Thursday, April 17, 2014
A recent story from the Economic Times highlights the difficulties States encounter as they try to relax restrictions on foreign ownership of airlines without actually allowing foreign ownership or control. India has recently opened up its carriers to investment by foreign airlines, which has allowed Etihad to make a significant investment in Jet Airways. The Directorate General of Civil Aviation is currently introducing measures, such as limiting the number of foreign directors that can be part of a joint venture, that are designed to prevent newly permitted foreign investment from resulting in a transfer of control abroad.
Because of the need for capital, States have become more accepting of foreign investment in airlines. However most still want to have their cake and eat it too, with foreign money coming in, but control remaining local. States will eventually have to decide whether efficient capital allocation or strict ownership rules are of greater importance.
Tuesday, April 15, 2014
Last week the European Commission released the 23rd version of its EU air safety list, identifying airlines that are subject to an operating ban or operational restrictions within the EU because of concerns about their level of compliance with international safety standards. The list can be found here.
Friday, April 11, 2014
ICAO has announced the adoption of a new Protocol to the 1963 Tokyo Convention on offenses committed on aircraft. The Protocol enhances states' authority to penalize passengers who commit disruptive acts on-board aircraft. It is now open for signature and will require 22 ratifications before taking effect. The full text of the Protocol is available here.
Monday, April 7, 2014
A judge has ordered Mexicana de Aviacion, one of the world's oldest airlines at the time it ceased operations in 2010, to begin selling assets to satisfy creditors. Employee unions, who have been keeping alive the possibility of a financial rescue and resumption of operations, announced plans to appeal the decision.
Thursday, April 3, 2014
In a vote earlier today, the European Parliament approved an agreement that had previously been negotiated with the Council that would restrict the application of the EU's Emissions Trading Scheme to intra-EU flights for the next few years. Carriers will not be required to submit allowances for emissions on arriving or departing flights between an EU and non-EU State. The exemption only runs through the end of 2016, by which time ICAO has pledged to produce a global plan for reducing emissions from the air transport industry. Should ICAO fail to produce an adequate proposal, the EU would presumably decline to extend the exemption any further. The agreement also imposes a transparency requirement on Member States, to monitor the allocation of revenue from allowances and to ensure that revenue is used for purposes related to climate change.
Wednesday, April 2, 2014
The Supreme Court today delivered its opinion in Northwest v. Ginsberg, this term's case considering the pre-emptive effect of the Airline Deregulation Act of 1978 (ADA). The unanimous opinion, written by Justice Alito, provided few surprises, falling mostly in line with the predictions in our December blog post. The primary question arising from oral arguments was whether the Court would announce a new, more expansive rule regarding the pre-emption of all implied covenants or leave the matter open for state-by-state consideration of the particular workings of each state's various implied covenants. To the dismay of the airlines, the Court chose the latter approach. The opinion includes an acknowledgement of the airlines' concern that differing treatment of various state covenants would subject airlines to a patchwork of legal regimes in contravention of the purpose of federal pre-emption as follows:
But the airlines have means to avoid such a result. A State's implied covenant rules will escape pre-emption only if the law of the relevant State permits an airline to contract around those rules in its frequent flyer program agreement, and if an airline's agreement is governed by the law of such a State, the airline can specify that the agreement does not incorporate the covenant.
Essentially, the Court is reiterating its position in Wolens that pre-emption does not apply to state law rules necessary for the enforcement of "privately ordered obligations" but does apply to covenants that represent policies imposed by the state. The Court clarifies this distinction by declaring that when parties have the ability to contract out of the covenant the covenant is merely a device used for interpreting the wishes of contacting parties, but when parties are prohibited from waiving the implied covenant by contract, as was the case here, then the covenant represents a separate policy choice imposed by the state and one that is subject to the ADA's pre-emption provision. Thus, airlines only have to include waivers of implied covenants in their contracts, and can rely on pre-emption in states where such covenants are not waivable, to ensure that a standardized set of national rules govern their frequent flyer programs.
