Thursday, August 31, 2006

China Route Case Update and News Follow-Ups

China Route Case Update

By August 17, 2006 airlines participating in the 2007 U.S.-China Combination and All-Cargo Frequency Allocation Proceeding were required to make their final selection of the U.S. and Chinese gateway points they propose to serve.  The routes carriers filed for are as follows:

Combination Carriers

1) American - 7 weekly frequencies for Dallas-Fort Worth/Beijing (non-stop)

2) Continental - 7 weekly frequencies for New York-Newark/Shanghai (non-stop)

3) Northwest - 7 weekly frequencies for Detroit/Shanghai (non-stop)

4) United - 7 weekly frequencies for Washington D.C.-Dulles/Beijing (non-stop)

All-Cargo Carriers

1) FedEx - 4 weekly frequencies (Zone 1) with no routing specified

2) Northwest - 4 weekly frequencies Anchorage/Osaka/Guangzhou

3) Polar - 4 weekly frequencies Los Angeles, Chicago and Anchorage/Beijing

On August 24, the U.S. DOT granted the all-cargo applicants the frequencies they applied for without further procedures because there were 15 frequencies available and the carriers only applied for 12.  The carriers cannot begin using the frequencies before March 25, 2007.  Going forward, only the combination carriers will take part in a full carrier selection proceeding.

News Follow-Ups

There was an interesting Reuters story today emphasizing the importance of the upcoming U.S. District Court decision in the dispute between Northwest and its flight attendants union.  According to a source quoted in the story, "If the court were to hold that the flight attendants’ strike was lawful, and if that ruling were to be upheld on appeal, it would certainly change the dynamic of bargaining in the airline industry."

According to The Times (London), in BAA's final submission to the UK Office of Fair Trading for its study on the UK airports market, BAA argued that a more fragmented ownership structure would undermine vitally needed investment in airport capacity.  The outcome of this study has some US relevance as well since BAA has been mentioned as a possible bidder if the City of Chicago decides to privatize Midway Airport.

[Andy Eastmond]

August 31, 2006 | Permalink | Comments (0) | TrackBack (0)

Monday, August 28, 2006

News Roundup

Northwest Airlines Temporary Injunction

Judge Victor Marrero of the U.S. District Court for the Southern District of New York issued a temporary injunction on August 25th preventing Northwest Airlines’ flight attendants from conducting any strike or work action.  The judge said that a decision will be made this week on whether or not Northwest Airlines cabin staff have the right to engage in their strategy of targeted "CHAOS" strikes.

Further resources:

1) AFA press release responding to Friday’s decision

2) Northwest Airlines press release responding to Friday’s decision

3) Link to AFA’s website with full text of legal documentation filed regarding the current right to strike issue

Chicago O’Hare and New York LaGuardia Congestion Issues

From ATW Online: "US FAA released a final albeit interim rule finalizing slot limits at Chicago O'Hare that originally were imposed on a temporary basis in 2004.  The rule takes effect Oct. 29, 2006, and terminates Oct. 31, 2008, at which point it is expected that the opening of a new runway under the O'Hare Modernization Plan will allow the airfield to accommodate more than ‘50,000 additional forecast operations’ annually."

Further resources:

1) Rest of ATW Online article

2) Full text of FAA final rule

The FAA is proposing a new rule for congestion management at New York’s LaGuardia Airport that will take effect when the High Density Rule expires there on January 1, 2007.  According to the FAA: "The rule, if adopted, would establish an operational limit on the number of aircraft landing and taking off at the airport.  To offset the effect of this limit, the proposed rule would increase utilization of the airport by encouraging the use of larger aircraft through implementing an airport-wide, average aircraft size requirement designed to increase the number of passengers that may use the airport within the overall proposed operational limits."

This is not the first time that the FAA has proposed aircraft size requirements as a potential solution to congestion problems.  It will be interesting to see if they are successful with this attempt.

Further resources:

1) New York Times article on this subject

2) Full text of FAA NPRM

UK Airlines Call for BAA’s Breakup

From ATW Online: "British Airways, Ryanair and easyJet yesterday called on the UK Office of Fair Trading to refer its study on the UK airports market to the Competition Commission, citing monopolistic conditions in the market and calling for the breakup of the airports operator.  OFT in June launched a consultation to determine whether the current market structure benefitted consumers after research showed that about two-thirds of UK air travelers--and nine out of 10 London passengers--fly through a BAA airport.  Interestingly, the UK House of Commons Transport Committee called for the breakup of BAA as far back as 1996, stating that Heathrow, Gatwick and Stansted should not be run by the same company."

