Open Skies Agreement (Membership) Bill [HL] - Second Reading

– in the House of Lords at 1:50 pm on 26th January 2018.

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Moved by Baroness Randerson

That the Bill be now read a second time.

Photo of Baroness Randerson Baroness Randerson Liberal Democrat Lords Spokesperson (Transport)

My Lords, I thank noble Lords who have agreed to take part in this debate today. I embark on the Second Reading of this Bill in the absence of a government commitment to emphasise the importance of the United Kingdom’s retention of the open skies agreement following EU withdrawal. Open skies is one of a suite of aviation-related issues that the Government need urgently to address. Others include the European Aviation Safety Agency the need for the free movement of skilled staff into and out of mainland Europe and UK border arrangements, with potential delays for both passengers and goods.

Since 1994, any EU airline has been free to fly between any two points in Europe, fuelling the rise of low-cost airlines and drastically reducing prices along existing routes. The UK has been at the forefront of these changes, creating an integrated aviation market with Europe. It is important to emphasise that much of the UK’s market access beyond the EU is also dependent upon our EU membership. For instance, our open skies agreement with the USA is simply by virtue of being an EU member. Signed in 2007, the EU-US Air Transport Agreement allows flights from any EU country to any part of the USA. It introduced closer regulatory co-operation and provides equal market access for any EU carrier. In 2011, Norway and Iceland acceded to the agreement too. Indeed, it was the US airlines that first alerted me to the international concern that the UK might end up in a position where our planes cannot fly.

The USA is our biggest trading partner outside the EU, but the EU, and hence the UK, also has similar agreements with a number of other countries, including Canada, Israel, Jordan, Georgia, Moldova and Morocco. At present, the UK has the third largest aviation network in the world, carrying 144 million passengers and 1 million tonnes of cargo in 2015 alone. It is worth £52 billion annually to our national income.

Aviation is an enabler of economic growth and a creator of jobs. People use airlines to get somewhere, to do something and to transport goods. Without daily flights, the economy would stall and the whole system would freeze. Commercial airlines have revolutionised the way in which we travel and how we view the rest of the world. This is a case of seeing the world not just as a market but as a community. When we emphasise the importance of aviation to business, we need to remember the significance of travel for leisure and to reunite families. Even at Heathrow, our premier business hub, 60% of flights are for leisure and family-and-friends travel.

Open skies agreements between countries eliminate the use of government restrictions on commercial air carrier services, such as controls on capacity and pricing, giving carriers the ability to provide convenient and affordable air services. They give airlines the right to fly across the world. Prior to this, each country enforced control over its territorial boundaries with air, land and sea defences. An aircraft could be apprehended or even shot down if it did not obtain prior consent to fly over an area. I am not anticipating a return to that situation, but that emphasises the importance of these arrangements—and, indeed, how far we have come.

Brexit threatens to throw the industry’s intricate arrangement of routes and ownership structures into chaos. The open skies agreement referred to in the Bill comprises two components: the intra-European arrangement between us and other member states and the agreement between the EU and the US. Almost all flights in and out of the UK are governed under one of those agreements. If the Government truly want Britain to be “open for business”, the industry needs now to be assured that it will not be disadvantaged by the impact of Brexit.

The low-cost, short-haul sector of the aviation industry, including the airlines Ryanair and easyJet, have repeatedly called on the Government for those assurances. The current agreements have been the catalyst for the successes of budget airlines over the past 20 years. EasyJet, for instance, holds an operating licence in the UK but relies on intra-European flights for more than 40% of its revenue, and continues ambitiously to expand its network of routes connecting Europe.

Twice in July last year, the Prime Minister and her Transport Secretary stated in Parliament that they had held discussions with their US counterparts on the issue of open skies, but still no assurances were forthcoming. In this case, there is no fallback position, no safety net, no World Trade Organization rules. This issue will not go away, because aviation agreements stand outside EU rules on membership. On the contrary, it is the issue of greatest urgency, because so much of our economy rests on the shoulders of the aviation industry. If you cannot fly, you cannot trade. It has to be fixed first.

