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Air carrier operations

Operating authorisation

What procedural and documentary requirements must air carriers meet in order to operate in your jurisdiction?

Carriers in the United Kingdom must hold an operating licence granted by the Civil Aviation Authority (CAA). Applicants must satisfy a number of requirements, including:

  • having their principal place of business in the United Kingdom;
  • being majority owned and effectively controlled by nationals of the European Economic Area (EEA);
  • holding sufficient insurance; and
  • being of good repute.

There are two types of operating licence – type A (operators of aircraft with 20 seats or more) and type B (operators of aircraft with 19 or fewer sears). Type A operators are also subject to certain financial requirements. The CAA continually monitors matters such as financial fitness, and majority ownership and control.

An operating licence can be granted only to an organisation that holds an air operator certificate (AOC) – see below.

An operating licence enables an EEA carrier to operate routes within the EEA. In order to operate routes from the United Kingdom to non-EEA countries, an air carrier requires a route licence. Route licences can be granted only to holders of an operating licence and also require the carrier concerned to be majority owned and controlled by UK nationals. A route licence also requires the air carrier concerned to be designated by the UK government under the terms of the applicable air services agreement in place between the United Kingdom and the third country to which operations are planned.       

Air carriers in the United Kingdom require an AOC in order to obtain an operating licence. The AOC is an approval of the carrier's organisation, management, personnel and systems in order to certify that it can safely operate the aircraft that it intends to fly. The CAA grants an AOC pursuant to European Aviation Safety Agency (EASA) regulations and standards. The CAA continually monitors, by way of audit, the competence and organisational structure and management of the AOC holder to ensure that it remains appropriate to the operations being undertaken.

In order to operate flights from, to or within the United Kingdom, foreign carriers (ie, non-EEA airlines) must apply for, and obtain from, the CAA a foreign carrier permit. Applicants must supply certain basic information to the CAA, including evidence of insurance and details of the routes to be operated and aircraft to be used. In addition, applicants must satisfy the requirements of the UK Home Office’s Advanced Passenger Information System, and may also be required to supply more detailed documentation, including a copy of the AOC and certificates of airworthiness for the aircraft that will operate in/to the United Kingdom.

Ownership and control

Do any nationality or other requirements or restrictions apply to ownership or control of air carriers operating in your jurisdiction?

All EEA carriers (including UK airlines) must, in order to obtain and hold an operating licence, be majority owned and effectively controlled by national of EEA states (Operation of Air Services Regulation 1008/2008). UK nationality and effective control requirements also apply in relation to obtaining of route licences (see above).

Financial requirements

What financial thresholds must air carriers meet to obtain operating authorisation?

The Operation of Air Services Regulation sets financial fitness requirements for applicants for an operating licence. In the case of large operators (ie, those operating aircraft of 10 tonnes or more or having 20 seats or more), an applicant must demonstrate that it can meet its actual and potential obligations under realistic assumptions for a period of 24 months from the start of operations, and that it can meet its fixed and operational costs as set out in its business plan for a period of three months from the start of operations without taking any income into account. Such applicants must also submit a business plan for the first three years of operation; certain financial and accounting information must also be provided to the CAA, including management accounts, a projected balance sheet, details of start-up costs, details of sources of finance, projected cash flow and liquidity statements, and financing details relating to aircraft purchase or leasing.

Small operators (those operating aircraft of less than 10 tonnes or with fewer than 19 seats) are subject to lighter-touch financial fitness requirements pursuant to the Operation of Air Services Regulation. In fact, the UK CAA typically neither regulates nor monitors the finances of smaller operators, nor seeks financial information from them other than to establish compliance with nationality requirements.

Insurance coverage

What is the required level of insurance coverage for air carrier operations?

The Aircraft Insurance Regulation (785/2004) establishes minimum insurance requirements for air carriers and aircraft operators in respect of passengers, baggage, cargo and third parties (including war risk). The CAA requires airlines to provide evidence, countersigned by their broker, that they have obtained the required cover. The requirements vary, particularly in relation to third-party cover, according to the weight and size of the aircraft used.