Further resources:

1) Rest of ATW Online article

2) "BAA at a Glance"

3) OFT document setting forth parameters of study

Ryanair Lawsuit Against UK Government

Ryanair submitted a claim for compensation with the UK government for £3.3 million pounds ($5.7 million US) for losses it says it incurred because of tighter aviation security in the wake of the foiled UK airliner bombing plot.  According to the airline, the claim "reflects Ryanair’s losses from cancellations and lost bookings over the week of 10-16 August only."  Ryanair also called on the UK government to "restore UK airport security to the same IATA norms that are followed at every other European international airport, and on every inbound flight to the UK."

Further resources:

1) Link to Ryanair press release

2) The Times (London) story on this subject

August 28, 2006 | Permalink | Comments (0) | TrackBack (0)

Thursday, August 24, 2006

Rulemaking On Foreign Control of U.S. Airlines Delayed Again

Last week the storm clouds began to gather again around the U.S. Department of Transportation’s (DOT) rulemaking on foreign control of U.S. airlines.  Both the U.S. State Department and the DOT made public statements about another delay in issuing a final rule to address concerns raised by Congress.  The U.S. stated that it would still abide by pledges made by both the U.S. and EU in June that committed both sides to concluding a open skies agreement by the end of 2006 (with implementation slated for mid-2007).

Also, The Times (London) reported earlier this week about an internal BAA study indicating that BAA expects significant difficulties in accommodating the expected traffic at London Heathrow if a U.S.-EU open skies agreement came into effect.  This development is likely to be cited as evidence by prominent U.S. critics of the agreement, such as Continental, who have argued that DOT should renegotiate with the EU and insist on fair access to commercially viable slots and facilities at London Heathrow.

As the Institute has noted in its comments to the DOT regarding the NPRM and SNPRM on foreign control of U.S. airlines, in the long run only a comprehensive elimination of foreign control limitations will truly liberate the marketplace for air services.  However, finalizing the DOT’s proposed rule remains a solid incremental step within the constraints imposed by the current law.

[Andy Eastmond]

August 24, 2006 | Permalink | Comments (0) | TrackBack (0)

Friday, August 18, 2006

Northwest Airlines Flight Attendants Free To Strike

An important case of first impression was decided yesterday regarding a union’s right to take job action against a Railway Labor Act carrier in Chapter 11 following the carrier’s rejection of the union’s collective bargaining agreement under Section 1113 of the Bankruptcy Code.  Judge Allan Gropper of the U.S. Bankruptcy Court for the Southern District of New York denied Northwest Airlines' request for a preliminary injunction enforcing the terms and conditions of the Railway Labor Act and enjoining the Association of Flight Attendants and its members from work stoppages or other self-help activity.  Northwest said that it would appeal this decision.  According to an article in the Minneapolis Star Tribune, the flight attendants may begin their "CHAOS" strategy of striking flights intermittently as soon as August 25.

August 18, 2006 | Permalink | Comments (0) | TrackBack (0)

Thursday, August 17, 2006

Governor of American Samoa Seeks to Bar Hawaiian Airlines

In a truly bizarre action, given that Hawaiian Airlines is the only carrier to currently serve American Samoa from the United States, the Governor of American Samoa issued an executive order prohibiting the carrier from flying there.  The Governor accuses Hawaiian of using its monopoly position on the Honolulu - Pago Pago route to charge airfares and fees that are higher than what it charges for service to other United States destinations that are a comparable distance away from Honolulu.  Hawaiian has reportedly offered to meet with the Governor to resolve this situation but any meeting has been stymied by the Governor’s demand that reparations be paid to the people of American Samoa.

On August 10, 2006, Hawaiian filed a petition with the U.S. DOT asking it to rule on whether or not the executive order is preempted by the Transportation Act despite any customs or border authority the Governor may have.  The petition raises interesting questions of law that will be considered more fully in future postings.  Also, there is an article from Pacific Magazine that provides a good summary of this dispute.