If work is taking place on this just a few hundred metres away in Whitehall, why not set our minds at ease? This week, the Secretary of State gave a speech to airline operators. I know that the Minister was there, as was I. He said that,

“discussions on replacing these arrangements have begun and are progressing well. We will be meeting US officials for a further round of talks in the coming weeks”.

I hope that the Minister will share some more detail with us on this today, and place on record exactly the Government’s intentions. I would also welcome information on progress in talks with other third countries, such as Canada.

A recent EU Commission document sets out the options for the future. It looks at both the transition phase and the long-term situation and provides options for deal or no deal. It spells out, in technical terms, a picture of the limited rights and muffled voice we will have on issues such as market access and safety if the current arrangements do not continue. Evidence to the EU sub-committee, of which I am a member, even suggested that we might have to fall back on the elderly Bermuda II agreement in the event of no deal.

If the UK is to go it alone successfully, we must seek to retain the aviation rights which we were awarded as a member of the EU. The clock is ticking. Tickets for package holidays are already being sold for spring 2019, on the assumption that a deal will be in place. Airlines sell tickets a year ahead; tour operators up to 18 months ahead. They need the public reassurance that only the Government can provide. The nearer we get to March 2019, the more their customers will want certainty about the product they are buying. If an agreement is not reached, even transitorily, there would obviously be huge economic disruption. These agreements are fundamental to the travel of millions of passengers and the movement of billions of pounds of freight, while keeping the cost of air travel affordable for ordinary people.

My intention is as succinct as the Bill itself: to gain a clear commitment from the Government that the UK’s membership of the open skies agreement will be maintained, or that a new agreement on the same terms will be reached prior to Brexit, not just with the US but with the remaining EU states and with other third countries with which we already have agreements. This would ensure the future prosperity of the aviation industry and the country. I beg to move.

Photo of Lord McNally Lord McNally Liberal Democrat 2:02 pm, 26th January 2018

My Lords, it is a great pleasure to follow the noble Baroness, Lady Randerson. We recently worked together, with the Minister, on the Space Industry Bill and I am pleased to return to aviation matters. Quite a few years ago, I visited Atlanta in the United States. That city was booming at the time and I met one of the chief architects of its success at City Hall. I asked him what had promoted Atlanta’s tremendous resurgence. He confessed that it helped to have the world headquarters of Coca-Cola there, but the really big decision they took was to campaign for, and succeed in, getting Atlanta made one of the United States’ airports. He then said something which has always stuck in my mind. Airports are a bit like the railhead in the old west. Wherever the railway came to an end, a town grew up and economic activity took place. That is what airports do today: they are engines of economic growth. The future of our airports and the traffic they can carry is extremely important.

I want to put this debate in context. Some 60 years ago, the late, great Peter Sellers mocked the then Prime Minister, Harold Macmillan, with a speech that consisted completely of meaningless clichés. The most famous of these was,

“this is not the time for vague promises of better things to come”, and then proceeded to give vague promises of better things to come. Today, that is not an amusing piece of satire, but the standard response from Ministers. Perhaps the noble Baroness, Lady Sugg, will forgive me if I take for an example the reply which she gave to a question from the noble Lord, Lord Razzall, about how we intended to assure equivalent air safety standards with the EU in the event of discontinuation of membership of the European Aviation Authority. She said:

“The Government is considering carefully all the potential implications arising from the UK’s exit from the EU, including the implications for continued or discontinued participation in the European Aviation Safety Agency. It is the Government’s intention to maintain consistently high standards of aviation safety once we have left the EU. As part of the exit negotiations the Government will discuss with the EU and Member States how best to continue cooperation in the field of aviation safety and standards”.

As I say, vague promises of better things to come.

On Monday, Carolyn Fairbairn, director-general of the CBI, called for a greater sense of urgency in the Brexit talks to give clarity to companies that will otherwise need to trigger alternative plans, including moving jobs and investment offshore. Earlier this week, I attended a future technology showcase promoted by Rolls-Royce, where similar pleas for certainty were made.

