September 23, 2009
A Conflict of Interest in the AA/BA Proceeding
The Dow Jones Newswire broke a story this afternoon reporting that John Porcari, U.S. Deputy Transportation Secretary, has recused himself from the ongoing American Airlines/British Airways/Iberia antitrust immunity proceeding. See Kaveri Niththyananthan, U.S. Transportation Official Recused From British Airways/AMR Study, Dow Jones Newswire, Sept. 23, 2009 (available here).
Porcari, in his former capacity as Maryland's Secretary of Transportation, supported the airlines' bid for antitrust immunity in a November 2008 letter to former U.S. Transportation Secretary Mary Peters. In the letter, Porcari wrote:
The emergence of airline alliances has bolstered competition and has greatly enhanced air service access around the world. In addition, the Open Skies agreement with the European Union now provides for access to London Heathrow for all U.S. carriers. The approval of this [antitrust immunity] application would be a prudent extension of your department's efforts to reduce barriers to entry and enhance competition in the international aviation arena.
Advancing inter-gateway competition has also been an objective of U.S. international aviation policy since the mid 1980s. I believe many benefits would accrue to BWI Marshall with the approval of this application. British Airways' daily non-stop service to London-Heathrow would be bolstered with a code share with American Airlines and federal employees who travel internationally would have more choices should British Airways and American Airlines be awarded Fly America traffic. Also, the Washington Council of Governments' biannual passenger survey consistently reports BWI Marshall as the preferred airport in the Washington-Balitmore metropolitan area.
Your affirmative decision for this ATI application is critical for the future growth of trans-Atlantic travel from BWI Marshall. Providing the carriers with [antitrust immunity] levels the playing field among the major airline alliances and further advances goals of U.S. international aviation policy, including inter-gateway competition.
See Letter from John D. Porcari to Hon. Mary Peters (Nov. 12, 2008) (filed Dec. 9, 2008 as part of DOT Dkt. No. OST-2008-0252) (available here).
Airlines Outpace Regulators on the Environment
The International Air Transport Association, the largest trade group for the global aviation industry, announced yesterday that it has established a climate change proposal on behalf of the airlines for the upcoming U.N. Summit on Climate Change in New York. A press summary of the proposal is available through IATA's website here.
This type of global thinking for the airline industry is sorely needed. After the European Community absconded from its commitment to address the aviation emissions issue through the International Civil Aviation Organization in 2007, it appeared that the aviation industry would have to endure a new fractured regulatory regime over its operations. IATA's proposal would restore ICAO's primacy of place in addressing international airline emissions and establish a multilateral solution. From the press release:
“Climate change is a global problem. Aviation is a global industry. And we need a global approach for this industrial sector if we are to deal with climate change effectively,” said Giovanni Bisignani, IATA’s Director General and CEO.
“Mechanisms designed for ground-based polluters will not work effectively for aviation which can emit CO2 across borders and over the high seas even on a single flight. And already uncoordinated national and regional schemes are creating a patchwork of punitive taxes that fill government coffers, but do little or nothing to effectively manage aviation’s emissions,” said Bisignani.
“The Kyoto Protocol directed states to address aviation through ICAO. Its global standards and cooperation with industry have made air transport the safest form of travel. A global sectoral approach for aviation can leverage this same leadership to deliver results for aviation and the environment,” said Bisignani.
September 22, 2009
Protectionism for Aviation on Hold...For Now
Due to the dominance of the health care reform agenda, Congress has reportedly run out of steam for passing the controversial 2009 FAA Reauthorization Act. See Jim Abrams, Congress Puts Off Action on Road, Air Bills, Associated Press, Sept. 22, 2009 (available here). From the story:
The House in May passed a bill authorizing $70 billion for the FAA over three years. The Senate Commerce Committee in July approved a two-year, $35 billion bill. Both measures concentrate money on the NextGen satellite-based air traffic control system that will make the nation's airways significantly safer and more efficient.
But the Senate Finance Committee, which is working on health care legislation, has yet to complete work on the tax provisions in the FAA bill.
