Open Skies Agreement (Membership) Bill [HL]

(Limited Text - Ministerial Extracts only)

2nd reading (Hansard): House of Lords
Friday 26th January 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)]

My Lords, I add my thanks to the noble Baroness, Lady Randerson, for raising the important issue of our future air services relationship with the United States, and I am most grateful to all noble Lords who have participated in this debate. I agree with the noble Lord, Lord Snape, that it is a pleasure to discuss aviation, a sector that is a great UK success story.

We have the largest aviation network in Europe and the third largest globally. Our airlines carry 144 million passengers and more than 1 million tonnes of cargo annually; and as the noble Baroness, Lady Randerson, said, the sector contributes some £52 billion annually to our GDP. It supports almost 1 million jobs in our country and is a key facilitator of exports, carrying goods worth £116 billion between the UK and non-EU countries. It is a reflection of our great trading economy that we have such an extensive global network of air services and we are determined that it will continue after Brexit.

The Bill highlights the desirability of a continued relationship with the United States—the noble Baroness is right that air services between the UK and US are of great importance to our economy. Some 20 million passengers a year fly between the two countries for business, tourism and to visit friends and family. That is second only to the number of passengers to Spain, which is our most popular overseas destination. Regular services to and from the US are available on more than 60 different airport pairings and new direct scheduled services start regularly. Air services between the UK and US help support more than £85 billion of trade between the two countries. This dynamic market is a global example of the benefits of competition and choice in air services. Of course, consumers benefit from competitive fares and a breadth of choice and we want this to continue after we have left the European Union.

As the noble Baroness pointed out, the current governing arrangement for UK-US air services is the EU-US Air Transport Agreement, often referred to as the EU-US open skies agreement. This agreement, dating back to 2007, lifted many restrictions that featured in earlier bilateral agreements and has removed all restrictions on direct flights. It also provides for code sharing, allowing, for instance, UK airlines to market services on US partner airline networks using their own flight codes. It is a multilateral agreement between the EU and its member states on one hand, and the United States on the other, with Iceland and Norway having joined the agreement as parties in their own right in 2010. This liberal market access and the competitive environment benefit passengers in terms of choice, connectivity and value for money. Passengers can fly directly to more than 20 US airports from a variety of points in the UK and can connect to virtually anywhere in the US.

A study last year reported savings of more than £200 per passenger compared with ticket prices before the agreement was signed. We aim to preserve this access after we leave the European Union, ensuring that the aviation industry and, of course, passengers continue to benefit. In preparing to exit the EU we have listened very closely to the aviation industry on both sides of the Atlantic. It has been clear in explaining the need for early certainty about the operating landscape. As has been pointed out in this debate, airlines sell tickets up to a year in advance and decisions on the deployment of capital and other resources also need to be taken well in advance to plan and grow routes. We have two overarching aims for future UK-US air arrangements. The first is to transition the liberal market access arrangements currently available under the EU-US agreement. The second is to provide the industry with the certainty it has asked for as soon as we possibly can.

Having set out the Government’s position I turn to the terms of the noble Baroness’s Bill. The Bill requires Ministers to,

“have regard to the desirability of continuing to participate”

in the EU-US Air Transport Agreement. As I and other noble Lords have mentioned, Iceland and Norway have both acceded to the terms of the EU-US Air Transport Agreement as states in their own right. I believe that the aim of the Bill is for Ministers to consider the UK acceding to the agreement in the same way. As I said earlier, we recognise that the aviation industry needs early reassurance about the terms under which UK-US air services will operate after we leave the EU. The noble Lord, Lord Paddick, is right to say that to do nothing is not an option. When we leave the EU, the EU-US agreement will no longer be legally operable for us; it would need to be amended to enable our continuing participation. This would require the unanimous agreement of all parties to it—that is, the European Union, each of the 27 other member states, Iceland, Norway and the United States. Such unanimous agreement would, of course, take time.

The Government believe that the quickest, simplest and clearest way to provide the early certainty so needed by the aviation sector is by concluding a new, bilateral arrangement with the US that will apply as soon as the EU-US open skies agreement ceases to apply to the UK. That is exactly what we are working towards. Department for Transport officials have already undertaken three rounds of informal discussions with their US counterparts on our future bilateral arrangements. A further round of discussions will take place with the US in the coming weeks. There is broad consensus on the outcomes we wish to reach. Both sides understand that preservation of the current liberal market access arrangements should be the starting point and that industry needs to be confident about what it can or cannot do in good time. These discussions are going well and I hope that this goes some way towards reassuring noble Lords concerned about our relationship.