Earlier this week, the CEO of JP Morgan warned that the lack of certainty and direction threatened jobs in financial services and a similar warning has come from the creative industries sector. We are too near the precipice for vague promises of better things to come to be a response to these cries of distress from almost every sector of industry.

We all know why the Government continue with the meaningless mantra of Brexit means Brexit, because if the Prime Minister ever tries to put flesh on the bone of her Brexit strategy, the choke chain on which she is held by the hard Brexit fundamentalists in her party is quickly yanked, Mr Rees-Mogg is wheeled out and talks of a leadership bid are reactivated. In any kind of rational world, the Government would rush to embrace this Bill as a means of getting ahead of the curve by giving certainty to this very important sector.

The excellent House of Lords Library briefing for this Bill cites IATA that in 2015 the aviation sector contributed £55 billion to the UK’s gross domestic product and that it supports nearly 1 million jobs.

When I was a lad, I worked at Blackpool Tower circus. However, I will not tell noble Lords what my job was. The Government’s Brexit negotiations look more and more like one of the acts I used to see at the circus where a performer would spin more and more plates on the end of a stick. Keeping the plates spinning is difficult at the best of times, but it becomes almost impossible when parts of the Conservative Party and the Cabinet are quite happy to see them come crashing to the floor.

A successful aviation policy is crucial to Britain’s economic future. My noble friend has made a practical suggestion in this Bill, which shows a way forward for this important sector. If we can keep this plate spinning, it will benefit us all.

Photo of Lord Snape Lord Snape Labour 2:08 pm, 26th January 2018

My Lords, it is a pleasure to follow the noble Lord, Lord McNally, who represented my home town of Stockport for a while. I had no idea that he came straight from the circus before he did so.

I too congratulate the noble Baroness, Lady Randerson, on providing us with the opportunity to discuss these matters. In my view we discuss aviation all too infrequently. This Bill provides us with an opportunity to do so, albeit it is late on a Friday afternoon.

It is easy to forget that 40-odd years ago the aviation world was very different from today. All over the world state-owned airlines operated infrequent and highly priced services. Indeed, sky-high fares and infrequent air services were in those days, to adapt a current slogan, for the few, not the many. It took the Carter Administration in the late 1970s to pass an airline deregulation Act in the United States, from which the rest of the world took their cue. I remember travelling to New York on Laker Airways in 1980 courtesy of a television company as we were filming the Carter/Reagan election battle. I sat next to an elderly lady from Scotland who did not know much about aviation policy but knew that Freddie Laker was the man who had enabled her to fly to see her relatives across continents. Although in 2018 we accept such a thing as a regular occurrence, for her it was new and dramatic.

Over the years there have, of course, been aviation agreements between the United Kingdom and the United States; prior to the open skies agreement there were the two Bermuda agreements, as the noble Baroness, Lady Randerson, reminded us. The open skies agreement has brought many benefits, but it is tilted—as are many agreements with the United States—towards the United States itself. While the agreement allows any EU airline and any US airline to fly from any point in the EU and in the United States, the agreement allows United States airlines to operate into EU flights, but European airlines are not allowed into United States flights. Indeed, noble Lords will be aware that in the land of the free, foreign companies are not allowed to purchase a controlling stake in any United States airline. As an aside, that is an eminently sensible policy; the fact that over the years this country has seen so many of its strategic industries fall into foreign hands—the hands of people who own no great allegiance to the United Kingdom—is a retrograde step. The United States also has some control over its civil airlines through its Civil Reserve Air Fleet. I am always amused when I hear Americans complain about subsidies to companies like Airbus, for example, when one reflects that much of the United States’ aviation strategy over the years has been assisted financially and in other ways by the United States military. Despite the open skies agreement, it would be impossible for any foreign airline to carry military and government personnel in any numbers around the world because of the Fly America Act that the United States adopted some years ago. But as the noble Baroness, Lady Randerson, reminds us, this is not just about the open skies agreement and the United States but about the European Union and the UK.

