August 8, 2009
Oberstar At It Again
Rep. James Oberstar is taking aim at the airlines again, this time with respect to their fees. See Josh Mitchell & Doug Cameron, US House Lawmaker Pushes for Study on Airline Fees, Dow Jones Newswires, Aug. 7, 2009 (available here). According to the story:
The U.S. House Transportation Committee's chairman is taking aim at a proliferation of airline-ticket surcharges and exploring whether the government should get a cut of the revenue.
Rep. James Oberstar, D-Minn., this week asked the Government Accountability Office, the investigative arm of Congress, to look into the practice of charging separately for checked baggage, meals, seat selection, ticket cancellations and fuel surcharges.
. . .
The GAO study should look into whether the fees "are commensurate with the cost of providing those services to passengers," Oberstar wrote to the agency in a letter co-signed by Rep. Jerry F. Costello, D-Ill. The lawmakers also requested that the office "study ways that Congress can effectively capture these fees for the Airport and Airway Trust Fund."
The story correctly notes that the Government does not have the authority to regulate or capture airline fees, though it appears that Oberstar is interested in changing that. As discussed in a post earlier this week, see "The Prescient Posner," the airlines remain locked in the regulators' sights.
August 7, 2009
Senate Hearing on Pilots' Living Conditions
As noted on the blog earlier this week, see "Pilots, Pay, and Regulatory Reform," critical attention is being paid to the living and working conditions of U.S. pilots (primarily those working for low-cost carriers). The Federal Aviation Administration, in turn, is contemplating revising its decades-old pilot rest and working hours rules. Now the U.S. Senate has stepped in on the matter. See Sholnn Freeman, Senate Hearing Examines Pilots' Living Conditions, Wash. Post, Aug. 7, 2009 (available here).
A full webcast of the proceeding along with copies of the opening remarks offered by the airline representatives on hand is available through the Senate Committee on Commerce, Science, and Transportation website here.
Air Canada Bailout
The Centre for Asia Pacific Aviation as a compelling piece up online, Air Canada Bailout Buys Time--But Canada Inc Sells Out to Forces of Protectionism (Aug. 7, 2009) (available here). From the summary:
The Canadian government is simultaneously bailing out its flag carrier and blocking entry by foreign airlines – on the basis that they are “instruments of government policy”. Air Canada is far from safe, even with the bailout. But there is a special irony here. The government justifies its action as a matter of “national interest”. As the legacy airline industry looks for a future, this begs the question of whether that future should focus more on the economic importance of airlines, rather than their financial well-being.
August 6, 2009
Misleading Story on Pending US Airways/ANA Codeshare Application
A brief story that ran earlier this week, see Jon Kell, US Airways Plan Codeshare Deal in US, Japan, Dow Jones Newswire, Aug. 4, 2009 (available here), framed the pending US Airways/All Nippon Airways codeshare application, see Joint Application . . . for Statements of Authorization, Dkt. No. OST-2009-0181 (Aug. 4, 2009), against the backdrop of the ongoing dispute over the future of the Transportation Department's antitrust immunity powers. The problem, however, is that the airlines' application has nothing to do with DOT's authority to immunize international intercarrier agreements.
Since 1987, the DOT has required codeshare arrangements between U.S. and foreign carriers to be filed for approval under 14 C.F.R. § 212. Unlike antitrust immunity for alliances, international codesharing has received official support as a way to enhance global service options for consumers, see U.S. International Air Transport Policy Statement, 60 Fed. Reg. 21,841 (May 3, 1995), and should thus be kept--for purposes of present aeropolitics at least--conceptually distinct. It is also important to note that one of the key prerequisites for any DOT grant of antitrust immunity, namely that the foreign carrier's home State has signed an open skies agreement with the U.S., is left unsatisfied by the restrictive U.S./Japan bilateral air services agreement, reprinted in 3 Av. L. Rep. (CCH) ¶ ¶ 26,366a et seq.
More on Forthcoming Revisions to FAA Pilot Rules
The Wall Street Journal has a story up on the Federal Aviation Administration's plans to revise its decades-old standards for pilot rest and work hours. See Andy Pasztor, FAA Chief Vows to Rewrite Pilot-Safety Rules, Wall St. J., Aug. 5, 2009 (available here).
