Friday, December 12, 2008
The European Commissioner responsible for Transport, Antonio Tajani, has established an e-mail address where passengers flying to and from the European Union can acquire information about how to exercise their rights under Regulation 261/2004. So far the link on the Commission's Air Transport Portal only takes you to an online form for making general enquiries. No mention is made about how many months it will take them to get back to you.
Yesterday's blog post concluded with a brief remark on the possibility of U.S. airlines falling in line behind the automakers if the global economic crisis proves too damaging. News that the bailout bill died in the Senate Thursday (see The Economist's story) has been topped with new reports that the White House is contemplating using funds from the Wall Street bailout package to help prop-up "The Big Three" (see the latest stories from The Wall Street Journal and The New York Times here and here). It will be interesting to see what (if any) future action Congress will take on behalf of the automakers once President-elect Obama (and a Democrat-dominated Congress) takes office next month. As The Economist mentions, "[h]is statements on the issue have so far been rather gnomic." This leaves lingering questions over whether he'll start a soup line for America's failing businesses or simply let the market do its (occasionally dirty) work. The airlines may still have someone to hold their hats out to.
Thursday, December 11, 2008
The International Air Transport Association reported on Tuesday that U.S. air carriers could post a very modest $300 million profit while the world's other regions will likely endure $2.5 billion in losses. The losses will be nowhere near as severe as $5 billion IATA expects the global industry to lose this year. A substantial drop in fuel prices and a 10% domestic capacity reduction accounts for the comparatively sunnier outlook for U.S. carriers next year. More gloomy was the outlook for air cargo, which already experienced a 7.9% decline in October.
In a speech delivered at IATA's 2008 Global Media Day, IATA Director General and CEO Giovanni Bisignani once again decried the slow pace of liberalization for the global air transport industry. The longstanding system of bilateral agreements which have ordered international aviation for six decades "denies airlines the basic freedoms to access markets and global capital or to merge or consolidate," said Bisignani. He continued: "Industry losses clearly show that airlines feel the recession like any other business. But we don’t have the commercial tools that other industries take for granted to manage through it."
To anyone who has followed the strange tale of modern aviation, this is old news. But "old" is hardly synonymous with "unimportant." The problem is that Bisignani's cries aren't being heard or, rather, heeded by the right ears. It goes without saying that the European Commission is looking for robust liberalization in its various aviation agreements with partners such as the U.S. and Canada, along with Australia and New Zealand. But are those partners on board with the idea? As mentioned on this blog earlier in the week, the U.S. appears as recalcitrant as ever when it comes to foreign ownership of its carriers and cabotage rights. The Canadian Government, despite the encomia heaped by the European Commission on its newly-inked Canada/EC Air Transport Agreement, has made no clear-cut statement that it intends to move foreward anytime soon on raising its foreign investment cap for airlines, to say nothing about allowing European nationals to own and control them. Even Australia, which has shown far more liberality with its air transport sector than most, has indicated reserve over the possibility of allowing British Airways to merge with Qantas. Doing so would mean a potential forefeiture of Qantas's right to conduct international services to Japan since the two countries' bilateral arrangement contains a so-called "nationality rule," namely that at least a 51% stake in Qantas must remain in Australian hands.
Given the financial turmoil in which global aviation finds itself, what are the alternatives? Nobody knows for certain how long the current recession will abide and once it clears, where will fuel prices be again? U.S. carriers, which took the brunt of the 2008 downturn, cannot endure these conditions indefinitely. How long before they join the automakers and get in line for a bailout? And what will be the ramifications of that? We could see a rapid dismantling of the business freedoms and consumer benefits which came out of the 1978 Airline Deregulation Act. We could also very well see the EU, provoked by a U.S. retreat in market medievalism, prove chief U.S. negotiator John Byerly wrong by indeed doing the "nutty" thing and "tak[ing] down the whole transatlantic [aviation] structure."
A full program and select presentations from the EU/U.S. Forum on Liberalisation and Labour is now available through the European Commission's Air Transport Portal here. In the Commission's words, the forum "forms part of an initiative to facilitate discussion between stakeholders and decision-makers on labour issues linked to the first stage [U.S./EC Air Transport Agreement] and the ongoing negotiations on a comprehensive second stage aviation agreement. The event was intended to provide the participants with a common understanding of the labour laws and employee concerns that have a bearing on the agreement and its future evolution."