I picked up a newspaper cutting that I found at home the other day—I am not in the habit of hoarding newspaper cuttings but it was from the day before the general election in 1983, in which I had a personal interest. Without going into the politics that made me keep the newspaper, in the classified section there were some advertisements for holidays abroad. A company called Meridian was advertising what it called the Phone ‘n’ Fly June Specials from Birmingham Airport. In 1983 it was possible to fly to Tenerife once a week for £118 plus taxes. If my arithmetic is correct, that amounts to £278.40 today, plus taxes. Today one can go on the internet and fly to Tenerife from Birmingham with Jetcost for £68, and you can get a deal through Skyscanner for £42—this is money in real terms, aside from the inflation since then. There was also an advertisement to fly to Malaga, back in those days, at £88. There are currently 12 flights a week between Birmingham and Malaga. Again, that is entirely due to our membership of the EU and the subsequent agreements that have been made to allow us to do that.

The noble Lord, Lord McNally, was quite rude about the Minister before she had even had a chance to open her mouth. He will be aware, as I am, that Ministers in either House are normally sent to answer debates like this on the understanding that they say as little as possible and offend a few people as possible. The coalition was no different when the noble Lord, Lord McNally, was a Minister.

I hope that the Minister recognises that this philosophy that we seem to have about Brexit of “It’ll be all right on the night” is a little worn out. If the aviation world is to be reassured about the future after Brexit, she will have to say a bit more than the Department for Transport has said already. I commend the Bill and will support it. I hope that the noble Baroness will take it as far as possible and that the Government will accept its provisions.

Photo of Lord Paddick Lord Paddick Liberal Democrat Lords Spokesperson (Home Affairs) 2:14 pm, 26th January 2018

My Lords, I too congratulate my noble friend Lady Randerson on securing a Second Reading of her Bill, which I am very pleased to support.

The substance of the Bill seeks to remedy what is—or what appears to me to be—symptomatic of the Government’s chaotic approach to Brexit. I have to admit that I am not sure what the origins of that chaos are. Could it be that the Government do not know what they are doing? Could it be that they are keeping their progress on this and many other issues from us? Or is it simply that they are crossing their fingers and hoping for the best? Someone described extracting the UK from the European Union as like trying to remove eggs from a cake.

As my noble friend said, “open skies” is not only a generic term to cover the agreement between the UK and the US that allows flights between any EU and US airport by any EU or US carrier; it is also a term used to cover a suite of agreements between the EU and third-party countries and between member countries within the EU. Not only do these agreements cover authority to fly between airports but they cover other aspects such as environmental and safety issues—for example, airport security—to ensure that air travel is safe.

I am only just beginning to understand the nature and complexity of open skies and the complexity of negotiating replacement agreements. No doubt the Government will say that it is in the interests of all countries that the freedom of airlines to fly into and out of the UK is maintained, but legally that cannot be done. Indeed, passenger safety could be jeopardised if such legally binding agreements were not maintained or replaced.

As with other important issues, such as co-operation on tackling serious and organised crime and terrorism, there is no “do nothing” alternative, as my noble friend Lady Randerson has said. Flights between the UK and all those countries, including our two most important trading partners, all EU countries and the US, as well as many third-party countries where the UK is dependent on EU open skies agreements, would have to be grounded if replacement agreements were not in place and if we were unfortunate enough to leave the EU.

As my noble friend Lord McNally suggested, this Bill is important in highlighting a general problem with exiting the EU. The Government appear to be taking a complacent attitude, based on the premise that replacement agreements for the existing arrangements, which are a result of our EU membership, can easily be replicated. Well, they cannot. If we rely on agreements between third-party countries and the EU, new agreements will have to be made with each of those third-party countries.

Of course, currently—because we are a member of the EU—airlines are forced, sometimes kicking and screaming, to compensate passengers whose flights are delayed or cancelled. Can the Minister say whether the Government will legislate to protect passengers once we have left the EU?

