January 1, 2010
With the holiday break at DePaul University College of Law winding down, the Aviation Law Prof Blog will return to regular updates starting next week. In the meantime, readers may want to simply consult their newspapers. There's been no scarcity of aviation-related stories over the last several weeks.
Developing Transport Infrastructure
Though encompassing more than just aviation, Andrew Sentance's Developing Transport Infrastructure for the Low Carbon Society, 25 Oxford Rev. Econ. Pol'y 391 (2009) (available from SSRN here), may be of interest to blog readers. From the abstract:
For the UK and other advanced economies the transition to a genuinely Low Carbon Society is a major undertaking. Within transport, changes to vehicle and aircraft technology are likely to be the key drivers of this change, underpinned by a more consistent and comprehensive approach to carbon pricing. Infrastructure investment is likely to be needed to cater for travel growth, but this should be on the basis that improvements in carbon efficiency outweigh the upward pressure of growth on emissions. A radical shift in the power supply for road transport to support electric vehicles could also have significant infrastructure requirements, and there will be potentially significant ‘soft’ investment requirements associated with improved traffic management, travel information systems, and road pricing. Road pricing and an extension of carbon pricing-particularly to aviation-create income flows which may help to fund transport infrastructure development in a world of constrained public finances.
December 30, 2009
Another Bailout for JAL?
Despite promises of capital infusions and lucrative joint ventures from the oneworld and SkyTeam alliances, JAL may be turning to the Japanese Government again for a bailout. See Yoshio Takahasi & Juro Osawa, Japan Says Talks of More Loans to JAL as Shares Shrink, Dow Jones Newswires, Dec. 30, 2009 (available here).
December 29, 2009
Code-sharing, Price Discrimination and Welfare Losses
Achim I. Czerny, Code-sharing, Price Discrimination and Welfare Losses, 43 J. Transp. Econ. & Pol'y 193 (2009) (available to subscribers here). From the abstract:
Airlines frequently use code-share agreements allowing each other to market seats on flights operated by partner airlines. Regulation may allow code-share agreements with antitrust immunity (cooperative price setting), or without antitrust immunity, or not at all. I compare the relative welfare effects of these regulation regimes on complementary airline networks. A crucial point is that such agreements are used to identify and price-discriminate interline passengers. I find that interline passengers always benefit from code-share agreements while non-interline passengers are worse off. Furthermore, I show that the latter effect questions the overall usefulness of code-share agreements from a welfare perspective.
Network Competition in the Open Aviation Area
Eric Pels, Network Competition in the Open Aviation Area, 15 J. Air Transp. Mgmt. 83 (2009) (available to subscribers here). From the abstract:
In 2008 the ‘joint open aviation area’ between the US and EU will become reality. It is expected that competition will increase. The reaction of the airlines depends on the possibility to make profits in ‘new’ markets (markets that can now be entered). This, in turn, depends on network characteristics. In this paper we find that full liberalization of international markets by means of a bilateral agreement results in higher welfare than the formation of an alliance. Carriers, however, will also in fully deregulated aviation markets most likely opt for an alliance. This is a result of a built-in competitive effect of hub–spoke networks. Only in markets where the reservation price is very high (e.g. to London Heathrow), hub–spoke airlines may enter a competitive game. Low-cost airlines, which do not operate extensive hub–spoke networks, may find it profitable to enter new markets.
Time for Transpacific Alliances?
Despite the recent delay to the oneworld Alliance antitrust immunity application which will put a final decision off until at least late January, see "DOJ Comes Out Against oneworld," the Star Alliance is gearing up to take full advantage of the recently finalized U.S./Japan open skies agreement. Star partners United Airlines, Continental, and Japan's ANA have filed for approval and antitrust immunity before the Department of Transportation in the hopes of "enter[ing] into a highly-integrated, metal-neutral joint venture agreement for the carriage of transpacific traffic[.]" See Joint Application of All Nippon Airways Co., Ltd., Continental Airlines, Inc., and United Airlines, Inc., Dkt. No. OST-2009-0350 (Dec. 23, 2009).
Up until last year, there was something of an expectation among the airline and industry observers that an open skies agreement meant "automatic" antitrust immunization for international intercarrier agreements. Now, with the Justice Department and lawmakers taking a greater interest in how these applications are approved, matters are less certain. One of the recent complaints against immunizing the three transatlantic alliances is that it places over 80% of the market in their hands. In the transpacific market, specifically between the U.S. and Japan, concerns have already been raised that a duopoly could form around Japan's two international airlines, ANA and JAL. With ANA already part of Star, all eyes remain on JAL to see if it will stick with oneworld or be lured away by the promise of greater rewards from SkyTeam.