Wednesday, June 30, 2010
The World Trade Organization's Council for Trade in Services recently launched its Air Services Agreement Projector which displays the relative "openess" of particular air services agreements. From the website:
The application uses information from the Quantitative Air Services Agreement Review (QUASAR), which documents developments in the air transport sector. QUASAR was devised by the WTO Secretariat.
The Air Services Agreement Projector allows the user to select bilateral air services agreements on the basis of a number of criteria, namely by signatories and regions, levels of openness, and traffic levels. Once selected, these agreements are charted on a map and the relevant underlying data is displayed.
Monday, June 28, 2010
Blog readers may be interested in reading Benito Muller and Cameron J. Hepburn's new article, International Air Travel and Greenhouse Gas Emissions: A Proposal for an Adaptation Levy, 33 World Econ. 830 (2010) (available from SSRN here). From the abstract:
Greenhouse gas emissions from international aviation services have been increasing rapidly and are likely to continue to do so in the absence of major policy changes. At the same time, while all countries will experience impacts from climate change, developing countries are the most vulnerable. Significant financial assistance for adaptation is therefore needed for developing countries, but current proposals are inadequate. Solutions to the challenges of both aviation greenhouse gas emissions and climate change adaptation finance are thus urgently required. This paper proposes an international air travel adaptation levy that addresses both problems.
Saturday, June 26, 2010
Representatives from the United States and European Union officially signed the "second stage" Protocol to the 2007 U.S./EU Air Transport Agreement in Luxembourg last Friday. See Press Release, Department of Transportation, U.S. Signs 2nd-Stage U.S.-EU Aviation Agreement, DOT 124-10 (June 24, 2010) (available here). From the release:
Cynthia Stroum, the US Ambassador to Luxembourg and Susan Kurland, the U.S. Department of Transportation’s Assistant Secretary for Aviation and International Affairs, along with representatives of the European Union (EU) and its 27 member nations, today formally signed an aviation agreement that continues the expansion of air services set in place by the 2007 U.S.-EU Open-Skies accord.
“This agreement will benefit consumers, airlines, workers, communities and airports on both sides of the Atlantic,” U.S. Transportation Secretary Ray LaHood said.
The second-stage U.S.-EU agreement signed today was concluded on March 25, 2010. It builds on the U.S.-EU Open-Skies agreement, the historic accord signed in April 2007 that eliminated restrictions on services between the United States and EU member states. That agreement allowed airlines from both sides to select routes and destinations based on consumer demand for both passenger and cargo services, without limitations on the number of U.S. or EU carriers that could fly between the two parties or the number of flights they could operate.
The new agreement affirms that the terms of the 2007 accord will remain in place indefinitely. It deepens U.S.-EU cooperation in aviation security, safety, competition, and ease of travel, and provides greater protections for U.S. carriers from local restrictions on night flights at European airports. It also includes a ground-breaking article on the importance of high labor standards in the airline industry. The new agreement also underscores the importance of close transatlantic cooperation on aviation environmental matters in order to advance a global approach to global challenges.
Blog readers may be interested in the U.S. Government Accountability Office's recent report, Transportation Security: Additional Actions Could Strengthen the Security of Intermodal Transportation Facilities, GAO-10-435R (May 27, 2010) (available here). From the summary:
Terrorist attacks on mass transit and commuter rail facilities in Moscow, Madrid, London, and Mumbai, and the significant loss of life and disruption they caused, have highlighted the vulnerability of transportation facilities to terrorism and the need for greater focus on securing these facilities, including intermodal transportation terminals. Such intermodal transportation terminals--locations where multiple modes or types of passengers or cargo transportation connect an merge--are potentially high value targets for terrorists because the large number of passengers or volume of cargo can lead to significant loss of human life and economic disruption. For example, New York City's Pennsylvania ("Penn") Station, the nation's busiest rail station, functions as an intermodal hub for Amtrak, two ma commuter rail lines (New Jersey Transit and the Long Island Rail Road), as well as six city subway routes. According to Amtrak, an average of 500,000 passengers the station daily. The Department of Homeland Security (DHS) has primary responsibility for homeland security, including transportation security, under the Homeland Security Act. Within DHS, the Transportation Security Administration (TSA) has primary responsibility for securing the aviation and surface transportation sectors. The Department of Transportation (DOT) supports DHS by providing technical assistance through some programs (e.g., supporting the development of security standards for mass transit and passenger rail systems). DOT also assists DHS when possible with implementation of its security policies, as allowed by DOT statutory authorities and available resources. A number of other entities, including Amtrak, transportation agencies, local law enforcement, and state and local governments, have day-to-day responsibilities for securing the aviation and surface transportation sectors. Amtrak, for example, operates the nation's primary intercity passenger rail system and serves more than 500 stations across the country. DHS and DOT formalized their roles and responsibilities for transportation security through a memorandum of understanding signed in September 2004, which identified that they would work together to achieve the required level of multi- and intermodal security. You raised questions about the level of security and protection at intermodal transportation facilities throughout the nation, and asked us to examine federal efforts to secure these facilities. On January 7, 2010, we met with your staff to update them on the status of our work assessing the security of aviation and surface transportation modes and intermodal facilities. As agreed, this report summarizes the work that we have completed in recent years in the aviation and surface transportation security area that is most directly related to intermodal facilities, as well as our ongoing work in these areas. Although this work focused on individual modes and related facilities within the transportation sector--such as aviation, mass transit and passenger rail, freight rail, and highway infrastructure--many of the facilities examined were also intermodal. Thus, this report addresses the following questions: (1) To what extent has DHS taken actions to ensure that efforts to strengthen the security of the aviation and surface transportation sectors are based on a risk management framework, particularly those that include intermodal facilities? (2) To what extent has DHS taken actions to ensure the security of the aviation and surface transportation sectors, particularly those actions that involve intermodal facilities?
