Theresa May has promised a speedy and generous trade deal with the US when Britain leaves the EU, but an early run-in with US negotiators shows the US is ready to take a far harder line on the UK than they anticipated.

The row over flying rights demonstrates why renegotiating Britain's relationship with the world after Brexit will be far harder than Brexiteers have promised.

"It's not going to be neat, it's not going to be sweet, and it's not going to be easy," aviation consultant Andrew Charlton told BI.



LONDON — Theresa May made securing a generous US trade deal one of the first aims of her government. Her early trip to Washington to meet Donald Trump and her promise of a state visit were all part of the UK government's plan to forge a new stronger post-Brexit trading relationship with the US.

The early signs were promising. After a trip to Washington, the foreign secretary Boris Johnson boasted that Britain would be "first in line" to do a trade deal with the US, while the International Trade Secretary boasted of dozens of new trade deals being ready to sign "the second after" Brexit.

However, two events this week show that it will not be anywhere near as easy as Brexiteers had promised. The first was Trump's decision to impose new tarrifs on trade with Europe. The second is an alarming new row over Britain's rights to fly across the Atlantic.

Open skies

A passenger walks past a flight information board showing cancelled flights during a pilots strike of German airline Lufthansa at Frankfurt airport, Germany, November 23, 2016. Reuters/Ralph Orlowski The row centres around attempts to keep planes flying across the Atlantic after Brexit. As things stand, Britain is set to leave the EU-US 'Open skies treaty' when it leaves the EU. In order to ensure planes can still fly, Britain will need to negotiate a replacement agreement with the US.

However, according to an explosive FT report this week, the US offered Britain in January a far worse "open skies" deal after Brexit than it currently has as an EU member. According to their report, accepting such a deal could seriously damage the flying rights of major UK airlines and — in the event of failure — see flights grounded between the two countries.

This is obviously highly troubling for the UK aviation industry. It is also, as aviation experts told Business Insider, not a situation that is likely to resolve in the UK's interest.

"There is no reason to assume the US will budge its position"

The UK reportedly walked out of secret talks when Washington offered the UK its standard bilateral open skies deal.

The crucial sticking point was a technical but important one. Washington's bilateral offer excluded airlines if "substantial ownership and control" does not rest with UK or US nationals. That would mean three of Britain's biggest airlines — British Airways owner IAG, Virgin Atlantic, and Norwegian UK — did not have the right to fly across to the US.

However, the government hopes that the Trump administration will eventually make an exception for the UK. So is this likely? Aviation experts we spoke to were not convinced.

"There is no reason to assume the US will budge its position on ownership and control because it never has," aviation consultant Andrew Charlton told BI.

"It didn't when the Europeans — which included the British at the time — asked for it. They've never done it."

"I think Europe will make life hard for the British and eventually give them what they want but not without getting something back in return," he added. "It's unclear what that is."

"Because of the implications of failure being so huge, I think we'll fudge through, but it's not going to be neat, it's not going to be sweet, and it's not going to be easy."

"The US has no reason to be nice, and neither do the Europeans"

US President Donald Trump and Britain's Prime Minister Theresa May at the start of the "retreat meeting" on the first day of the G-20 summit in Hamburg, northern Germany, Friday July 7, 2017 . Turkish Presidency Press Service via AP, Pool The other major issue is that the UK will struggle to negotiate a deal with the US until it has negotiated a deal with the EU, something which is likely to be fraught with its own difficulties.

That is because of something known as "the fifth freedom". This international agreement means that American airlines are able to fly into the UK and then onto other European cities, and is heavily used by business travellers. Under the terms of the agreement, the UK can't offer the "fifth" to American carriers until the EU has offered it to the UK.



According to Charlton, both US and EU carriers would see that as an opportunity to lobby for their own interests.

"If I'm [EU-headquartered] Lufthansa or Air France, I'd think: 'Here is a chance to stuff it up to BA.'" he said.

"If I'm the Americans, I'd think: 'Here's a chance to get Norwegian Airlines off the roof."

"So suddenly they've got no reason to be nice. The US have no reason to be nice, and neither do the Europeans."

"There is a need for speed"

The other major factor working against the UK is time. Airlines are already looking to book their schedules for 2019 and put flights on sale, but they are unable to do so in the knowledge that flights will even by operable by then.

As the budget airline Ryanair announced on Friday, it will start selling tickets from September which include the alarming caveat that "this flight is subject to the regulatory environment allowing the flight to take place."

"Once the UK falls out of the EU-US Open Skies agreement, it's not as if they'd fall into a void. They'd actually fall into something worse than a void."

Experts told BI that action was needed immediately to resolve this uncertainty.

"There is a need for speed," said John Strickland, an aviation consultant who previously held senior positions at several airlines.

"It's not helpful if it's finally sorted out one minute to midnight on March 28, 2019.

"The next few months are going to be fraught. There are going to be attempts at brinkmanship, posturing, and point-scoring."

"That's all very unhelpful because we're getting close to the time when airlines start to move to finalisation of their flying programmes for summer next year.

"They can't do it with complete confidence until they know that we've retained the open skies in Europe that we currently enjoy, or open skies across the Atlantic."

Strickland warned that a positive solution wouldn't be found without "a lot of effort and some goodwill," and warned "there needs to be urgency."

He said US, UK, and EU governments needed to demonstrate "the ability to quash side-stepping and very narrow partisan interests of individual countries — and in particular individual companies."

"They need to move to clear, clean negotiations as soon as possible."

Failure to secure a deal with the US could have huge implications, Charlton said, because the UK would fall back into the previous agreement in place between the two countries, called Bermuda II, which he said was "very poor and very unliberal in every way."

"Once the UK falls out of the EU-US Open Skies agreement, it's not as if they'd fall into a void. They'd actually fall into something worse than a void."

The reality of Brexit

International Trade Secretary Liam Fox REUTERS/Toby Melville The row over Open Skies is just one example of the huge and complex difficulties that Britain faces in renegotiating its relationship with the world after Brexit.

The scale of the task is difficult to comprehend. The UK reportedly needs to renegotiate at least 759 other treaties with 168 countries before it leaves the EU on everything from transport, to fish, to farming. And while some of these negotiations will be relatively straightforward and end up in Britain's favour, many others will not.

With just over a year to go until Britain leaves, some who campaigned for Brexit have still failed to face the scale of the task ahead. In the past week, that reality has finally started to become clear.