Brexit: of theoretical risks

29/04/2018

There was a time when dropping out of the European Aviation Safety Agency (EASA) would have been welcome (to some). Booker wrote a story on it back in 2003 on the difficulties experienced by Swedish balloonist Per Lindstrand, who had been unable to get certification for his "HiFlyer" aerostats (one pictured), built by his Oswestry-based company.

This was just about the time EASA was taking over certification responsibilities from the UK's Civil Aviation Agency and other national governments in the EU, representing a major step in the inexorable march of European political and economic integration.

This continued until early 2005 when Lindstrand gained his certification, only for his firm to be plunged into another crisis when new EC regulations came into force requiring operations such as his to gain Design Organisation Approval (DOA) from EASA, involving a huge increase in bureaucracy and massive costs.

In due course, however. Lindstand's business was able to deal with the Kafkaesque bureaucracy and is now back in business - only now to face the same crises in reverse as, with Brexit, all his hard-won certification and approvals will lapse.

This was the message conveyed in the "Notice to Stakeholders " issued two weeks ago by the European Commission entitled "Withdrawal of the United Kingdom and EU aviation safety rules", heralding a situation that has the potential to cause serious damage to the UK's £31.8 billion-a-year aerospace sector.

The events leading up to this underline an important aspect of Brexit. Simply, while many were saying at the time we handed over so many functions to EASA that we should have maintained our own independent capabilities, the fact is that we didn't. And now, even if there are good reasons for rebuilding those capabilities, restoration will take time and cost a great deal. It is not something that can be rushed.

Thus, with Booker returning to the subject in this week's column, he suggests that if Theresa May really wants to know what she is up against as the months tick down on Brexit, she should read the Notice to Stakeholders.

This sets out in four pages just how totally dependent our aviation industry is for everything it does on authorisations granted by EASA, applying to every tiniest detail of how we make aircraft, to the running of our airports, to air traffic control, to the airworthiness of aircraft, to the certification and licensing of pilots, cabin crews, engineers, medical staff and trainers; in short, to every last item of what allows our aviation sector to function.

But as the document repeatedly makes clear, the moment the UK leaves the EU to become what it classifies as "a third country", every one of these authorisations and approvals will lapse. Unless each of them is replicated in time, our factories will close, our aircraft will be grounded, our airports and our entire £31 billion-a-year aerospace industry will shut down overnight.

The only clue Mrs May has given as to how she thinks this chaos can be avoided, as she said at the Mansion House, is that we should be allowed to remain in EASA. This was echoed by our own Civil Aviation Authority, which knows it would take years for us to create our own system. But the commission immediately pointed out that we cannot remain in EASA because, as the rules make clear, this is open only to EU members.

And we cannot even apply for the right for our airlines to fly to the EU and other countries until the moment we become a "third country", by a process that could then take months or even years to negotiate. Some of the biggest industry players have been waking up to the threat all this poses. Airbus and Ryanair, for instance, have both spoken of the possibility that their UK operations could "grind to a halt".

In fact, easyJet has already relocated its base to Austria; and Rolls-Royce, the world's second-largest aero-engine manufacturer, we learned last week, is making preparations to move part of its operations to Germany. This was reported in the Telegraph, which gave some details but didn't really have the measure of the story.

Rolls-Royce, the paper said, is preparing to relocate the "signing off" of British-made airliner engines to Europe, as the EU aviation authority will hold the right to certify they are safe to fly in the event of a hard Brexit. The company, therefore, "is preparing the contingency plan to protect itself from huge disruption if negotiations stall over Britain leaving the EU".

According to the Telegraph, "if Britain leaves the EU without agreeing a deal that includes associate membership of EASA, Rolls-Royce's products will not be able to be signed off in the UK and will, therefore, be unable to take to the air".

A senior Rolls-Royce source is then cited, saying: "It's a theoretical but real risk that either a deal or EASA membership will not happen. We would have to stop making engines until it was sorted out without a plan in place".

In fact, the risk is very much more than "theoretical". Outside the EEA there is no possibility of the UK gaining associate membership of EASA and, as I wrote in this piece, the best we can hope for is a "Working Arrangement". This will, of course, require full regulatory alignment but that is the least of our problems.

Crucially, the UK will become a third country, whence aviation enterprises will have to go through the full gamut of the relevant procedures to gain whatever approvals or authorisations that apply to them.

Here, it starts to get extremely complex. The system as it stands in the UK operates on the basis of shared responsibilities. Some approvals (licences, etc.) are handled by EASA, others remain with the CAA. Following Brexit, some will move to EASA but there are others which will have to be carried out by the CAA under the supervision of EASA.

This will require the formal agreement of a Working Arrangement, which will only come when the UK is able to demonstrate that it has a fully functioning national safety agency of its own.

On the other hand, the CAA itself has said that it could take between 5-10 years to acquire the full suite of capabilities, leaving the prospect of the UK not being able to satisfy the EU that its facilities fully conform with EU legislation.

The precise details of this are extremely difficult to work out for several reasons. Firstly, the EASA acquis is relatively new and many of the arrangements with third countries rely on legacy agreements which have been carried over. With the UK, however, all the existing agreements have either lapsed or been terminated. We will have to start again, with a clean sheet, something never before attempted and certainly not in circumstances where many of the structures required simply do not exist.

The point I've also made, for instance, here and here, is that the UK's current arrangements with third countries are folded into EU agreements – such as the EU-US Agreement on cooperation in the regulation of civil aviation safety.

When the UK drops out of EASA, therefore, it loses reciprocal rights with the US and other countries. This could end up with FAA officials having to assume some supervisory functions of UK facilities in order that American aircraft can be maintained on UK soil.

As regards manufacturing operations such as the Rolls-Royce aero-engine plants, there is no ambiguity here. There are two possibilities, As I indicated here and here, the immediate option is for Rolls-Royce to apply separately for Design and Production Organisation approvals, directly from EASA.

Longer-term, the CAA must satisfy the EU that it is maintaining regulatory alignment and has systems in place to ensure that it will continue. Then, the UK must conclude an agreement (with formal treaty status) with the EU on aviation safety. Clearly, that is not going to happen in a hurry.

Interestingly, not only is the Telegraph downplaying the issue, it demoted Booker's story, putting it below a squib on spring temperatures, thereby ensuring that it will not appear in Google News. And at an official level, there is also very little being admitted. All we get from Mrs May is a wishful thinking "non-solution" that the EU has already ruled out.

Says Booker, she really needs to read that Notice to Stakeholders very carefully – it was the 60th in a series of similar documents, applying to many of our other key industries. She then needs to explain how she proposes to avoid a quite unimaginable disaster which is very, very far from theoretical.

One can see why Rolls-Royce might need to play this down – it has shareholders and it must keep up market confidence. But Mrs May's stance is another matter. She really needs to get to grips with this – the "magical thinking" in which she is indulging simply doesn't cut it.