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European ownership safeguarded under new UK-US open skies

UK based airlines will be able to remain owned by UK, EU and European Economic Area (EEA) shareholders rather than by UK nationals alone after Brexit, under the terms of the new air services agreement struck with the USA.

The text of the new agreement signed by USA and UK last month, and seen by FlightGlobal shows, that after Brexit UK registered airline will need to be able to demonstrate that “substantial” ownership remains vested in the country or "one or more" states that were party to the European Economic Area Agreement as of 28 November 2018.

In additional those shareholders must be resident of "one or more" states that have a "modern liberal" air transport agreement with the USA.

Under the current EU-US open skies agreement of which the UK is currently a member, carriers from either bloc must be at least 51% owned by nationals from their respective jurisdictions.

The documents show that during the negotiations the UK delegation asked about the licensing of future UK airlines which would not meet the ownership and control requirements set out in the agreement.

The US delegation responded that the Department of Transportation (DOT) has "broad authority" to waive ownership and control standards when all countries are open skies partners.

In response to further questions by the UK delegation, the US delegation noted "no concerns" with the current ownership and control structures of the UK-licensed airlines serving the US-UK market at this time.

The UK delegation inquired as to the ongoing immunised joint ventures involving US, UK, and EU airlines.

The US delegation noted that, notwithstanding the UK's withdrawal from the EU, DOT's approach to analysing competition issues regarding such joint ventures would "not change".

Regarding the inclusion of open entry opportunities for new business models and airlines in transatlantic joint ventures affecting US, UK, and EU airlines, the US side says that liberal aviation agreements among all relevant countries continue to be central for approval for such agreements.

The US delegation noted that the DOT "looks forward to working with the appropriate UK authorities to ensure that the necessary conditions for existing and future joint ventures operating in the transatlantic market continue to exist after the UK withdraws from the EU".

The documents show that the US team expressed its interest in developing a "co-operative dialogue" with the UK Competition and Markets Authority, which will be involved in international aviation competition matters after Brexit.

The US delegation inquired as to the future regime for the management of slots at UK airports, including for new entrants, after the European Commission is no longer involved in establishing slot policy and regulating their allocation.

The UK delegation explained that existing EU legislation relating to slots will be retained within UK domestic law immediately following the UK's exit from the EU, but that the degree to which the UK continues, subsequently, to align with EU slot regulations will be a matter for the future relationship negotiations with the EU.

In terms of aircraft leasing arrangements, the documents state that the exact form under which the existing EU regulations on aircraft leasing are incorporated into UK domestic law are "yet to be determined".

"Both delegations confirmed their understanding that the agreement foresees a regime without time limitations on leasing arrangements, thereby offering airlines greater flexibility to maximise commercial relationships," it states.

The two sides also declared that they recognise the benefits that can arise when open markets are accompanied by "high labour standards with respect to international air transportation".

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