I take this opportunity to highlight that the Government do not rule out participation in the EU-US Air Transport Agreement at some point in the future. The UK could apply to become a party to the agreement as a state in our own right if that offered the optimum solution for the circumstances of the time. However, as I say, the consent of all other parties to the agreement would be required and that would take time, so the Government believe that the best option to provide early certainty is a new, bilateral agreement with the United States.

I turn to some questions raised by noble Lords. The noble Baroness, Lady Randerson, raised the issue of third countries. Where market access is currently determined by EU-negotiated arrangements we are working with those countries, including Canada, to ensure that the new, bilateral arrangements will be in place well before we leave the EU. I hope to provide further updates on these soon. Of course, we already have bilateral air services agreements with 111 countries, which will continue as we leave the EU.

The noble Lord, Lord Snape, correctly highlighted many details of the EU-US deal. We do not propose to open these in discussions with the US at the moment. For example, cabotage within the US will not be up for discussion. Our aim is to replicate the current arrangements as they stand, as soon as possible, so as to provide certainty to industry. I quite agree with the noble Lord that we cannot simply say that it will be all right on the night.

[Lord Purvis of Tweed]

We have partial clarity from the Minister that the UK will seek a bilateral agreement with the United States and then, in due course, there will have to be a bilateral relationship with the European Union. When does the Minister believe that that will be required to be ratified by this Parliament to offer the security for the industry that she says is desperately needed? Can she offer clarity that, in discussions with the United States on this bilateral agreement that the Government seek to intend, part of that agreement will be that UK safety will be regulated by the European Aviation Safety Agency?

[Baroness Sugg]

I shall come to EASA, but that will not be included in the UK-US bilateral agreement that is being discussed; that will be a separate negotiation and conversation with the European Union. On the timing of ratification, I am afraid that I shall have to get back to the noble Lord, but the aim is that this will be in place well before we leave the European Union, to provide certainty.

The noble Lord, Lord Paddick, and the noble Baroness, Lady Hayter, asked about customer protection. The UK has always been a leader when it comes to providing protection for holidaymakers, and we want that to continue to be the case whether we are inside or outside the European Union. The consumer protections based within the EU will be retained through the European Union (Withdrawal) Bill, so that British consumers will be able to rely on the same rights as they have now after we leave the EU. The absolute aim is to provide consistency with what they currently have.

The noble Lord, Lord Purvis, raised EASA. We are working closely with industry on this and, of course, we are very aware of all its views and what is needed for the sector. Again, we desire a speedy agreement on this. We are representing those views very clearly in our conversation with the EU, and will continue to keep the sector updated as negotiations progress. There is a precedent for non-EU states to be part of EASA; Switzerland and Norway are, for example. We continue to examine the possibility and suitability of such an arrangement.

On the CJEU, the Government have been clear that the UK will no longer be subject to direct CJEU jurisdiction after we have left the EU. There are models—

[Baroness Hayter of Kentish Town]

Given that that is not quite the case, in that EU citizens will have some access to the ECJ for eight years, perhaps the Minister could accept that it has not been completely ruled out, as much as it had before.

[Baroness Sugg]

In the case of EASA and the CJEU, there is an example where non-EU countries are able to participate in EASA without the direct jurisdiction of the CJEU. It is a co-operative arrangement, and that is exactly what we are looking to replicate.

The noble Baroness, Lady Hayter, and others mentioned the Commission paper. I have seen the presentation, which looks like an opening position from the Commission, drafted with its own interpretation of the UK position. It is clearly designed to be thought provoking and to ensure that member states focus on aviation issues. The paper sets out a number of options but also makes it clear that, in the unlikely event of a no deal, there will be contingency measures to ensure traffic rights and safety. As many noble Lords acknowledged, we have no WTO fallback on aviation, so it is encouraging that aviation is one of only two sectors that have been considered by the Commission in such close detail. We are pleased that the EU considers aviation to be such a priority—we feel that, too—and we look forward to conversations progressing.

I agree with many points raised by noble Lords this afternoon. We all want to continue open and liberal access to our skies after we leave the European Union, and we have all explained why this access is so important. I hope that I have provided some assurance that that is exactly what we are working towards—although I imagine that the noble Lord, Lord McNally, would categorise it as vague promises of better things to come. I apologise if that is the case. We will ensure that we keep your Lordships updated as negotiations progress. I also confirm that I was in no way offended by the noble Lord reading back my own words to me—but I am very interested to know what his job was in the circus.

The noble Baroness, Lady Randerson, has helped to highlight the importance of the UK-US air services relationship and the vitality of the current market. This relationship and vitality are things that we intend to preserve and to build on. However, the Government believe that the Bill is not necessary. It requires us to do something that we are already doing: to have regard to the desirability of continuing to participate in the EU-US Air Transport Agreement. We do not believe that we need another law on the statute book in this respect.