Friday, April 27, 2007
U.S. DOT To Investigate Airline Scheduling
According to an article in TheStreet.com, the DOT has launched an investigation of airline scheduling practices that may lead it to issue fines against as many as eight carriers. The DOT investigation is focused on flights that are late more than 70% of the time, as well as the failure of airline reservation agents to disclose accurate information about how often a flight is late.
Delta Heathrow Service?
In a development that supports those who argued that London-Heathrow slots would become available to U.S. new entrant carriers, the Financial Times reported that Delta anticipates obtaining up to six pairs of slots to enable it to start Heathrow service in March 2008. The article states that Delta is "very confident" that these slots can be obtained through its alliance partners and other unaligned carriers.
EU Commission Italian PSO Decision
The EU Commission recently issued a ruling on public service obligations (PSO) on flights between Sardinia and Italy's mainland. The decision allows Italy to keep its PSO, but any operators that meet terms of the PSO must now be allowed fly the routes. According to an AFX story, Alitalia, Easyjet and Ryanair are now considering starting flights to Sardinia. Click to access the Commission press release and full decision.
House Aviation Subcommittee Hearing on EAS Program
The U.S. House Aviation Subcommittee met this past week to hear testimony about the Essential Air Service (EAS), and Small Community Air Service Development (SCASD) programs. The Bush Administration's 2008 budget proposal would provide only $50 million in funding and limit the EAS program to about 70 communities. Any significant changes to the EAS program would be a tough political sell as it has bipartisan support from members of Congress. Click here for full testimony from this hearing.
GAO Report on A380 Impact
The U.S. General Accounting Office (GAO) recently released a report on "Potential Safety and Capacity Issues Associated With the Introduction of the New A380 Aircraft." The report makes the interesting point that while the large capacity of the aircraft may help improve airport congestion (by removing multiple flights in smaller aircraft), increased separation requirements, operating restrictions and gate limitations may offset this benefit.
Friday, April 20, 2007
I noticed some interesting new proceedings and information while trolling around the U.S. DOT and European Commission DG-TREN's websites:
(1) DG-TREN has recently expanded a section on their website dedicated to routes where public service obligations are imposed. The new webpage gives up to date information on PSO routes, what carrier is serving them and ongoing tender procedures. This increased level of transparency makes sense at a time when the application of PSO obligations is increasingly coming under fire from low fare carriers in Europe (see Section 6 of ELFAA position paper on 3rd package revisions).
(2) Similarly, the first applications are being received for the DOT's 2007 solicitation of proposals for its Small Community Air Service Development Program (see Order instituting proceeding). Applications are due by April 27, 2007 so the next week should bring a great deal of interesting reading in this docket. The Program is funded at $9.9 million, and up to 40 applications can be awarded (only 4 per any one state). The Boyd Group, a consulting firm that has worked on these applications in the past, has a web page with some interesting insight into what type of proposals might be successful.
(3) Earlier this month, the European Commission presented a report which evaluated the results of the application of their airline passenger rights regulation (see DG-TREN webpage on this topic). The Commission determined that "further work is needed in a number of areas: improving enforcement, clarifying the interpretation of certain aspects of the regulation, establishing clarity between delays and cancellations as different rights are awarded to the passengers depending on the circumstances, and enhancing the role of the National Enforcement Bodies that oversee the application of the common rules." The Commission will be working with the National Enforcement Bodies over the next six months to step up enforcement of the rules. If this is not satisfactory the Commission has threatened to bring infringement actions against lagging Member States. Also, in a direct acknowledgment of the complaint lodged with the European Ombudsman, the Commission will prepare updated information material to inform passengers of their rights under the regulation.
(4) Finally, the DOT is conducting an interesting administrative proceeding considering if the recent increase in airport terminal charges assessed by Los Angeles International Airport to its tenants is reasonable and non-discriminatory (see Order instituting the proceeding). A recommended decision by the administrative law judge is due by May 15, 2007 with a final order due by June 15, 2007. United Airlines, which has a significant hub operation at LAX, recently announced that it will add a $10 surcharge for passengers departing LAX in an effort to offset a $10 million annual cost burden it will face under the new scheme.
Friday, April 13, 2007
U.S.-China Open Skies
A recent AP story indicates that the U.S. DOT is pursuing an open skies aviation agreement with China. The DOT hopes to have a draft agreement done by May with a full agreement signed by the end of the year. A clear winner would seem to be Delta, which does not yet have any U.S.-China routes. It will be intriguing to see if the Chinese government proposes a phased in agreement to shelter its carriers from full open skies while they attempt to make their product more attractive to U.S. originating passengers.
