February 5, 2010
Susan Kurland, the current Assistant Secretary for Aviation and International Affairs at the Department of Transportation addressed the ABA Forum on Air and Space Law last week in Washington, D.C. (available here) on key points of U.S. international aviation policy. Of particular interest were her remarks on the state of U.S./EC second stage negotiations and the future of antitrust immunity for airline alliances.
On the U.S./EC negotiations, she reaffirmed U.S. commitment to finalizing a second agreement and identified security, regulatory cooperation, and the role of the 2007 Air Transport Agreement's Joint Committee as areas where progress had been made. At the same time she indicated that the U.S. was not prepared to relax its foreign investment restrictions for airlines, noting that Congressional action would have to be taken first. Conspicuously absent from her remarks was the issue of cabotage despite the fact the EU has singled it out as a negotiating point.
As for antitrust immunity, Kurland implicitly rejected the contention that immunity proceedings were policy driven by stating that "the Department has granted antitrust immunity only in cases where it has determined that doing so would enhance competition and provide consumers with a broader choice of options and other benefits not otherwise available." While cognizant of the fact that U.S. open skies partners "have a strong interest in the Department's disposition of immunity cases involving their airlines," Kurland again "emphasize[d] that the review of each application, and its ultimate disposition, is based on the specific merits of each particular application."
February 3, 2010
Virgin Contra Open Skies
According to a story out today, Virgin Atlantic CEO Steve Ridgway is calling on the European Union to take retaliatory measures against the United States under the 2007 U.S./EC Air Transport Agreement if the U.S. fails to raise its 25% limit on foreign investment in its airlines and grant EU carriers cabotage rights by the end of the year. See Steven Rothwell, EU Should Scrap U.S. Open Skies Benefits, Virgin Says, Bloomberg, Feb. 3, 2010 (available here). Under the 2007 Agreement, if either party is dissatisfied with the outcome of negotiations for a "second stage" treaty by November 2010, they may suspend some or all of the rights granted in the original agreement. See 2007 U.S./EC Air Transport Agreement, art. 21(3), 2007 O.J. (L 134). 4.
If the EU follows through on Ridgway's advice, it could mean a return to the days when only American Airlines and United had authorization to fly to and from London Heathrow Airport and a concomitant loss of traffic rights for Delta Airlines, Continental, and US Airways. On the other hand, EU carriers such as British Airways could also find their rights to operate services to and from the U.S. curtailed. What a suspension would ultimately amount to is an aviation trade war between the two largest air transport markets in the world. Given the tough economic climate and the massive financial losses incurred by carriers on both sides of the Atlantic, the impact of a war would prove devastating.
February 2, 2010
The Fifth Jurisdiction
A recent article which may be of interest to blog reader's is Norberto Ezequiel Luongo's The Fifth Jurisdiction: The "American Dream," 34 Annals Air & Space L. 437 (available from SSRN here). From the abstract:
The article covers the historical process that led to the inclusion in the Montreal Convention of 1999 of the concept of a jurisdiction based on the place where a claimant has his/her regular place of residence. It particularly analyzes the historical scenario in which the idea of a "fifth jurisdiction" made its formal debut, when the efforts undertaken by IATA to create private liability agreements seemed to represent the only way to keep the old Warsaw System alive. It explains in detail how the United States, through successive Orders issued by the Department of Transportation, endeavored to attach its antitrust approval to such conversations to the explicit inclusion of a "lex domicilii" provision in such agreements, and why this concept was of great importance to American interests. In its conclusion, the article describes how the fifth jurisdiction finally became a reality under the new legal regime, despite numerous previous unsuccessful attempts at incorporating it into the law.
oneworld's Approval and Future
The oneworld Alliance appears to have moved significantly closer to gaining regulatory clearance from the European Commission. According to a story in yesterday's Financial Times, EU regulators are consulting with the alliance's rivals (most notably Virgin Atlantic) on commitments oneworld has made to assuage fears that it will harm competition. See Nikki Tait & Pilita Clark, Three-Way Global Alliance Edges Nearer Regulatory Clearance, Fin. Times, Feb. 1, 2010 (available here).
Winning approval in the EU is only half the battle, however. A cloud of uncertainty still rests over the alliance's chances of gaining antitrust immunity from the U.S. Department of Transportation without being asked to surrender lucrative slots at London Heathrow. The DOT could also choose to carve out certain routes from the immunity and thus potentially hinder the full network benefits the alliance is attempting to secure. It's possible, however, that a favorable decision from the European Commission concerning oneworld's commitments could persuade U.S. authorities to approve the alliance's immunity application with few or no additional concessions.
Meanwhile, sitting against the backdrop of both approval processes is the future of oneworld's relationship with bankrupt Japanese airline JAL. While many industry analysts believed that a jump to rival airline alliance SkyTeam was imminent for JAL, a final decision remains on hold. See Tomoko A. Hosaka, JAL Says It Will Decide on Alliance Partner Soon, Assoc. Press, Feb. 1, 2010 (available here). If oneworld is able to clear the regulatory hurdles on both sides of the Atlantic, it could go a long way toward persuading JAL to stay put.