My noble friend Lady Randerson also mentioned border issues following Brexit. Noble Lords will by now be bored with me raising, as I have done on numerous occasions in this Chamber, issues relating to the UK border, particularly at Heathrow Airport. Queues at terminal 4 for non-EEA passengers peaked at two and a half hours in January, but when I ask not what the answer is but what contingency planning the Government have done in relation to EU nationals joining those queues after Brexit, there is no response. Perhaps the Minister can enlighten us today.

There could be legal issues as well. I am not an expert on this matter, unlike my noble friend, but in relation to, for example, the sharing of information and intelligence, there are no examples of sharing some vital intelligence data with non-EU countries which are not part of the European Economic Area or the Schengen agreement. Therefore, I might argue that issues around tackling crime and terrorism also face a cliff edge with no safety net—albeit that I may be mixing my metaphors. Can the Minister advise the House whether the Government have identified any such legal obstacles to renegotiating open skies agreements?

Of course, with airport security and environmental conditions being part of the current open skies agreements, there is a need for an arbitration system in case of a dispute between countries if any are believed to be failing to comply with these conditions. One possible solution would be to retain membership of the European common aviation area, which spans the EU and some non-EU countries and provides unrestricted access. However, this would be subject to the European Court of Justice, which Theresa May has recklessly ruled out post Brexit. Can the Minister tell the House whether the European Court of Justice will play a role in adjudicating in cases of disputes involving the replacement for the existing EU open skies agreements? If not, what body will need to be set up and what will be the additional costs to the UK as a consequence?

Like many of her colleagues, the Minister may say that all these issues are a matter for negotiation and that the negotiations are not at a stage where any of these questions can be asked—yet Ryanair’s chief executive officer, Michael O’Leary, said this summer that flights for 2019 will be cancelled for months after the UK leaves the EU unless an agreement can be agreed within a year. The chair of the Airport Operators Association, Ed Anderson, recently told its annual conference that the deadline for the aviation industry is just four months away. That is why this Bill is necessary and why I support it.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade) 2:21 pm, 26th January 2018

My Lords, this has inevitably been a short debate. However, my noble friend deserves commendation for securing this Bill in the ballot and bringing it to our attention. It is a massively important issue for the future of our country. Like many Members of your Lordships’ House, I am a regular flyer and to that extent I declare an interest: I benefit, as do others, from there being a secure, safe and reliable aviation sector in this country. However, as my noble friend indicated, this does not happen by accident and it is therefore right that we should focus on this vital issue.

After this debate I will to go straight to Heathrow airport to fly home. As a regular flyer from that airport, I will be on a plane which is one of 3,000 air departures from UK airports. I will be in the minority because it will be a domestic flight. As my noble friend indicated, 60% of those flights will be taking off and landing in Europe, and so our relationship with our nearest neighbours within this aviation market and industry is of vital importance. It has the same profile as our relationships for trade and, as my noble friend Paddick indicated, our relationships connected to immigration, intelligence and data are all interlinked.

If I had been a Member of this House 40 years ago and I was travelling home to Edinburgh, the situation would have been radically different. If you visit the air museum at East Fortune outside Edinburgh, you can see the British Airways standby plane, which was always there in case a shuttle flight was full. A traveller would have a rip-off ticket as part of a carnet for the Edinburgh to London shuttle flights—no ID was needed, no booking was necessary: you just turned up with your tear-off slip—and, if the flight was full, the next flight would be put on for that shuttle route. It is inconceivable that we would go back to historical regulation. My noble friend is right that we need to be part of the future, and that is why enhanced clarity is necessary.

I have lived all of my life as a British subject, and now as a European Union citizen, and the growth of air travel is part of a generational trend. When I was born in 1974, there were 400 million air passengers that year in the world. In 2016, there were 3.7 billion. That is why a complex lattice of international commitments and regulations is in place. It is necessary that the United Kingdom is not only part of those after Brexit but continues to play a role in shaping them. That is because, far from Britain having been held back by our membership of the EU and organisations such as the European Aviation Safety Agency, the single European sky initiative and the single market, we have benefited from them and in many respects we have shaped the regulations.

