Tuesday, November 30, 2010
The fourth installment of the International Aviation Law Institute's "Conversations with Aviation Leaders" Oral History Series--A Conversation with John Byerly--is now online in streaming video here. Prior to his retirement in October 2010, Byerly served as the Deputy Assistant Secretary of State for Transportation and was the lead U.S. negotiator for the historic 2007 U.S./EU Air Transport Agreement and, more recently, the 2009 U.S./Japan Open Skies Agreement.
Earlier installments in the series, featuring former Civil Aeronautics Board Chairman Alfred Kahn; Professor and former Northwest Airlines Exectuive Michael Levine; and former American Airlines Chairman and CEO Robert Crandall can be accessed here.
Monday, November 29, 2010
Blog readers may be interested in Yannis Karagiannis & Adrienne Heritier's new working paper, The New Institutions of Transatlantic Aviation (IBEI Working Papers 2010/32, Nov. 2010) (available from SSRN here). From the abstract:
This article focuses on the institutions of transatlantic aviation since 1945, and aims at extracting from this historical process topical policy implications. Using the methodology of an analytic narrative, we describe and explain the creation of the international cartel institutions in the 1940s, their operation throughout the 1950s and 60s, their increasing vulnerability in the 1970s, and then the progressive liberalization of the whole system. Our analytic narrative has a natural end, marked by the signing of an Open Skies Agreement between the US and the EU in 2007. We place particular explanatory power on (a) the progressive liberalization of the US domestic market, and (b) the active role of the European Commission in Europe. More specifically, we explain these developments using two frameworks. First, a “political limit pricing” model, which seemed promising, then failed, and then seemed promising again because it failed. Second, a strategic bargaining model inspired by Susanne Schmidt’s analysis of how the European Commission uses the threat of infringement proceedings to force member governments into line and obtain the sole negotiating power in transatlantic aviation.
Friday, November 19, 2010
The European Commission and the U.S. Department of Transportation have released their two-year-long study of international airline alliances. See Eur. Comm'n & U.S. DOT, Transatlantic Airline Alliances: Competitive Issues and Regulatory Approaches (2010) (available here). From the press release:
The European Commission and United States Department of Transportation (DOT) have published a report on the role of alliances in the market for transatlantic air services. The report completes a joint research project aimed at developing a greater understanding of airline alliances and the separate regulatory approaches applied by each agency to address competitive issues.
The report examines the competitive structures of the airline industries in Europe and the United States and compares the respective legal regimes and analytical frameworks applied by the Commission and DOT. The report concludes that the competitive structures of the airline industries are similar. Despite important differences in legal regimes, the report finds that there is scope for the Commission and DOT to work towards the promotion of compatible regulatory approaches as specified in Annex 2 to the EU-U.S. Air Transport Agreement, to achieve pro-competitive outcomes for consumers and the airline industry.
The EU-U.S. Air Transport Agreement – provisionally applied as of March 2008 – enhanced competition in the transatlantic market by allowing, for the first time, EU or U.S. airlines to serve any routes between Europe and the United States. It also called for the Commission and DOT to develop a common understanding of trends in the airline industry in order to promote cooperation on competition issues. The joint research project was a first step in this process.
See Press Release, U.S. DOT, Competition: European Commission and U.S. Department of Transportation Publish Joint Report on Transatlantic Alliances (Nov. 16, 2010) (available here).
Thursday, November 18, 2010
The Cato Institute has posted a series of critical commentaries on airport screening measures and the TSA. All of them are worth reading.
David Rittgers, Body Scanners: The Naked Truth, N.Y. Post, Nov. 17, 2010 (available here)
Jim Harper, "Strip-or-Grope" vs. Risk Management, Cato at Liberty, Nov. 16, 2010 (available here)
David Rittgers, Body Scanner Blues, Cato at Liberty, Nov. 17, 2010 (available here)
Yesterday, Congressman Ron Paul introduced the Air Traveler Dignity Act, H.R. 6416, 111th Cong. (2010), the full text of which reads:
No law of the United States shall be construed to confer any immunity for a federal employee or agency or any individual or entity that receives federal funds, who subjects an individual to any physical contact (including contact with any clothing the individual is wearing), X-rays, or millimeter waves, or aids in the creation of or views a representation of any part of a individual's body covered by clothing as a condition for such individual to be in an airport or to fly in an aircraft. The preceding sentence shall apply even if the individual or the individual's parent, guardian, or any other individual gives consent.
The legislative proposal comes in response to growing public resentment of the Transportation Security Administration's heightened screening measures. Video of Rep. Paul explaining the proposal and lambasting the TSA for its "Soviet-style" searches is available below.
Tuesday, November 16, 2010
Blog readers may be interested in Cristian Huse & Alessandro V.M. Oliveira's new working paper, Does Product Differentiation Soften Price Reactions to Entry? Evidence from the Airline Industry (Latin American Ctr. for Transp. Econ. Working Paper No. 35, Nov. 12, 2010) (available from SSRN here). From the abstract:
We examine the effects of entry on the pricing behavior of incumbent legacy airlines in a market where the newcomer is a rapidly expanding low-cost carrier - the Brazilian airline industry in the early 2000s. We estimate the timing and the determinants of price responses to entry allowing them to be asymmetric and controlling for product differentiation. We also propose a decomposition procedure of time fixed-effects to better control for unobserved heterogeneity in prices: by accounting for time-varying route-, city- and carrier-specific unobservables, we find that incumbents do price-respond to actual entry but not to potential entry. We provide suggestive evidence that the lack of preemptive behavior is due to the fact that financially distressed incumbents with virtually no bankruptcy protection were not able to engage in costly deterrence against a newcomer with deep pockets and committed to expansion. Our most important results uncover product differentiation effects stemming from more convenient departures during peak hours and nonstop service, which significantly softened actual price responses.