Friday, June 18, 2010
Several news outlets are reporting that Japan's primary air carriers, ANA and JAL, are pressing ahead with plans for deeper integration with the Star and oneworld alliances, respectively. See Yoshio Takahashi, Filed ATI Application with Japan Govt on United, Continental Joint Ops, Dow Jones Newswires, June 18, 2010 (available here); Yoshio Takahashi, JAL Submits Anti-Trust Immunity Application on Ties with American Airlines, Dow Jones Newswires, June 18, 2010 (available here). Both applications have been filed with Japan's Transport Ministry, though neither story offered a timetable on when a decision would be reached.
Winning antitrust immunity from Japanese regulators is only half of the equation for both joint ventures. The U.S. Department of Transportation has to make an antitrust immunity determination as well. Given how protracted the recently concluded oneworld Alliance proceeding was, it's hard to speculate when the DOT will reach a decision in the matter. Besides the protest both applications are likely to receive from the Justice Department's Antitrust Division, there are two additional complicating factors to consider.
First, with respect to the ANA/United/Continental application, it's unclear what impact the pending United/Continental merger will have on the DOT's analysis. Will the DOT wait until the merger is cleared before deciding on whether or not to grant antitrust immunity? Arguably the merger shouldn't be a factor. Continental and United are already allowed to cooperate on international services as part of the antitrust immunity they received in 2009 to cooperate with the Star Alliance's European airlines. More importantly, the merger is not expected to substantially reduce competition since the two airlines have complementary rather than overlapping route networks. Even so, the DOT may wish to avoid the appearance of "jumping the gun" on rendering a decision before the DOJ concludes its pre-merger review.
Second, with respect to the JAL/American Airlines application, JAL is still in the midst of bankruptcy reorganization. It will be difficult for the DOT to make a proper assessment of the potential harms and benefits of the alliance until it knows for certain what JAL will look like after its restructuring.
Wednesday, June 16, 2010
The House Committee on Transportation and Infrastructure held a hearing today on the pending United/Continental merger. Streaming video of the proceedings, along with written transcripts of witness testimony, are available from the Committee's website here.
Tuesday, June 15, 2010
Blog readers interested in the Asia-Pacific aviation market may be interested to read Worata Kongseanitsara & I.M. Pandey's working paper, Bangkok Airways Limited (June 4, 2010) (available from SSRN here). From the abstract:
Bangkok Airways Limited, started in 1967, is a leading private sector air transport company in Thailand. It is still fully controlled and led by the founder who follows a centralized decision making. The operations of the company are highly capital intensive. It is the only airline, perhaps in the world, which has its own airports. Now, the company has grown in size, has enlarged operations and faces competition. It has plans for significant capital investments in the future. The challenge before the owner-manager is to evolve a capital budgeting system and process which is based on an organization structure which facilitates the involvement of executives in decision making and is linked to the company’s strategy and performance and control system.