With regard to the other notable question to arise during oral arguments, whether the evolution of frequent flyer programs to represent material benefits distinct from airline prices and services removes them from the scope of the ADA pre-emption, the Court, as expected, declined to address the matter as it wasn't a part of Ginsberg's complaint.
Thursday, March 20, 2014
As we discussed earlier this month, representatives of the European Union Member States have, in the wake of ICAO's announced timetable for the creation of a global aviation emissions plan, lobbied to effectively exclude foreign carriers from the EU's emissions trading scheme in order to avoid conflict with major trading partners. Members of the European Commission and Parliament, by contrast, have proposed only exempting foreign carriers from responsibility for emissions occurring outside the airspace of EU Member States. A few weeks ago an agreement was announced between members of Parliament and the Council that suggested that a full exemption would be provided, but that agreement still awaits formal approval by the Parliament. Yesterday Parliament's environmental committee voted to reject the compromise, making clear that significant opposition to the full exemption still remains ahead of the crucial April 3 vote.
Tuesday, March 18, 2014
Air Canada has announced that it will suspend its service to Caracas, the capital city of Venezuela. While Air Canada attributed the decision to the ongoing protests and civil unrest underway in Caracas, Air Canada is one of a number of carriers engaged in an ongoing dispute with the Venezuelan government over their inability to access funds from ticket sales because of the country's currency controls. The problems are related to a bizarre practice of Venezuelan citizens purchasing airline tickets, not for the purpose of actually flying, but because possessing a valid airline ticket enables them to exchange local currency for U.S. dollars at the official exchange rate, which is considerably lower than the unofficial rate. This has led to excessive overbooking of international flights out of Venezuela, though a number of foreign carriers have stopped selling tickets until they can be assured they will be paid for the sales.
Friday, March 14, 2014
According to the Financial Times, some U.K. ministers are pushing to devolve responsibility for the air passenger duty to the Scottish government in attempt to undercut one of the Scottish National Party's arguments for independence. The SNP, which objects to the application of the tax to flights into and out of Scottish regional airports, has proposed reducing the duty by 50 percent should Scotland gain the authority to do so under independence. Northern Ireland was granted similar authority over the administration of the APD to flights in or out of its airports in 2012 and used it to revoke the duty entirely for long-haul flights.
Wednesday, March 12, 2014
Last week an administrative law judge overturned a fine that had been levied against an aerial photographer for his operation of an unmanned aerial vehicle in 2011. The judge ruled that existing airspace regulations were not intended to apply to vehicles of this type. While the FAA Modernization and Reform Act of 2012 clearly authorizes the FAA to adopt regulations to incorporate small UAVs into the national airspace system, the first of those regulations is not expected until November. Arguably, the FAA lacks legal authority to apply many of the rules written for manned aircraft to the operation of unmanned aircraft, which would mean that until the new rules take effect, commercial UAV use could operate free from regulation. The FAA is appealing the ruling.
Tuesday, March 11, 2014
Friday, March 7, 2014
As reported by USA Today, the Federal Aviation Administration has decided to grant U.S. carriers' request that the slot usage requirements normally in force at high density east coast airports such as Reagan National in Washington D.C., Kennedy International and LaGuardia in New York, and Liberty International in Newark be waived for cancellations related to the heavy storms of the past few months. Under normal conditions, airlines are at risk of losing their slot rights if they fail to use them at least 80 percent of the time. A pdf of the order, which includes the specific dates covered by the waiver and will be published in next week's Federal Register, is available via the Federal Register here.
Thursday, March 6, 2014
The long and contentious conflict over the application of the European Union's Emissions Trading Scheme to foreign carriers appears to be nearing an end as Members of the European Parliament reached an agreement with negotiators from the various Member States to essentially exempt non-EU carriers from any obligation to participate in Europe's cap-and-trade program. Carriers based in EU Member States will still be required to comply. The application of Directive 101/2008 to non-EU airlines has been criticized for its extraterritorial effects since its passage six years ago. Under pressure from Member States fearful of repercussions from trade partners, the EU temporarily suspended its application to non-EU carriers last year, and the European Commission and Parliament had both recently backed a measure to restrict foreign carriers’ obligations to only those pertaining to emissions occurring in EU airspace – thereby addressing the primary legal argument opposing States had put forward. Despite the Parliament's acquiescence to their purported concerns, non-EU countries, perhaps emboldened by their success, continued to press for complete exemption for their carriers which they now appear to have won.
