of operating authorisations of United Kingdom air carriers. The assessment of the level of equivalence and the adoption of corrective measures by the Commission are not solely linked to strict, formal correspondence between the two legal orders; this is because of the marked differences between the respective markets and in order to avoid a blind mirroring approach - which might in the end prove counter to the Union interest.

Just as the Union strives to achieve in all its air services agreements, the proposed Regulation, even though it aims to temporarily ensure basic connectivity, lays down a flexible mechanism to ensure that Union air carriers enjoy fair and equal opportunities to compete with United Kingdom carriers once the United Kingdom will no longer be bound by Union law. A level playing field requires that, even after the withdrawal, the United Kingdom continues to apply sufficiently high standards in the area of air transport as regards: fair competition including the regulation of cartels, abuse of dominant position and mergers; the prohibition of unjustified government subsidies; the protection of workers; the protection of the environment; safety and security. Moreover, it must be ensured that Union carriers are not discriminated against in the United Kingdom, be it de iure or de facto. The proposed regulation thus charges the Commission (Article 5) with the task to monitor the conditions of competition between Union and United Kingdom air carriers and empowers it to adopt the necessary measures, by means of implementing acts, to ensure that those conditions remain fulfilled at all times.

The necessary procedures are established so as to enable the Member States to verify that air carriers, aircraft and crews flying into their territories under this Regulation are licensed or certified by the United Kingdom in accordance with internationally recognised safety standards, that all relevant national and Union legislation is complied with and that the allowed rights are not exceeded (Articles 6 to 9).

Explicit provision is made to recall that Member States must not negotiate nor enter into any bilateral air services agreements with the United Kingdom on matters falling under the scope of this Regulation and that they must not otherwise grant UK carriers, in connection with air transport, any rights other than those granted in this Regulation. (Article 3). Nevertheless, the respective competent authorities will of course be able to cooperate as necessary for the good implementation of the Regulation (Article 10), so that the least possible disturbance is brought to the management of the air services that will continue to be provided under its aegis after the United Kingdom's withdrawal.

The European Council (Article 50) reiterated its call, on 13 December 2018, for work on preparedness at all levels for the consequences of the United Kingdom's withdrawal to be intensified, taking into account all possible outcomes. This act is part of a package of measures which the Commission is adopting in response to this call.