The story references a speech delivered by FAA Chief Randy Babbitt to the Air Line Pilots Association, We Can't Regulate Professionalism, Speech to the ALPA Air Safety Forum, Washington, D.C. (Aug. 5, 2009). A full copy of the talk is availabe through the FAA website here.
August 5, 2009
Pilots, Pay, and Regulatory Reform
The Washington Post ran a story Monday on the "night life" of pilots who operate (primarily) low-cost carriers in the United States. See Sholnn Freeman, A Crowded Hub Away From Home, Wash. Post, Aug. 3, 2009 (available here). As the story starts:
At first sight, the Sterling Park house looks like an ordinary split-level, complete with carport, backyard grill and freshly mowed grass. But instead of housing a growing suburban family, it offers accommodations for 30 pilots and flight attendants struggling to string together a few precious hours of sleep.
This is a typical crash pad for regional airline flight crews -- part of a subculture of boardinghouses jokingly referred to by those who use them as the world's largest illegal housing network. It's a makeshift arrangement for people who often have to travel cross-country from the cities where they live to the airports where their jobs are based. A few describe themselves as "somewhat homeless" and complain that they make so little money that they have to make crash pads their primary homes.
The articles goes on to discuss the present challenges facing the U.S. airline industry and the "trickle down" effect falling revenues for major carriers is having on the regional airlines which supply their networks. The report also notes that the Federal Aviation Administration is currently exploring possible revisions to its decades-old standards for pilot rest and work hours, though it has no plans--and indeed no authority--to regulate crew wages. Recommendations for revisions to the rules are expected on September 1.
Horan Responds on the Law of Antitrust Immunity
In response to a blog post from earlier this week, "The Law of Antitrust Immunity for Alliances," airline analyst Hubert Horan, whose guest post concerning consolidation in the transatlantic aviation market from last week makes for an engaging read, brought the following excerpt from the recently approved Star Alliance application to our attention:
[The Department of Justice's] Comments provide no basis to turn back the clock on a successful two-decade U.S. international aviation policy . . . . Our nation's trading partners, both present and future, have relied on, and will rely on, the continued availability of ATI [antitrust immunity] as the cornerstone of U.S. aviation policy. For example, the U.S.-EU Agreement negotiations included a Memorandum of Consultations that specifically promised prompt action on applications for expanded immunity such as that sought by the Joint Applicants here[.] . . . Thus the Memorandum of Consultations is an acknowledgement of the aeropolitical reality that open skies and ATI are integrally linked and essentially refutes the DOJ's position that the Joint Application is not linked to open skies benefits. DOJ would have the Department renege on that promise.
[F]or the Department to deny or modify its tentative decision risks sending a message to the world of a sea change in U.S. aviation policy.
Joint Application to Amend Order 2007-2-16, Dkt. No. OST-2008-0234, Response of the Joint Applicants to the Department of Justice (July 6, 2009), at 7-9.
According to Horan, a careful parsing of language shows that the Star Alliance wasn't directly arguing that the EU-U.S. Treaty supercedes the U.S.'s antitrust review processes, but they are doing their best to link the treaty to a U.S. commitment to pro forma approval of any ATI application that anyone might propose. They are also trying to conflate Transportation Department policy with treaty obligations, i.e., the treaty and policy require approval, therefore the DOJ evidentiary objections are irrelevant. It appears that the alliances are making explicit the "U.S. is obligated to approve American the Airlines/British Airways application" argument in their private discussions with the DOT and others.
August 4, 2009
Some Day They'll Get It Right
Daily Airline Filings, the single best source of U.S. airline regulatory information, has called attention to a brief story in the Washington Post on problems concerning the overhaul of the Government's own regulatory depository, Regulations.gov. See Al Kamen, Red Tape, Now With More Clickiness!, Wash. Post., July 31, 2009 (available here). According to the story:
Transportation Department officials responsible for air carrier licensing sent an e-mail Monday to a group of frequently appearing aviation attorneys, advising them to send in a copy of anything filed on the Web site. There's even some chatter that a courtesy copy might be needed in order to ensure that your comments are read.
"The FDMS [Federal Document Management System] web site has been redesigned and is even more difficult to use," said the e-mail Monday from Esta Rosenberg, chief of the U.S. Air Carrier Licensing Divisions in the Office of International Aviation. "Please send George Wellington or me a courtesy copy of anything you file in the system."
