Thursday, September 28, 2006

News Roundup

Virgin Atlantic Press Release on Aviation and Climate Change

On September 27, Virgin Atlantic put out a press release giving specific ideas about how aviation carbon emissions could be reduced.  This follows an announcement last week of Virgin Group’s plans to invest $3 billion in renewable energy initiatives over the next ten years (by using the profits from its transportation related businesses).  Virgin’s ideas include: (1) creating "starting grids" at airports (that would be close to runways) where aircraft could be towed to before starting their engines; (2) "continuous descent approach" procedures for aircraft where they would begin their descent from altitude earlier (thus reducing fuel burn); (3) reducing aircraft weight; and (4) reducing air traffic control delays (through projects such as the "Single European Sky").

The debate surrounding the best way to encourage aviation to reduce its carbon emissions is just beginning to heat up.  The EU is pushing to include aviation in its Emissions Trading Scheme and the European Commission is expected to publish a legislative proposal in this area by the end of 2006.  The US has objected to the EU's proposal to include aviation in its Emissions Trading Scheme as the proposal might impact US carrier flights operating in Europe as well.  The US believes that the International Civil Aviation Organization is the best forum to coordinate any efforts to reduce carbon emissions from aviation.  This issue is also on the radar of groups like the World Economic Forum, who are interested in promoting awareness of the complex technological, jurisdictional and regulatory issues posed by the wide range of policy solutions that have been suggested.

Northwest Airlines/Flight Attendants Right to Strike

Stymied by the court ruling on September 15 blocking their union from striking Northwest after concessionary contract terms were imposed on them during the bankruptcy process, the airline’s flight attendants (who are represented by the Association of Flight Attendants) have decided to appeal to the National Mediation Board (NMB) to have an impasse declared in their talks with the airline. While the NMB declined to release the parties from mediation at this time, it is expected that they will eventually do so, enabling the union to legally strike.

United Merger Plans?

Crain’s Chicago Business reported this week that United Airlines has hired advisors from Goldman Sachs to look at possible merger targets.  While many in the press have speculated that Continental would be a possible merger target for United, any deal with United would be complicated by the "golden share" that Northwest has in Continental that would allow them to effectively veto any merger deal.  If a large-scale merger proposal (Continental, Northwest, etc.) is made by United, it would likely be the first merger with any significant route overlap (the America West - US Airways deal created a barbell shaped route network with little overlap) since the United-US Airways deal that collapsed in 2001.  It will be interesting to see if the DOJ takes a less rigorous approach to antitrust clearance of a merger than it took during the earlier round of merger proposals six years ago.  Finally, United is effectively precluded from merging with what might be the best partner of all, Lufthansa, as the NPRM that would liberalize foreign ownership of U.S. air carriers has been held up from becoming final until at least the end of the year.

China Route Case

On September 25, each of the combination carriers (American, Continental, Northwest and United) participating in the 2007 China Combination and All-Cargo Frequency Allocation Proceeding were required to have filed their direct exhibits supporting their proposed service.  We will have a full analysis in an upcoming blog posting of the most powerful arguments that each of the carriers made to support their service.

Additionally, there was an interesting article on the China route case by Laura Meckler, on page A4 of the September 25 Wall Street Journal, entitled "Airlines Lobby Full Throttle for China: U.S. Carriers Enlist Supporters to Sway Decision on Awarding the Lucrative Route."  Given the economic success of US-China routes in the past, airlines are enlisting as much civic support as they can to bolster their applications.  According to the article, "As of late Friday, more than 1,600 letters had been submitted to the Department of Transportation supporting one or another application.  Airlines also plan to submit names of tens of thousands of people who have added their names to online petitions on the carriers’ web sites."

Further Resources:

1) American direct exhibits

2) Continental direct exhibits

3) Northwest direct exhibits - Vol 1, Vol 2

4) United direct exhibits

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