The issue of the European Aviation Safety Agency, which has been referred to in the debate so far, in many respects sums up the dilemma that the Government have placed themselves in and are now inflicting on the country. This is a Community agency with its own legal personality and is governed by European public law. Membership of the European Aviation Safety Agency is not consistent with government policy—it goes against the red line that the Prime Minister has set—but we have heard the Transport Minister say repeatedly to our aviation industry that the UK will continue to come under the aegis of the agency.

If we do not come under the EASA, we have heard from the chief executive of the Civil Aviation Authority, Andrew Haines, about the consequences. He has said that it was his hope that we would remain an active member of the EASA, because it would impose a massive regulatory burden to separate ourselves from it. He has highlighted the fact that the UK and France already provide two-thirds of the input to aviation regulation—that reflects the leadership role we currently play—and some 90% of the outsourced activity of the agency is carried out by France and the UK. That relationship is fundamental to our ongoing negotiations on trade, and it is inconceivable that any modern trade agreement will not have aviation regulation as a key component, covering both safety and the environment. If the Government have set this red line—when I asked the Minister’s colleague, the noble Baroness, Lady Fairhead, about it last week, she said that it would be inconsistent with the red line that the Prime Minister has set—we are putting ourselves in a position where we would be setting back the United Kingdom.

If we take an alternative route like that of Switzerland and its relationship with the single European sky initiative, we see that it has accepted EU aviation law and ECJ jurisdiction. However, Swiss airlines have been granted only seven of the nine possible freedoms of the air. Are we seeking all of the nine freedoms in our new relationship with the European Union while being completely separate from ECJ jurisdiction? I would like to hear from the Minister how that will be at all possible.

I conclude by saying that my noble friends are absolutely correct to look for clarification in this area. We are not seeking to have the book that our negotiating team is using, but we are hoping to be shown the same respect in this Parliament that the European Parliament has in the ongoing negotiations. When the Commission has been set its mandate by the European Council, it will be made public; we seek the same—we want clarity on the single European sky, clarity on the market for aviation and clarity on the EASA, and we need it now. That would be the respectful position for our Parliament, and it would mean that our aviation industry and passengers have the confidence they need in this crucial industry for our economy.

Photo of Baroness Hayter of Kentish Town Baroness Hayter of Kentish Town Shadow Spokesperson (Business, Energy and Industrial Strategy), Shadow Spokesperson (Exiting the European Union), Shadow Deputy Leader of the House of Lords 2:27 pm, 26th January 2018

My Lords, I too thank the noble Baroness, Lady Randerson, for this imaginative way of focusing the Government’s attention on a vital and urgent issue. Quite simply, if we do not get this right, British carriers may not be able to fly domestically within the EU. As the EU’s ad hoc working party on Article 50’s internal discussion paper of 16 January states, as a “third country”, the,

“UK ceases to be part of fully liberalised EU aviation market”.

It is clear that in Brussels, work is moving apace on this, an area of great urgency since there is no fallback WTO position, as we heard from the noble Baroness, Lady Randerson. A decision is therefore critical. Airlines need to know within weeks whether they can continue current routes in 15 months’ time. Schedules and slots are decided early, with ticket prices, ticket sales and therefore the prices of package tours following soon after.

I am aware that talks are ongoing and will resume on Tuesday between the UK and US on new bilateral air services arrangements for after our exit or following any transition period. While we know that both sides want to protect current market access between the two countries, we need a reassurance from the Government that this will not come at the expense of our continued close relationship with or membership of the EU’s single aviation market—from which UK airlines and passengers have benefited, as we have heard today—along with the related agreements between the EU and third countries beyond the US, which again have benefited our travellers. Our participation in the single aviation market allowed the UK to develop the largest aviation network in Europe and the third largest in the world, providing significant economic benefits through inbound and outbound tourism, our trading links, investment in the infrastructure of airports and access to them, while providing British citizens with a wide variety of destinations.