Though only indirectly related to aviation, blog readers may still be interested in Kai Möller's The Right to Life Between Absolute and Proportional Protection (LSE Legal Studies Working Paper No. 13/2010, June 4, 2010) (available from SSRN here). From the abstract:
One of the puzzles of human and constitutional rights law is whether there are any rights which are absolute. The question is important not only for practical purposes but also for the theory of human and constitutional rights: an absolute right presents a departure from what is now the ‘default’ in constitutional and human rights law around the world, namely the proportionality approach according to which an interference with a right is justified if it serves a legitimate goal and is proportionate to that goal. This paper tries to shed some light on the issue by focusing on the right to life. It proceeds by first presenting an account of the leading case in this area, namely the judgment of the German Federal Constitutional Court in the Aviation Security Act case, where the Court held that shooting down an airplane which was likely to be used as a terrorist weapon was a violation of the right to life in conjunction with the human dignity of the innocent passengers aboard. It then offers a few thoughts on the Court’s reasoning, specifically with regard to what it has to say about the idea of absolute rights. Having concluded that the judgment offers little help in illuminating this problem, it presents some approaches to absolute rights from moral philosophy and applies them to human and constitutional rights law. The conclusion is that the right to life will under certain circumstances be absolute or near-absolute, but that these circumstances occur less frequently than is sometimes assumed.
Sunday, June 13, 2010
It was reported last Friday that the European Commission has set July 15, 2010 as the provisional date for concluding its investigation of the proposed British Airways/Iberia merger. See Peppi Kiviniemi, EU Begins Probing BA/Iberia Merger Plans, Dow Jones Newswires, June 11, 2010 (available here). From the story:
Concerned that the deal may create monopolies on certain routes the commission, Europe's highest antitrust authority, has already sent a questionnaire to competitors querying whether they see any issues with the merger, according to a person familiar with the questionnaire.
Main routes under scrutiny concern flights between London to Madrid, London to Barcelona and London to Malaga the person said. In addition the commission is asking questions about some 20 indirect routes. The commission is also asking about the likelihood of passengers being willing to substitute close-by airports with each other, to see whether instead of flying directly to Barcelona passengers might be happy to board a flight that lands close to Girona, the person added.
Brussels lawyers following the airline industry closely say that it is likely the commission has its eye on gaining some concessions from the airlines before clearing the deal.
The deal is expected to make the combined airline the third largest in Europe by revenue. It will also mark another step toward a sustainable air transport market in the EU. Since the finalization of a common aviation market in the 1990s, the Union has seen numerous crossborder consolidations, including the landmark Air France-KLM tie-up and Lufthansa's acquisitions of Austrian Airlines, bmi, and Swiss.
Friday, June 11, 2010
Real Time Brussels, a web-log of the Wall Street Journal, has an excellent posting by Daniel Michaels on the future of U.S./EU aeropolitical relations. See U.S.-EU 'Open Skies' Near Arrival, Real Time Brussels, June 11, 2010 (available here). The post discusses the pending approval of the U.S./EU "second stage" Protocol and the potential impact chief U.S. negotiator John Byerly's retirement will have on future negotiations between the world's largest air transport markets.
Blog readers may be interested in a detailed story on the new IMAX film, Legends of Flight, which was part of NPR's daily show, Talk of the Nation. See Legends of Flight: Aviation Hits and Misses, Talk of the Nation (NPR), June 10, 2010 (available in transcript and streaming audio here). The movie itself charts the hundred-year-plus history of aviation, culminating in the recent development of the Airbus 380 and Boeing 787 Dreamliner aircraft. More information on the film, including interactive features, is available here.
Wednesday, June 9, 2010
Last week Friday, a number of national papers picked up a story analyzing the potential for a US Airways/American Airlines merger. See US Air/American Link Could Bolster Global Routes, Reuters, June 4, 2010 (available here). The article speculated that the two U.S.-based air carriers could forge an alliance relationship before seeking a full-on merger. According to the story: "In that scenario, US Airways and American would seek an exemption from U.S. antitrust law to share scheduling and pricing details."
This is not entirely accurate. The 1979 International Air Transportation Competition Act allows for intercarrier agreements which affect foreign transport to be filed before the Department of Transportation for approval and antitrust immunity. See 49 U.S.C. §§ 41308-09. In other words, US Airways and American would still be subject to U.S. antitrust statutes with respect to their domestic operations even if they received immunization to cooperate with their foreign partners.
This week's edition of the Economist has an excellent briefing on aviation industry developments in the Gulf region. See Rulers of the New Silk Road, Economist, June 3, 2010 (available here). A shorter piece, "Super-Duper-Connectors From the Gulf," is also available here.
