November 13, 2009
Harvard Fellow on Airline Leadership
Harvard Business School has a Q&A session up online with Tony Mayo, Distinguished Research Fellow at HBS and one of the authors of Entrepreneurs, Managers and Leaders: What the Aviation Industry Can Teach Us About Leadership (Palgrave, 2009). See Come Fly With Me: A History of Airline Leadership (Nov. 9, 2009) (available here). An excerpt from the book follows the Q&A.
November 12, 2009
A New Airline Commission?
In 1992, the U.S. Congress passed enabling legislation for the National Commission to Ensure a Strong Competitive Airline Industry. While Congress (with the notable exception of Rep. James Oberstar) has placed aviation on the back burner, the U.S. Department of Transportation has not. Now, over 15 years since the Airline Commission was formed, the DOT announced at the end of its closed-door meeting with industry stakeholders that it is forming a new federal advisory committee to study and recommend regulatory changes for the air transport sector. See Jennifer Michels, New Panel to Create U.S. Aviation Blueprint, Aviation Wk., Nov. 12, 2009 (available here). From the story:
The announcement was made during closing remarks to an invitation-only, five-hour meeting of airline, airport, labor and consumer group representatives yesterday, who were called together to discuss the future of U.S. aviation. It appeared to have covered the gamut, and ended with LaHood asking the participants to go home and send him an email with three things: how many people should be on the committee, what the mix of participants should be, and the five issues they think must be addressed for the DOT to create a road map for aviation.
BA/Iberia Agree to Consummate Merger
British Airways and Iberia have agreed to terms to consummate a merger which would make them Europe's third-largest airline by revenue. See Pilita Clark & Mark Mulligan, BA and Iberia to Create Europe's Third-Largest Airline, Fin. Times, Nov. 13, 2009 (available here). However, there is a caveat: "[T]he two airlines have agreed that Iberia will be able to terminate the accord if it is unhappy with BA's handling of its swollen pension scheme, which has been one of the sticking points in the deal, first announced in July last year." Id.
The agreement comes against the backdrop of regulatory uncertainity over the future of the oneworld Alliance, to which both carriers belong. While some analysts believe the U.S. Department of Transportatio will grant the alliance approval and antitrust immunity despite objections from the Justice Department, there is less certainity with respect to the European Commission's view of the alliance. In the recent past, the Commission has emphasized its "broadly positive approach" to airline alliances in order to allow European carriers to compete effectively on a global level. See Competition: Commission Confirms Sending Statement of Objections to Members of SkyTeam Global Airline Alliance, Memo/06/243 (Jun. 19, 2006). Neelie Kroes, Commissioner for Competition Policy, has stressed that EC policy encourages European airlines to become "global winners" even as it enforces its competition rules. See Competition in the Aviation Sector: The European Commission's Approach, Address to the Conference Celebrating the 20th Anniv. of the Int'l Inst. of Air & Space L., Speech/06/247 (Apr. 24, 2006) (available here). Whether that still holds true remains to be seen.
ATA on DOT's Airline Forum
The Air Transport Association has issued a statement on today's airline forum hosted by the Department of Transportation. See Press Release, ATA, ATA Comments on DOT Stakeholder Forum . . . (Nov. 12, 2009) (available here). From the release:
Airline executives participating in the forum called for:
- No new taxes and fees, which would burden an already overtaxed industry and travelers/shippers
- Fully funded and accelerated modernization of the nation’s air traffic control
- Enhanced oversight of energy markets to excessive speculation and the resulting volatility of oil prices
- Elimination of arcane restrictions on airlines’ ability to operate efficiently in the global marketplace
- A global sectoral approach to climate change for aviation developed through the International Civil Aviation Organization (ICAO)
Reminder on the IATA Agenda for Freedom
Though the event is by inviation only, blog readers may be interested to learn that the International Air Transport Association will be holding its next Agenda for Freedom Summit this weekend in Montebello, Quebec. The meeting, which will include representatives of seven countries' aviation authoritiesthe European Commission, will discuss a statement of policy principles on air transport liberalization, and how to implement it.
The International Aviation Law Institute will be present at the meeting as well. IALI Director, Prof. Brian Havel, will be giving one of the event's keynote addresses.
Labor Looking to Turn Back the Clock
The U.S. Department of Transportation, in cooperation with the AFL-CIO, is holding a closed-door forum today to discuss the airline industry's future with an apparent eye on reregulation. See Joan Lowy, Unions Prod Obama to Fix Ailing Airline Industry, Assoc. Press (Nov. 12, 2009) (available here). From the story:
The forum, which is closed to the public and the media, was organized at the request of the AFL-CIO's Transportation Trades Department.
Ed Wytkind, the trades department's president, said the industry has become dysfunctional, and all involved are suffering. He said he'd like to see a blue-ribbon commission to recommend solutions.
"We can't keep doing things the exact same way and expect a better outcome," Wytkind said, adding that new regulation probably should be considered.
. . . .
"A safe, secure, stable industry can't be driven by lowest common denominator," said John Prater, president of the Air Line Pilots Association. "The cheapest fare out there will not give us a transportation system that works for everyone."
November 9, 2009
Public/Private Risk-Sharing in Air Service Provision
A new working paper out which may be of interest to blog readers is David Timothy Duval & Niven Winchester's Public/Private Risk-Sharing in Air Service Provision (Working Paper, Nov. 2, 2009) (available from SSRN here). From the abstract:
The paper identifies and theories future trends in public/private risk-sharing agreements, as a form of public subsidy, in thin market air service provision. Using a Pacific Islands example, the paper details the economic and policy implications of such agreements. In November 2008, the Cook Islands reached a risk-sharing agreement (with a reported value of NZ\$5 million) with Air New Zealand that secured the continuation of a weekly flight from Los Angeles (LAX) to Rarotonga (RAR). By buying the option directly from the producer, the Cook Islands Government has secured access via public subsidy to ensure future visitation. Supply-side subsidisation of air service provision is not uncommon. Existing models in the United States, Europe and Australia highlight the importance of connectivity of destinations for overall economic growth. The paper makes use of policy analysis to dissect the stated value of securing air access for several Pacific Island nations, including the Cook Islands, Samoa and Tonga. The paper concludes by assessing future trends of direct government subsidisation of air services for autochthonous destinations given increasing stress on airline unit costs.
Regulators to Approve U.S./Australia Alliance
Back in July, the blog briefly discussed the alliance approval and antitrust immunity application filed before the Department of Transportation by the U.S.'s Delta Airlines and Australia's Virgin Blue, V Australia, and Pacific Blue (which also has operations in New Zealand). See here; see also Dkt. No. OST-2009-0155, Application for Approval of and Antitrust Immunity for Alliance Agreements (July 9, 2009). While pressure was being placed on the Australian Competition and Consumer Commission to block the venture, it appears the Commission is now prepared to grant the plan an initial three-year authorization. See Ian McDonald, Australian Regulator Proposes to Approve Virgin Blue, Delta JV, Dow Jones Newswire, Nov. 1, 2009 (available here).
There is no word yet on when the DOT will issue its final order for the application. Currently, the focus remains on the yet-decided oneworld Alliance application. A decision on that application was supposed to have been rendered by October 30, but has been delayed due objections from the Justice Department.