Having mentioned the advantages to British citizens, I raise the issue of the future of important consumer rights if we fall out of the single aviation market: whether the EU’s flight delay regulation 261/2004 will continue to apply once we leave the EU. For example, regarding an EU airline flight from a third country to the UK, or a UK airline flight from a third country to an EU 27 member state, what protection will there be for consumers in any delay? As this issue obviously cannot be covered by the EU withdrawal Bill as it depends on reciprocity, and as we would no longer be a member state for the purposes of the current regulation, we will be highly dependent on the Government negotiating this compensation package, presumably in the withdrawal deal or, more likely, in the subsequent agreement. Alternatively, and definitely preferably, our association with or membership of the single aviation market could perhaps include retention of the EU’s flight delay regulation 261/2004. Would the Minister respond in writing, or today if she can, as to whether the Government are already pursuing such a possibility?

Looking more broadly at the value of this industry to our economy, according to the travel trade association ABTA, outbound tourism directly sustains more than 200,000 UK jobs and supports another 170,000 indirectly. While outbound tourism brings significant financial benefit to the destination countries in Europe, it also benefits the Exchequer, with UK travellers spending about £300 on goods and services in preparation for those foreign holidays before they have even taken off. Such outbound tourism is worth about £12 billion a year.

Meanwhile, the aviation industry is worth £52 billion to our national income and it contributes £8 billion in tax a year. It supports about 960,000 jobs, one-third of a million in the sector itself and perhaps another one-third of a million indirectly. Furthermore, UK cargo airlines handle millions of shipments every month —predominantly high-value and time-sensitive parcels —across the globe. These services play a crucial role in maintaining UK businesses’ global competitiveness and connectivity with the EU and other international partners. Any disruption to the UK’s connectivity would harm the growth of UK businesses globally. Given that UK tourism is worth about €37 billion a year to the EU 27, and that aviation and good air transport links are vital to the continuing success and growth of the UK economy, but also that of our EU counterparties, we hope the Government will be able to negotiate our continued participation in the single aviation market.

Indeed, what is needed is us being “very modestly apart”, as I believe the expression is—though the overnight squabbles between the Chancellor and No. 10, at the behest of Jacob Rees-Mogg, give little confidence that the Government are up to the task of negotiating the price of a second-hand car, let alone the future of our economy. Today’s papers are full of the row, with Iain Duncan Smith saying he is pleased that the Chancellor has been contradicted by No 10—did you hear that? He was pleased that our Chancellor of the Exchequer has been contradicted by the Prime Minister. In contrast, another Conservative MP said that the Chancellor was spot on and that the Prime Minister should support her Chancellor and not give in to an unrepresentative, ideologically driven minority. That was a Conservative; it was not even from this side. But seriously, the coverage, attention and energy that go into all this waste the chance to make a clear statement to the EU and more widely on how Britain sees its future after Brexit and on what sort of deal it wants with the EU 27.

The Minister will be well aware of what Airlines UK, which represents the airlines, needs after Brexit: most urgently, a transition phase based on current rules and regulation, open access and full participation of the European Aviation Safety Agency. However, the EU 27 could exclude us from the safety agency because that membership is contingent on accepting the jurisdiction of the ECJ. Without it, there would be increased certification costs for airlines, manufacturers and maintenance companies, while the CAA would have to take responsibility for ensuring that they all adhered to safety rules, raising questions about its capacity—as we have just heard from the noble Lord, Lord Purvis.

Given such urgency, it is vital that aviation is dealt with separately and in advance of the main negotiations with the EU and that priority is given to safeguarding EU, US and international market access for our aviation industry. If it means the Government quietly rubbing out a red line and accepting some ECJ role in aviation, then so be it. Is not the economy rather more important than red meat demanded by Conservative hard Eurosceptics?

The aviation industry will need many things that go well beyond this Bill, particularly being able to employ staff from across Europe and having no further restrictions on borders. We will press these issues on other occasions and in other Bills, but their importance to the Minister’s transport portfolio means that I would welcome some reassurance from her that her department’s representations to the Home Office and other departments are making clear the importance of such issues.