Commerce Committee Chairman Jay Rockefeller, D-W.Va, believes the FAA has broad bipartisan support and that it's critical for the Senate act on it this calendar year, said spokeswoman Jena Longo. But "floor time is of great concern," she said.
Even if the Senate took action, there would be serious policy differences to work out with the House. The House bill, for example, would allow airports to raise passenger facility charges from $4.50 to $7 a ticket. It also has angered the European Union by directing more U.S. inspections of overseas aircraft repair stations. Another provision of the House bill would make it easier for unions to organize FedEx truck drivers and other non-aviation employees.
Both the House and Senate bills have provisions to improve the rights of air travelers, but the Senate Commerce version specifies that an air carrier must provide passengers the option to leave a plane after three hours of waiting on a runway.
This may be good news for the ongoing negotiations between the U.S. and European Community for a "second stage" agreement to expand the traffic rights and cooperation provisions contained in the 2007 U.S./EC Air Transport Agreement. Statesmen from across the Atlantic, including EU Ambassador John Bruton and former U.K. Transportation Secretary Geoffrey Hoon, both chastised the Reauthorization Bill as a potential roadblock to a second agreement. In addition to the Act's troublesome provisions on foreign repair stations, the legislation would also end antitrust immunity for international alliances and tighten restrictions on foreign control of U.S. airlines.
Crandall Supports Passenger Rights Legislation
Bob Crandall, former President and Chairman of American Airlines, went public today with his support for federal passenger rights legislation. See Joan Lowy, Ex-CEO Backs Limit on Leaving Passengers on Tarmac, Associated Press, Sept. 22, 2009 (available here). From the story:
"I think the airline industry should have led the way in responding to this problem rather than having resisted it," Crandall said. "Every responsible airline executive I know thinks these things are an outrage."
However, he said returning passengers to terminals likely will result in more flight cancellations and modest fare increases.
Since flights are increasingly full or nearly full due to airlines' cutbacks in schedules, passengers who opt to deplane may have difficulty finding seats on other planes and may be delayed longer than if they had continued to wait on a runway, Crandall said.
He recommended an initial four-hour time limit to give airlines time to make adjustments before ratcheting down to a three-hour limit in 2011.
Crandall's publicly stated views are consistent with those he expressed to the International Aviation Law Institute last week as part of its ongoing Conversations with Aviation Leaders series. (The full three-hour interview with Crandall is forthcoming on the Institute's website here.) During the interview, Crandall took repeated note that the U.S. lacked a coherent air transport policy and cited serious delays at airports as evidence of that fact.
September 21, 2009
JAL and the Future of oneworld
British Airways is reported to be in talks with Japan Airlines (JAL) to ensure it stays in the oneworld alliance, As discussed on the blog last week, see here, JAL is seeking over $2 billion in funding to offset the severe losses it's suffered over the last several years. News agencies began to immediately report that Delta Air Lines, a member of the rival SkyTeam Alliance, was eager to strike a deal with the Japanese airline. Shortly thereafter, American Airlines became involved in intense negotiations with talks of take a substantial stake in the carrier. Given the importance of JAL to oneworld's network access into Japan and Asia, both BA and AA will likely remain vigorous in their attempts to broker a deal.
If a deal with JAL falls through and the carrier defects to SkyTeam, it may not be the worst news oneworld hears in 2009. The alliance's pending antitrust immunity application before the U.S. Department of Transportation is expected to be decided in October. With the Justice Department remaining critical in its stance toward these international ventures, both BA and AA should expect the same (if not more) intense scrutiny from Justice's Antitrust Division that Continental Airlines received in its bid to join the Star Alliance. While the DOT eventually decided to step aside most of the Justice Department's concerns when issuing its final order for Star, there is no guarantee it will be so sanguine about the BA/AA link-up. Much attention has been placed in recent months on the dominant position both carriers will have in the transatlantic market between the U.S. and London Heathrow should they be granted full antitrust immunity to cooperate on scheduling, routes, and prices. That fact may stay the DOT's hand when it goes to wield its wand of antitrust immunity in October.