Wednesday, December 10, 2008
The first issue of Issues in Aviation Law and Policy (IALP) published under the auspices of the International Aviation Law Institute at DePaul University College of Law is now available. Formerly published by CCH/Wolters Kluwer since April 2001 in looseleaf format, IALP is now available as a more portable and readable perfect-bound journal. What has not changed is the core concept that animated the launch of IALP eight years ago--to present articles and commentaries by leading policymakers, officials, analysts, academics, and industry leaders who have the experience and expertise to brief readers on the challenges confronting global civil aviation today and in the future. Contributors to Volume 8, Issue 1 include:
- Brian F. Havel, Associate Dean and Professor of Law, DePaul University College of Law and Director, International Aviation Law Institute
- Michael E. Levine, Distinguished Research Scholar and Senior Lecturer, New York University School of Law
- Robert L. Crandall, Former Chairman and CEO, AMR Corporation and American Airlines
- Erwin von den Steinen, Independent Policy Analyst and author of National Interest and International Aviation (Kluwer Law/Aspen Publishers, 2006)
- Ambassador Donald T. Bliss, U.S. Permanent Representative on the Council of the International Civil Aviation Organization
- Michael S. Jacobs, Professor of Law, DePaul University College of Law and Co-Director, International Aviation Law Institute
- Randy Bennett, Former Director of the Office of Aviation Analysis, U.S. Department of Transportation
- Patrick Murphy, Principal at Gerchick Murphy Associates and former Deputy Assistant Secretary of Transportation for Aviation
- Douglas M. Marshall, Professor and Director of Program Development, UAS Center of Excellence, Department of Aviation, John D. Odegard School of Aerospace Scinces, University of North Dakota
- Gabriel S. Sanchez, Adjunct Professor, DePaul University College of Law and FedEx/United Airlines Resident Research Fellow, International Aviation Law Institute
Those interested in subscribing to IALP are encouraged to contact Stephen Rudolph, the Institute's Executive Director, at 312-362-5769 or by e-mail. A comprehensive two-volume looseleaf archive of the first seven years of IALP is also available. Contact Mr. Rudolph for further details.
Until the text of the newly-initialed EU/Canada Air Transport Agreement is posted online, readers may be interested in some of the less-than-boisterous feedback the agreement is already receiving in the press. As any schoolboy who has ready his Aristotle knows, potentiality is not actuality. A bleak economy and the protectionist sentiments it is expected to generate may have the final say.
"Canada-EU Open Skies Deal Under a Dark Cloud" from the Star notes that "industry observers warn that a slumping global economy will prevent airlines from taking full advantage of the new freedoms in the near term."
"Rules Relaxed, But Will It Open Up the Skies?" from the Globe and Mail reports that "industry analysts agreed that the deal sounds fine on paper but cautioned that, in reality, most airlines are scaling back and not adding overseas routes, citing weakened travel demand. The world's airline industry remains protectionist, and allowing full-fledged competition within Canada isn't in the cards, analysts say."
Tuesday, December 9, 2008
The European Union and Canada have just reached an historic agreement on air transport services. The new agreement, which is expected to come into effect during the first half of 2009, will grant parties' carriers the unlimited freedom to operate direct services between any point in Europe and any point in Canada. It will also grant more freedoms for carriers on both sides to enter into code-share arrangements with other airlines.
More intriguing than what the agreement immediately grants is what it promises for the future. Following the first phase of new rights in 2009, the agreement envisages three additional phases of liberalization which will ultimately allow each parties' investors to set up and control new airlines in each others' markets and full cabotage rights. Though there is no set timetable in the agreement for the implementation of these phases, the second phase--which will begin once Canada allows European investors to own up to 49% voting equity in its carriers--will give Canadian cargo carriers full seventh-freedom rights. The Canadian Government has already been under pressure from Air Canada to raise the foreign investment cap from its current 25%. Now the EU has given it a further incentive to do so.
For more information on the new agreement and its history, visit the European Commission's Air Transport Portal here.
Monday, December 8, 2008
While a number of commentators have adopted the approach of Chicken Little when it comes to the possibility of European Union Member States suspending rights under the 2007 U.S./EC Air Transport Agreement should the U.S. fail to relax its foreign ownership rules for airlines or grant cabotage rights to EU carriers as part of the second-stage negotiations to expand the first Agreement, the U.S.'s chief negotiator is more circumspect.
John Byerly, the U.S. Department of State's Deputy Assistant Secretary for Transportation Affairs, was reported by Air Transport World last week as calling it "nutty to think we're [U.S. and EU] going to take the whole transatlantic [aviation] structure down because one side doesn't get its way." Byerly's remarks contrast those of Daniel Calleja, Director for the European Commission's Air Transport Directorate, who stated that the second-stage negotiations "have to succeed by 2010." "Success," from the EU perspective, has been conceived of in terms of foreign ownership and cabotage since before the 2007 Agreement was even finalized. How likely is it that the EU will be willing to accept another delay on these issues, especially in light of the fact that the U.S. has not proffered any comparably enticing alternatives?
Byerly, it seems, is banking on the fact that the EU isn't up for a game of aeropolitical hardball and that a trade war over transatlantic air services at this point in time would be disastrous for both sides. Even if that is true for most EU Member States, the United Kingdom--spurred largely by lobbying from British Airways--has not backed off its commitment to suspend the U.S.'s recently-acquired traffic rights if the U.S. doesn't open its airlines up to substantial foreign investment. Due to the importance of London Heathrow as the primary air gateway into Europe, the UK wields considerable clout; its unilateral suspension alone could seriously impact U.S. carriers. The question the U.S. may need to ask is whether the UK might be disinclined from such rash action if, for example, the proposed deepening of the oneworld alliance between American Airlines and British Airways is granted approval and antitrust immunity from the U.S. Department of Transportation. Considering the role this repeatedly proposed (and repeatedly thwarted) alliance has played in the oftentimes tense aeropolitical relations between the U.S. and UK, it's possible that the U.S. may finally tolerate the venture in order to appease this key (and openly disgruntled) air services trading partner. Whether that and other air alliance approvals will be enough for the rest of the EU remains to be seen.