The Prescient Posner
In an essay published at the dawn of the decade, Judge Richard Posner wrote:
[I]t is worth pointing out . . . that regulation, deregulation, and reregulation are all favored by economic distress. The Great Depression of the 1930s led to an enormous expansion in the scope of public utility and common carrier regulation, and the "stagflation" (inflation accompanied by a slowdown in economic growth) of the 1970s set the stage for the deregulation movement. Should the nation encounter serious economic distress in the future, regulation may be reinstituted, confirming the existence of a regulatory cycle. This possibility makes it all the more important that we understand the economic consequences of regulation and deregulation.
Richard A. Posner, The Effects of Deregulation on Competition: The Experience of the United States, 23 Fordham Int'l L.J. S7, S19 (2000).
Without a doubt, "the nation [is] encounter[ing] serious economic distress," i.e., a depression. See Richard A. Posner, A Failure of Capitalism: The Crisis of '08 and the Descent into Depression (Harvard Univ. Press, 2009); Paul Krugman, The Return of Depression Economics and the Crisis of '08 (W.W. Norton, 2008); George C. Cooper, The Origin of the Financial Crises: Central Banks, Credit Bubbles, and the Efficient Market Fallacy (Vintage, 2008). In the face of this distress, is regulation being reinstituted? With respect to the aviation industry, the answer appears to be, "Yes."
Since 2007, House Transportation Chairman James Oberstar has led the charge to "protect" U.S. airlines by imposing new strictures on their business operations and entrepreneurial ingenuity. Elements of the 2009 FAA Reauthorization Act, H.R. 915,111th Cong. supported by Oberstar could potentially foreclose foreigners from holding middle and upper management positions in domestic carriers, see id. sec. 801, and likely spell disaster for the present alliance system by sunsetting their antitrust immunity, see id.sec. 426. The legislation also contains so-called "passenger rights" provisions which would force carriers to establish "Emergency Contingency Plans" in accordance with government-promulgated "minimum standards" to allow passengers to deplane following delays, with civil penalties attached for compliance failure. See id. sec. 407. Though this isn't the first time in the last decade the U.S. has moved toward tightening its control of the airlines, see, e.g., Brian F. Havel & Michael G. Whitaker, The Approach of Re-Regulation: The Airline Industry After September 11, 2001, [2001-04 Transfer Binder] Issues Aviation L. & Pol'y ¶ 10,051, at 4101, it is potentially the most impacting. As history has borne out, once the government snarls itself in industry oversight, it's a long time coming before the detangling process begins.
August 3, 2009
More Alliance Readings
Since international airline alliances and the sticky matter of the U.S. Department of Transportation's powers of granting antitrust immunity to such ventures has been a hot topic as of late, here are some further readings on alliances and the present foreign ownership restrictions which gave rise to them.
Jan K. Brueckner & W. Tom Whalen, The Price Effects of International Airline Alliances, 43 J.L. & Econ. 503 (2000)
Ved P. Nanda, Substantial Ownership and Control of International Airlines in the United States, 50 Am. J. Comp. L. Supp. 357 (2002)
Sivakant Tiwari & Warren B. Chik, Legal Implications of Airline Cooperation, 13 Singapore Acad. L.J. 296 (2001)
Charles N.W. Schlangen, Differing Views of Competition: Antitrust Review of International Airline Alliances, 2000 U. Chi. Legal F. 413 (2000)
Jacob A. Warden, Comment, Open Skies at a Crossroads, 24 Nw. J. Int'l L. & Bus. 227 (2003)
Further reading suggestions are available in an earlier blog post here.
The Law of Antitrust Immunity for Alliances
In his guest post to the Aviation Law Prof Blog last week, see here, airline analyst Hubert Horan responded to the apparent misconception of some that the 2007 U.S./EC Air Transport Agreement, 2007 O.J. (L 134) 4 [hereinafter Air Transport Agreement], "require[s] approval" of antitrust immunity applications for U.S. and EU alliance partners. According to Horan:
That’s certainly what the applicants are claiming, but if it did the State Department would have said so, and that would have saved DOT and DOJ the need to undertake detailed reviews. I didn’t see anything in the treaty limiting the application of US antitrust laws and precedent, and I think the claim that it did would stir up vigorous opposition on Capitol Hill.