Aviation is unique within Brexit negotiations. There is no WTO fallback; there is an urgency replicated in few other sectors; it is an industry on which almost every other sector depends; it is important to tourism, and it is of mutual benefit to the UK and the EU 27. It is vital that we reach a comprehensive air transport agreement with the EU that maintains the current level of market access and traffic rights. I look forward to hearing the Minister’s reassurance on all the points raised today.

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport) 2:38 pm, 26th January 2018

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.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade)

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?

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport)

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—

Photo of Baroness Hayter of Kentish Town Baroness Hayter of Kentish Town Shadow Spokesperson (Business, Energy and Industrial Strategy), Shadow Spokesperson (Exiting the European Union), Shadow Deputy Leader of the House of Lords

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.

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport)

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.

Photo of Baroness Randerson Baroness Randerson Liberal Democrat Lords Spokesperson (Transport) 2:50 pm, 26th January 2018

My Lords, I thank all noble Lords who have spoken in this debate. My noble friend Lord McNally, in his inimitable manner, evoked Peter Sellers. I certainly cannot apply what I am about to say to everyone who has spoken today, but I remember Peter Sellers and I also remember that in those days—prior to the open skies agreement—we had restrictive ownership and a very limited concept of international travel. It is difficult to imagine those days if you did not live through them. The noble Lord, Lord Snape, emphasised with his quotation about the price of travel to Tenerife exactly how prices have benefited consumers in between. We now take for granted a simple, cheap and straightforward system of international flights. It has transformed not just our holidays but the way in which we live.

My noble friend Lord Paddick talked about the Government’s chaotic approach. Every time I feel myself being reassured by soothing words from the Government, up pops the Foreign Secretary or one of his allies—a “friend” or “close acquaintance” of the Foreign Secretary—to remind us that the Government do not agree with themselves about where we are going on this issue, let alone agree with the EU or those of us in opposition parties. So, despite good intentions, aviation could easily be the victim of a problem at the last minute.

My noble friend Lord Purvis charted the phenomenal growth of the aviation market and pointed out that membership of EASA crosses the Government’s own red line. With the outline that the Minister has given of the Government’s intentions on EASA, at the very best we will go from a leading role to a walk-on part, and that is very regrettable.

The noble Baroness, Lady Hayter, emphasised the urgency of the problem very effectively. There is of course a huge issue with consumer rights and legislation from the EU on delays, which gives consumers rights that people take for granted now. The Minister answered with some detail, which I will read with great care. She is always helpful within the scope of what she is allowed to say on the Government’s position on these negotiations. But I say to her that representatives of the industry first talked to me about the urgency in late 2016, and that I raised it first here at that time. Minister, the urgency has become very urgent.

We appreciate the importance of continued agreements and the Government’s efforts to devise ways round this but the Minister has emphasised how long it would take, or how difficult it would be, to get agreement across 27 countries and other partners. That says a lot about the complexity of the Government’s situation and how easily things could fall apart. I will comment briefly that the Commission’s paper is actually technical. It is not a rhetorical paper but a technical paper. The deals I refer to in the Bill are particularly beneficial to areas outside London. If we were forced to fall back on the Bermuda agreements of 1946 and 1977—which is another world in aviation terms—we would have to accept a restricted number of airlines and flights into London only.

There are probably ways around this issue, but I am still not convinced that the Government have the key to finding them. They face so many pressing issues on the Brexit process that there is a real danger that one of the eggs will be dropped, and I do not want it to be aviation. It is a hugely important industry across Britain. We should aim to be part of the European common aviation area. Whatever happens, we need to remain as close as possible to the current situation. Whatever caused people to vote for Brexit, they certainly did not vote for more expensive flights or more restrictive rules on travel, so it is essential that the Government take the lead and develop a sense of true urgency. I ask the House to give this Bill a Second Reading.

Bill read a second time and committed to a Committee of the Whole House.

House adjourned at 2.57 pm.