Tuesday, March 4, 2014
A potentially significant development is underway in Australia as Prime Minister Tony Abbott revealed plans to abolish both the 49% cap on foreign investment and 35% cap on ownership by foreign airlines currently in place for Qantas' domestic operations. This would presumably require the company to create a bifurcated corporate structure similar to that employed by Virgin Australia, separating control of the domestic and international operations. Foreign ownership restrictions would remain in place for international operations as is necessary to remain compliant with most bilateral air services agreements. The proposal is likely motivated by Qantas' recent financial struggles amidst increasing competition from the expansion of LCCs both within Australia and throughout the Asisa-Pacific market. As of now, the measure's adoption remains uncertain as it is expected to face opposition in the Australian Senate.
Thursday, February 20, 2014
In a press release today, the European Commission announced that it had adopted a new set of guidelines for Member States to use when assessing their ability to provide financial assistance to local airports or airlines without running afoul of EU competition rules. The new guidelines are designed to restrict subsidies to smaller airports and to phase out those subsidies within ten years. The text of the new guidelines can be found here and a policy summary can be found here.
The Commission also announced today that it had concluded investigations into Berlin's Schonefeld Airport, Denmark's Aarhus Airport, and Marseille Provence Airport in France, finding none of the three to be in violation of the guidelines.
Thursday, January 23, 2014
European Court of Justice Advocate General Yves Bot issued an opinion today declaring that a Spanish law prohibiting carriers from charging additional fees for checked baggage violates Article 22 of EU Regulation 1008/2008 which allows carriers to freely set air fares and rates.
Thursday, January 9, 2014
On January 1, Frankfurt Airport introduced FRAConnect, a program by which the airport will refund portions of carriers' airport charges for airlines that can achieve a 1% increase in passengers served via the airport on international routes, but only if that growth is achieved through the use of aircraft meeting the appropriate noise standards. To be eligible airlines must serve a minimum of 7,500 departing passengers. More details about the program are available here. Frankfurt's program could prove to be a valuable case study in the use of airport charges as an incentive to attract traffic and reduce noise.
Wednesday, January 8, 2014
Tuesday, January 7, 2014
Having returned from the between-semester hiatus, we thought it appropriate to use our first post of 2014 to collect some of the stories that came out while we were on break.
- The FAA announced the selection of six operators that will conduct research on and test unmanned aircraft systems.
- The National Transportation Safety Board has begun investigating Sunday's crash of a Bombardier C-600 in Aspen, Colorado.
- The recent severe cold spell across much of the United States has taken a heavy toll on commercial air transport.
- CNN offers a glimpse of what's ahead for air travel in 2014.
Thursday, December 19, 2013
The Bipartisan Budget Act of 2013, also known as the Murray-Ryan bill, has now passed both chambers of the U.S. Congress and will be signed into law by President Obama. The agreement, which increases the Sept. 11 passenger security fee from $2.50 to $5.60 per one-way trip, represents a failure of airlines' recent lobbying efforts on two fronts. First, U.S. airlines have argued, ineffectively it turns out, that air transport taxes are already too high. Perhaps more importantly, the industry has been pushing the idea that all of the various fees associated with air transport amount to taxes by another name. While primarily semantic in nature, the argument is an important one as Republican negotiators made rejection of tax increases a precondition of negotiations. Thus the ability to classify revenue raised from air transport fees as distinct from tax revenues appears to have played a significant role in how the air transport sector came to be chosen as a place from which to derive budget savings.
It wasn't all bad for the airlines as an underreported provision in the legislation repeals a security fee charged directly to carriers instead of to passengers. And of course, there are those who argue airlines are still getting off easy.