Ryanair's Transatlantic Ambitions
Yesterday, Ryanair announced its plans to offer transatlantic flights for as little as $12 once the new U.S.-EU open skies agreement comes into effect in 2008. EU airports to be served are London-Stansted, Dublin and Frankfurt-Hahn. The carrier plans to serve secondary airports in the U.S. in cities such as New York, San Francisco and Boston. See Bloomberg article. News reports also contain speculation that Ryanair may be forced to sell all or some of its one-quarter stake in Aer Lingus if the European Commission decides to block the proposed merger between the two carriers. See Irish Times article.
Mercer Management Strategy Paper
Mercer Management Consulting recently released a paper suggesting options for airlines to thrive during the next recession. Options include consolidation, strategic spinoffs, and dramatic productivity increases. See Mercer paper.
Senate Passenger Bill of Rights Hearing
The U.S. Senate Commerce, Science and Transportation Committee recently held a hearing entitled "Airline Service Improvements" which focused on a potential airline passenger bill of rights. At the hearing, Senators Barbara Boxer (D-Calif.) and Olympia Snowe (R-Maine) disclosed that they might try to attach their proposed bill to the FAA reauthorization legislation due to be considered later this year. The U.S. DOT indicated that further study of the issue is needed and that it did not back airline passenger bill of rights legislation at this time. See all testimony, ATA head James May's testimony, and an ATW online article discussing the hearings.
Monday, April 2, 2007
While airline consolidation efforts have slowed down recently in the United States in the wake of the collapsed US Airways-Delta deal, airline mergers in Europe continue to evolve. Last week, Texas Pacific Group expressed its interest in making a takeover offer for Iberia that would potentially be valued at $4.53 billion. (ATW Online article). Ryanair also expressed its displeasure with a leaked EU DG-COMP conclusion that a merger between Aer Lingus and Ryanair "is likely to significantly impede effective competition." Finally, BMI has not yet decided if it will begin London Heathrow-U.S. services as soon as the new U.S.-EU open skies agreement takes effect. (ATW Online article). Both Virgin Atlantic and BA are reported to be interested in buying BMI. (London Times article).
New U.S.-Argentina Bilateral Agreement
The U.S. and Argentina recently negotiated a more liberal bilateral agreement that significantly increases over the next two years the number of weekly passenger frequencies that U.S. and Argentine carriers can operate between the two countries. (DOS press release). The agreement falls short of a full passenger open skies agreement. An all-cargo open skies agreement was concluded by the two countries in 2000.
An issue that we have been following in our blog since last year concerns the issue of whether Northwest Airlines’ flight attendants (who are represented by the Association of Flight Attendants) are free to strike following the voiding of their contract in bankruptcy court. The U.S. Court of Appeals for the Second Circuit upheld the ruling of U.S. District Court Judge Victor Marrero, who concluded that the flight attendants did not have the right to strike. Although the AFA has indicated that it will appeal to the U.S. Supreme Court, this case appears to hand more leverage to airline management as they may now be able to use the Section 1113 bankruptcy process to impose new labor contracts without the fear of a strike.
Airport Privatization and Capacity Issues
The UK Office of Fair Trading referred BAA (operator of many of the UK’s airports) last week to the UK’s Competition Commission for a full antitrust investigation of its operations. (OFT press release). The investigation may take up to two years to complete and could lead to the divestiture of one or more airports. Airlines such as Ryanair and Easyjet praised the referral. (Ryanair and Easyjet press releases).
The UK slot coordinator has released a briefing note that sketches out existing London Heathrow slot availability while suggesting that additional slots may be hard to come by for new U.S.-Heathrow operations made possible by the U.S.-EU open skies agreement.
Finally, the GAO issued a report supporting the idea that "[Washington] Regan International Airport can accommodate some additional capacity." However, the GAO found that airport infrastructure is a constraint on how much capacity can be added.
John Macilree’s Blog
Readers of our blog may be interested in reading a blog with additional coverage of aeropolitical developments (particularly in the Asia-Pacific area). The blog is the personal blog of John Macilree, who in his day job is Principal Advisor with the Air Services Team of the New Zealand Ministry of Transport. It can be accessed by clicking here. Give it a look!