Tuesday, June 8, 2010
Blog readers fluent in Portugese may be interested in Fabiana Todesco et al.'s Airline Web Pricing During a Price War: Where Are the Deep Discounts?, 2 Rev. Transp. Lit. 21 (available from SSRN here). From the abstract:
This paper uses a reduced form econometric model to identify elements correlated with discounts in air fares three Brazilian airlines charge in a set of six domestic destinations flown out of the city of São Paulo. Our dataset was built with information extrated directly from the websites of the airlines especially with the intention of empirically modelling the statistics associated with the practice of the web pricing of the airlines, namely means and variations. Obtained results show that traveling with GOL, TAM, or late in the night represent the options for lower fares. Higher fares are associated with evening departures, and connecting flights.
Blog readers may be interested in Jose Maria Silveira & Alessandro V.M. Oliveira's An Empircal Game-Theoretical Approach to Model a Price War in the Brazilian Airline Industry, 2 Rev. Transp. Lit. 7 (2008) (available from SSRN here). From the abstract:
This paper develops a model of post-liberalization price competition between airlines on the route Rio de Janeiro - São Paulo. The intense price competition episode culminated in the rupture of a thirty-nine year-old cooperative structure - the air shuttle service cartel. By modeling and estimating parameters of a two-stage Stackelberg game with incomplete information, we aim at contributing to the understanding of price war rationality in the airline industry.
Friday, June 4, 2010
The International Air Transport Association's 66th Annual General Meeting and World Air Transport Summit will take place June 6-8, 2010 in Berlin, Germany. From the press release:
The official program starts at 0900 CET on 7 June with the State of the Industry address by Giovanni Bisignani, IATA’s Director General and CEO. “We are meeting as the industry continues its recovery from the global financial meltdown and turbulent decade of cycles and shocks that resulted in accumulated losses of nearly $50 billion. A strong traffic growth trend prior to the setback of the Icelandic volcano is improving the industry’s bottom line prospects. It is finally time for some cautious optimism,” said Bisignani.
Among the highlights of the AGM will be the release of a new industry outlook as part of the Director General’s State of the Industry address. The discussions of top industry leaders will also focus on:
- The industry’s strategy on climate change in the aftermath of the Copenhagen talks and in preparation for COP-16 in Mexico
- Structuring the industry for profitability with consolidation and commercial freedoms
- Finding an effective and harmonized approach to security
- Finding a better way for governments and industry to work together with a common vision
Even though the U.S. Senate Committee on Commerce, Science, and Transportation postponed its May 27 hearings on the pending United/Continental merger, the Senate Judiciary Committee went forward with theirs last week. See Senate Judiciary Committee, Subcommittee on Antitrust, Competition Policy, and Consumer Rights, The United/Continental Airlines Merger: How Will Consumers Fare? (May 27, 2010) (available here).
The Judiciary Committee's webpage includes testimony transcripts along with a webcast of the hearings. Blog readers should note, however, that the actual hearings don't begin until approximately 12 minutes into the video file.
Thursday, June 3, 2010
The Department of Transportation announced its intentions yesterday to ratchet up its already controversial airline consumer protection rules, see Enhancing Airline Passenger Protections, 74 Fed. Reg. 68, 983 (Dec. 30, 2009) (available here), with additional provisions which would:
• increase compensation for passengers involuntarily bumped from flights
• allow passengers to make and cancel reservations within 24 hours without penalty
• require full and prominently displayed disclosure of baggage fees as well as refunds and expense reimbursement when bags are not delivered on time
• require fair price advertising • prohibit price increases after a ticket is purchased
• mandate timely notice of flight status changes
See Press Release, DOT, DOT Proposes Additional Consumer Protections for Air Travelers, DOT 110-10 (June 2, 2010) (available here).
Blog readers interested in perusing the entire text of the new rule may do so here. Additionally, Econometrica, Inc. has submitted a preliminary analysis of the proposed rule as part of the docket. See Econometrica, Inc., Preliminary Regulatory Analysis: Consumer Rulemaking NPRM: Enhancing Airline Passenger Protections II, Dkt. No. DOT-OST-2010-0140 (May 24, 2010) (available here).
Tuesday, June 1, 2010
Blog readers may wish to read the American Enterprise Institute's new report on the North American airline industry and what lawmakers can do to improve service for consumers. See Mark Milke, Open Skies: What North America Can Learn From Europe, AEI Outlook Series No. 3 (May 2010) (available here). From the summary:
As Americans head into the summer travel season, there is a lesson they could learn from the European Union (EU): how to make airfare cheaper. The EU instituted an "open-skies" policy in 1997, resulting in more routes, more airline competitors, and lower fares. The European market is distinct from the airline market in North America, where both U.S. and Canadian regulations prohibit foreign-owned airlines from offering domestic flights--that is, from picking up and dropping off a passenger in-country--within the United States or Canada. North American policymakers would do well to follow Europe's example and establish open-skies agreements.