But is that "what the applicants are claiming"? A perusal of the recently approved application for Continental Airlines to join the Star Alliance reveals the carriers relying on the Department of Transportation's history of "consistently . . . predicat[ing] its willingness to approve and grant antitrust immunity for alliances on the effectiveness of an open skies agreement in the relevant markets." Joint Application to Amend Order 2007-2-16 (Public Version), Dkt. No. DOT-OST-2008-0234 (July 23, 2008), at 50. After 1992, open skies bilaterals inter alia with Austria, Belgium, France, Germany, the Netherlands, and Switzerland were each accompanied by antitrust immunity for alliances linking the national carriers of those countries with U.S. airline partners. The 2007 U.S./EC Agreement, in its Memorandum of Consultations, specifically confirms DOT policy that antitrust immunity will only be extended to agreements involving foreign carriers whose home States have concluded open skies agreements with the United States. See supra, Memorandum of Consultations, para. 48. Indeed, the 2007 Agreement does not "limit the application of U.S. antitrust laws and precedent," but rather reaffirms longstanding DOT administrative precedent with respect to an open skies agreement being the necessary (though not sufficient) prerequisite for antitrust immunity. Cf. Joint Application . . . to Amend Order 2007-2-16, Dkt. No. OST-2008-0234, Final Order (July 10, 2009), at 2 (stating that "[u]nder the Department's established policy, the existence of an 'open-skies' regulatory framework between the U.S. and foreign carriers' homelands is a necessary predicate to our consideration of requests for antitrust immunity").
Nowhere, does it seem, are alliance applicants seriously asserting that an open skies treaty is anything more than a conditio sine qua non. There are still U.S. statutory standards which must be satisfied. The 1979 International Air Transportation Competition Act allows for crossborder intercarrier agreements such as alliances to be filed before the DOT for approval and antitrust immunity. See 49 U.S.C. §§ 41308-09. Under the statute, the DOT shall approve such agreements so long as they are "not adverse to the public interest." § 41309(b). Applying the standard Clayton Act test, however, the DOT "shall disapprove . . . an agreement . . . that substantially reduces or eliminates competition," § 41309(b)(1), unless "the agreement . . . is necessary to meet a serious transportation need or to achieve important public benefits (including international comity and foreign policy considerations)," § 41309(b)(1)(A). The DOT must also apply the so-called Bank Merger Act escape clause to find that "the transportation need cannot be met or those benefits cannot be achieved by reasonably available alternatives that are materially less anticompetitive." § 41309(b)(1)(B). Only after winning DOT approval can an agreement receive antitrust immunity "to the extent necessary to allow [the applicants] to proceed with the transaction specifically approved . . . and with any transaction necessarily contemplated by the [approval] order" if the DOT "decides it is required by the public interest." See § 41308(b). While there are two "public interest" tests bundled in the DOT's alliance approval and immunization jurisprudence, the DOT "has always recognized that the public interest standard [for antitrust immunity] is a much more stringent standard than [the alliance approval] public interest standard." Joint Application . . . to Amend Order 2007-2-16, Dkt. No. OST-2008-0234, Order 2009-4-5 (Apr. 7, 2009) (internal quotation marks ommitted).
There are, of course, critics who believe that the DOT's application of the statutory standards has not been robust. Indeed, Horan has characterized the DOT's "recent airline competition policy as 'rubber stamp whatever proposal the airlines bring us as long as there isn't serious industry opposition.'" That may be, but it is a separate issue from any misapprehension that international agreements automatically trump domestic law with respect to international intercarrier agreements.
August 2, 2009
EU Airlines Want Extension to Slot Rule Suspension
According to a release from the Association of European Airlines (AEA), a delegation of chief executives from a number of EU carriers have asked European Transport Commissioner Antonio Tajani to extend the current suspension of the Community's "use-or-lose" rule for airport slots through the winter. See Press Release, AEA, Help Us Manage Our Way Out of Crisis, Airline Chiefs Tell EU Commissioner (July 29, 2009) (available here). For more on the "use-or-lose" rule and the problems of suspension, see earlier blog posts here and here.