August 17, 2006 | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 16, 2006

Welcome To Our New Blog and China Route Case

Welcome To Our New Blog

The International Aviation Law Institute at DePaul University College of Law welcomes you to our Aviation Law Prof Blog, part of the Law Professor Blogs Network.  In coming months you will be able to turn here for critical analysis of current issues in domestic and global aviation law and policy.  We will have commentary from our resident experts at the Institute as well as invite guest bloggers to join us from the academy, from the media, and from across the entire spectrum of the air transport industry.  We welcome your comments and invite your contributions.

The Institute, founded in 2004, is the first of its kind in the United States.  It strives to provide a thriving intellectual environment for our faculty, our students and graduates, and for experts in the fields of aviation regulatory, competition, finance, and tort law.  We are engaged in a number of major scholarly research projects, including a global aviation law treatise for the International Air Transport Association and a systematic oral history of the U.S. and European airline deregulation experiments.  We are working with the World Economic Forum on developing an agenda for regulatory approaches to aviation emissions in the carbon economy.  We contribute commentaries and make submissions on major industry issues (including, for example, the U.S. Department of Transportation’s pending NPRM with respect to relaxing the criteria for assessing foreign control of U.S. air carriers).  We have inaugurated a seminar course in International Aviation Law and Policy and are currently developing a complete curriculum for the nation’s first master’s program in aviation law.

The Institute’s legal and policy interests extend to issues of competition, privatization, deregulation, globalization, safety and security, and we are engaged in hosting conferences and seminars in the United States, Europe, and Asia, as well as meetings of experts and roundtable discussions on current industry issues.  We will co-host an aviation leadership summit with the Chicago Council on Foreign Relations in Chicago this coming October, and in 2007 we will host conferences in Beijing (with the Beijing University of Aeronautics and Astronautics) and in Dublin (with the European Air Law Association).  To serve the needs of a global industry, we are proud to have established associations with distinguished foreign institutions such as the Air and Space Law Institute at Leiden University in the Netherlands and the aviation law and policy program of the Federal University of Rio de Janeiro, Brazil.

For more information, please see the following "backgrounder" on the Institute.

China Route Case

On July 10, 2006, the U.S. DOT instituted the 2007 U.S.-China Combination and All-Cargo Frequency Allocation Proceeding.  Effective March 27, 2007, the U.S.-China aviation agreement will allow an increase of seven combination and fifteen all-cargo frequencies for U.S. airlines to serve points in China Zone 1 (Beijing, Shanghai or Guangzhou) or China Zone 2 (e.g. Guangdong (except Guangzhou), Hunan, etc.).  The agreement also provides for seven additional combination or all-cargo frequencies that can only be used for service to points in China Zone 2.  As the proceeding is limited to incumbent carriers only, Northwest, United, Continental and American are eligible to receive the additional combination carrier frequencies, and Northwest, Federal Express, UPS, and Polar Air Cargo are eligible to receive the additional all-cargo frequencies.

Key procedural dates that we are watching are: (1) August 17, when the airlines must make their final selection of the U.S. and Chinese gateway points they propose to serve; (2) September 25, when the airlines must submit direct exhibits supporting their proposal; and (3) October 16, when the airlines must submit exhibits rebutting the other airlines' proposals in the case. If the DOT follows a similar schedule to the 2005/2006 China Air Services Case a final decision on the proceeding can be expected sometime late in the first quarter of 2007.

Initial questions that we have are:

(1)  Why did United file for Washington, D.C.-Beijing service instead of San Francisco-Guangzhou authority as they did in the 2005/2006 China Air Services Case?  Do they believe that they can convince the DOT to use the next round of U.S.-China air service agreement talks to get Guangzhou removed from Zone 1 of the bilateral agreement into a category that would more easily facilitate service to this market?

(2)  Will Northwest file for additional combination carrier frequencies or only focus on all-cargo service as they did in the 2005/2006 China Air Services Case?

(3)  Will the DOT’s policy of favoring new entry (meaning in this case more services for Continental and American) over incumbents (Northwest and United currently operate more weekly round-trips to China than Continental and American) hold true in this proceeding?

(4) Will American’s Dallas-Fort Worth/Beijing proposal be hurt by the small Dallas-Fort Worth/Beijing local market much as Delta’s Atlanta-Beijing proposal was in the 2005/2006 China Air Services Case?

August 16, 2006 | Permalink | Comments (0) | TrackBack (0)