It is no surprise that the EU would no longer permit in case of a no-deal scenario intra airline services between the UK and the Member States (MS), likewise the UK will not permit intra services from the EU to the UK, despite the UK not condoning such restrictions.
UK airline companies such as IAG which owns the landmark British Airways and Iberia needs to radically revamp their shareholder structure if they intend to retain full flying rights within the EU in the possible event of a no-deal Brexit. This involves having a majority of the airline company shareholding owned and controlled by EU nationals. A typical case of Ryanair with the incorporation of Malta Air.
The aviation industry is heavily regulated and the aftermath of a no-deal Brexit means potential disruptions to flying schedules but over-and-above licensing technicalities which are in fact based on the nationality of shareholders. UK airline companies such as IAG and Ryanair have a large number of UK shareholders and the tight deadlines which these companies would face may even give rise to the need for selling of shares.
It is in the interest of both parties, namely the European Union (EU) and the United Kingdom (UK) to have a stable air connectivity programme in place, irrespectively of a deal or no-deal Brexit. As a result, measures are in place to facilitate the reciprocal air traffic permissions that would arise between the UK and the other Member States (MSs) of the EU.
In December 2018 the European Commission set forth the proposal for a regulation 'on common rules ensuring basic air connectivity with regard to the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the Union.' This regulation makes it clear that this is a matter tackled at an EU not a national level: 'The Member States shall neither negotiate nor enter into any bilateral agreements or arrangements with the United Kingdom on matters falling within the scope of this Regulation' (Article 3(3)). The regulation, however, is not intended to apply indefinitely and clearly there has to be a strict level of reciprocity between both sides.
The UK Government has declared it is committed to deliver a sense of certainty to the airline industry; to avoid connectivity disruptions due to the exit process; and that the UK airline industry is not at a disadvantage when negotiating following the term of the said regulation.
From a historical perspective, the Chicago Convention of 1944 governs the provision of international air services. The convention, in a nutshell, specifies, in the case of the agreed routes, what are the eligible criteria. So long as those criteria are met an airline would be permitted to operate those routes. A case in point, there are seventeen countries which are not in the EU but have an agreement with the UK via its EU membership. The UK Government claims to already have in place the necessary replacement arrangements for such flights.
Regarding the issue of reciprocity, the UK has officially declared it will grant airlines licensed in EU countries a level of access which is at least equivalent to that granted by the said regulation. The regulation is entitling the UK airlines the right to fly over the EU territory and also the permission to land in case of refuelling or for maintenance purposes but does not include the embarking or disembarking of passengers and cargo. The UK's intended level of permission to EU-based airlines is practically identical, that is flying over the UK territory and the ability of landing for refuelling and maintenance.
The UK is actually going a step further than the regulation by allowing a MS-based airline permission to enter UK airspace and land for refuelling/maintenance not only from the territory of the MS where the airline is based but from any other MS of the EU. The UK is doing this to reduce the risk of disruption to the concerned airline industry during the initial stages. However, once the regulation is no longer applicable the UK looks to discussing further with the concerned stakeholders from a more long-term perspective. The UK finds that a more liberal approach doing away with restrictions based on ownership would foster better flexibility of the airline industry. The criteria that should matter most are things such as safety and security and not nationality.
In respect to cargo, for the duration of the regulation, a UK airline can operate from the UK, to a point in the EU, and onwards to a third country. The UK's reciprocity cargo agreement is similar, that is an EU airline can operate from any third-country territory to a point in the UK which then has as its final destination an EU territory and also a cargo service originating in the EU can enter UK territory towards a destination point in a third-country.