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!