November 19, 2010
New U.S./EU Airline Alliance Report Available
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).
November 18, 2010
Cato on Airport Screening
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)
Ron Paul Introduces New Air Traveler Act
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.
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.
November 15, 2010
Southwest/AirTran Likely to Clear Antitrust Hurdle
According to Cambridge Aviation Research, the pending Southwest Airlines/AirTran merger is likely to clear the Justice Department's merger review process. The 18-page report is available for a mere $995.00 here.