 

Minimum requirements are as follows:

  • Passenger – 250,000 special drawing rights (SDRs) (the unit of account of the International Monetary Fund and some other international organisations whose value is based on a basket of key international currencies);
  • Baggage – 1,131 SDRs;
  • Cargo – 19 SDRs per kilogramme (kg); and
  • Third-party cover – minimum requirements are on a sliding scale increasing according to the maximum take-off mass (MTOM) of the aircraft. Minimum third-party cover ranges from 750,000 SDRs for aircraft with MTOM of up to 499kg, up to 700 million SDRs for aircraft with MTOM of 500,000kg or more.

 

The Air Carrier Liability Regulation (2027/97), as amended, also requires that carriers be insured for up to at least 100,000 SDRs per passenger and at a reasonable level for third-party risk.

 

Safety requirements

What safety requirements apply to air carrier operations, including with regard to professional and technical certifications?

Aircraft and personnel must be certified and licensed pursuant to regulations promulgated by EASA and applied across the EU, including in the United Kingdom. 

An aircraft type requires a type certificate (issued to the manufacturer) and each aircraft requires a certificate of airworthiness. If safety issues arise, either the UK CAA and/or EASA are empowered to issue an airworthiness directive in order to address the unsafe condition, compliance with which is mandatory.

Licensing and certification requirements apply pursuant to EASA regulations for maintenance organisations, maintenance engineers and manufacturers (production and design organisations).

Environmental obligations

What environmental obligations apply to air carrier operations?

Certain environment matters are regulated by EASA, whose rules apply to UK airlines and aircraft. EASA implements environmental standards from the International Civil Aviation Organisation (ICAO) for aircraft noise and engine emissions by means of rules relating to airworthiness and environmental certification of aircraft and related products, and certification standards for emissions and noise. Compliance with noise and emissions standards is a necessary part of aircraft and engine certification. 

Noise certificates for aircraft on the UK register are granted on application to the CAA, either pursuant to EASA regulations or, for non-EASA aircraft, pursuant to national regulations. The CAA also has a role in relation to use of, and changes to, airspace from a noise perspective and also monitors, and publishes information about, noise around UK airports.

Carriers must participate in the European Union's emissions trading system (EU ETS) in relation to flights within EEA airspace. This requires them to monitor their carbon emissions and to buy and surrender allowances equivalent to those emissions. EU ETS does not currently apply to flights outside EEA airspace, pending development and implementation of ICAO's Carbon Offsetting and Reduction Scheme for International Aviation, which is in the course of preparation. 

 

Air traffic control

How are air traffic control services regulated in your jurisdiction?

Licensing of air traffic controllers is regulated by EU legislation. Applications are made to the CAA. 

In the United Kingdom, air traffic control for controlled airspace is provided by NATS. Outside controlled airspace, users bear their own responsibility for their own safety and that of others, although they can request help from NATS. NATS is a public-private partnership, with the UK government owning a 49% stake and a golden share; 42% is held by the Airline Group, which includes a number of prominent UK airlines including British Airways, easyJet, Virgin Atlantic and Thomas Cook.

Routes

Do any licensing requirements apply to specific routes?

Routes between the United Kingdom and non-EEA states require an operator to hold a route licence.  For intra-EU routes, an operating licence is required.   

Are any public service obligations in place with respect to remote destinations?

The Operation of Air Services Regulation provides the legislative authority for such obligations to be imposed. The United Kingdom has put in place a number of such public service obligations in respect of routes, chiefly (though not exclusively) between mainland Scotland and the Scottish islands.  

Charter services

Do any special provisions apply to charter services?

 No.

Taxes

What taxes apply to the provision of air carrier services?

The principal tax of relevance is air passenger duty (APD), which is levied on air carriers and calculated on a per passenger carried basis. The tax is payable if the aircraft utilised weighs 5.7 tonnes or more, and the amount payable depends upon the distance travelled and the class of travel. The airline industry has mounted publicity campaigns and engaged in lobbying in order to try to influence a reduction in APD rates, which the industry views as being too high.

The rates of APD (applying from April 2017) are below. The Band B rates applying from April 1 2018 are scheduled to increase slightly.

Destination bands and distance from London (miles)

 

Reduced rate (for travel in the lowest class of travel available on the aircraft)

Standard rate (for travel in any other class of travel)

Higher rate (for travel in aircraft of 20 tonnes or more equipped to carry fewer than 19 passengers)

Band A (0 to 2,000 miles)

            £13

         £26

              £78

Band B (over 2,000 miles)

            £75

         £150

              £450

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