Monday, November 15, 2010
Saturday, November 13, 2010
As expected, the Department of Transportation finalized its approval and antitrust immunity for the American Airlines/JAL and United/ANA transpacific alliances. See U.S.-Japan Alliance Case, Dkt. No. DOT-OST-2010, Final Order (Dep't of Transp. Nov. 10, 2010) (available here).
Monday, November 8, 2010
Jeffrey Goldberg, who writes for The Atlantic, has an interesting blog post up about a recent letter sent from Captain Dave Bates, President of the Allied Pilots Association, concerning the humiliating treatment American Airlines' pilots are allegedly receiving at the hands of the Transportation Security Administration. Goldberg's comments, along with a copy of the letter, are available here.
For those interested, Professor Robert Hardaway's eye-opening article, Of Cabbages and Cabotage: The Case for Opening Up the U.S. Airline Industry to International Competition, 34 Transp. L.J. 1 (2007), is available for free download from SSRN here. From the abstract:
The United States should aggressively pursue cabotage agreements with foreign governments and in particular with the EEC. Such agreements should be reciprocal in principle, offering cabotage rights in the U.S. equal in terms of mileage or other agreed upon benchmark in exchange for equal rights in the foreign country participating in the agreement. The adoption of cabotage with whomever it can be negotiated should be combined with domestic policies opening up domestic airport gates and resources and slots to all who seek entry, whether new entrants or incumbent foreign carriers. All foreign airlines granted cabotage rights should be required to satisfy all safety and regulatory and security requirements currently imposed on U.S. carriers, as well as additional security requirements deeded necessary under Homeland Security laws.
The Federal Aviation Administration has released a new report on flight delays at the New York-area airports. See FAA, New York Flight Delays Have Three Main Causes, But More Work Is Needed to Understand Their Nationwide Effect, Rpt. No. AV-2011-007 (Oct. 28, 2010) (available here). From the summary:
On October 28, 2010, we issued our report on the causes and nationwide effects of flight delays at the principal New York area airports--Kennedy, LaGuardia, and Newark. During the summer of 2007, these airports led the Nation with over 40 percent of arriving flights either delayed or cancelled. We conducted this review at the request of the Chairman of the House Aviation Subcommittee, who requested that we (1) determine the principal causes of flights delays in the New York region and (2) identify the corresponding effect of these delays nationwide.
Flight delays in the New York area have three main causes: (1) crowded airspace due to the close proximity and high volume of flight operations of the three main New York airports; (2) airport capacity constraints; and (3) continued growth in air traffic during the last 10 years, in part due to the phase-out of flight limits (caps) from 2000 to 2007. FAA reestablished the caps in 2008 at Kennedy and imposed them for the first time at Newark, but these have done little to reduce New York area delays. While there is substantial agreement that New York delays have a nationwide "ripple effect," the extent and nature of their impact are largely unknown. FAA's efforts to measure this effect are in the developmental stage and require additional work to provide a full understanding of delay propagation.
We made four recommendations to FAA aimed at reexamining its flight caps, enhancing existing flight data, and developing a viable methodology for understanding delay propagation effects. FAA fully concurred with one recommendation and partially concurred with three. We are requesting that FAA provide our office with a new written response addressing specific issues with these three recommendations within 30 days.
Thursday, November 4, 2010
Brett Snyder, who writes the Headwinds blog for the CBS Interactive Business Network, has a new post up about Oberstar's ouster. See Brett Snyder, Airlines Lose Key Merger Opponent in the House with Oberstar Defeat, Headwinds, Nov. 3, 2010 (available here). The post goes into some detail on Oberstar's opposition to consolidation in the U.S. air transport market.
Wednesday, November 3, 2010
Minnesota Democratic Congressman James Oberstar, Chairman of the House's Transportation and Infrastructure Committee, became one of at least 60 victims of last night's Republican sweep of the House. Oberstar, who is completing his 18th term in Congress, has been Chair of the Transportation and Infrastructure Committee since 2007.
In a period when Washington's attention was turned toward two foreign wars, a global financial crisis, and health care reform, Oberstar had the opening to radically retune U.S. air transport policy in an illiberal key. For example, in 2008 Oberstar introduced legislation to sunset the Department of Transportation's grants of antitrust immunity to international airline alliances and tighten federal rules which limit the right of foreign nationals to own and control U.S. air carriers. More recently, the soon-to-be-former Chairman publicly criticized the Justice Department's approval of the United/Continental merger and stated that the U.S. needs to rethink its antitrust policy toward the airlines. Thankfully, despite the rhetoric, none of Oberstar's protectionist policy prescriptions came to pass.
Blog readers interested in reviewing some of our more pointed critiques of Oberstar's aviation policy agenda can consult the following in the archives: