Friday, September 30, 2011
The two-day meeting in New Delhi wrapped up today with 26 ICAO members, including China and the U.S., agreeing on a joint declaration of opposition to the EU emissions plan. See Krittivas Mukherjee and Michael Szabo, India, 25 Others Oppose EU Airline Carbon Charge Plan, Reuters, Sept. 30, 2011 (available here). According to the Reuters story, the EU remains unswayed by the complaints from non-EU states. The next major development on the ETS should come as soon as next week when the ECJ is expected to issue its initial opinion on a legal challenge to the plan brought by U.S. carriers.
Thursday, September 29, 2011
More than 30 ICAO members met in New Delhi today to develop a strategy for how best to resist implementation of the EU emissions plan. See Karthikeyan Sundaram, India Rallies 30 Nations Against EU Airline Emission Levy, Bloomberg, Sept. 29, 2011 (available here). Meanwhile, in Rome, Abdul Wahab Teffaha, secretary general of the Arab Air Carriers Organization, indicated that his organization, which represents Emirates, Etihad and Qatar Airways, among others, also opposes the ETS. See Nicola Clark, Middle Eastern Airlines Join Opposition to E.U. Emissions Plan, N. Y. Times, Sept. 29, 2011 (available here). The New Delhi talks are scheduled to conclude tomorrow.
Wednesday, September 28, 2011
Should the EU ETS take effect in January as planned, the economic effects will reverberate through the industry. By one estimate the total industry-wide cost of compliance in 2012 will be 1.1 billion euros. See Michael Szabo, Easyjet Warns ETS to Erode 2012 Profits, India Rebels, Reuters, Sept. 22, 2011 (available here). Given the already tight profit margin on which most airlines are currently operating, the industry will likely seek some form of political relief. As of now, for non-EU carriers that has manifested itself in opposition to the EU ETS. However, should there come a point in the near future where carriers are forced to accept that some level of emissions reduction costs are inescapable, the question will then become what alternative form of political relief might carriers seek? In short, could ETS be the trigger that provokes a broader and more concerted push for substantial liberalization such as repeal of the nationality and cabotage rules? It is conceivable that once carriers are confronted with permanent costly emissions regulations, they will no longer be willing to tolerate costly protectionist restrictions. The further-reduced profit margins resulting from ETS compliance could leave states with no choice but to allow cross-border mergers and consolidations for carriers to remain economically viable. Conversely, it is also possible to imagine the economic consequences of emissions regulation prompting industry actors to seek out increased rather than reduced state protectionism. As we have seen recently in response to Emirates' success, some states have reflexively adopted a more protectionist posture aimed at reducing access and competition for vulnerable flag carriers. It would be highly unfortunate if a more desperate economic climate brought about by emissions regulation contributed to a global step backward from the progress that has been made toward trade liberalization over the past two decades. This is all speculative for now, but it is worth contemplating the hard-to-predict ramifications of ETS compliance costs on the industry's future.
Tuesday, September 27, 2011
Sandwiched between yesterday's announcement of benchmark values for ETS emissions allowances and tomorrow's meeting in New Delhi for ETS objectors, proponents and opponents of the scheme restated their positions today. IATA Director General Tony Tyler, speaking at the Greener Skies conference in Hong Kong, advocated what has also been U.S. thinking on the matter in saying that airlines would support reducing emissions through continued investment in fuel efficient aircraft, biofuels and improved air traffic management systems, and that airlines might be amenable to a global trading scheme, but were opposed to the EU's regional plan. See Christopher Hinton, Airlines Back 'Cap and Trade' Just Not the EU's, MarketWatch, Sept. 27, 2011 (available here). Meanwhile, Jos Delbeke, Director General of the EC's Climate Action directorate, told reporters in Brussels that the EU preferred a global solution to its current plan, but lack of progress on a global emissions scheme (notable at ICAO) had motivated the EU to take unilateral action. See Pallavi Aiyar, Fasten Your Seatbelts, Says Brussels, Business Standard, Sept. 27, 2011 (available here). As Brian F. Havel and Gabriel S. Sanchez acknowledge in their forthcoming article Toward a Global Aviation Emissions Agreement (available here), a unified global emissions agreement is infeasible in the near future, so the EU is not off base in its concern that waiting for a uniform global agreement is at best naive and at worst a stalling tactic. Though, as Havel and Sanchez also argue, the EU's unilateral application of its emissions rules to non-EU airlines operating outside of EU airspace may be no more viable a solution as it is at odds with the Chicago Convention and may not survive the legal challenge by American carriers in the European Court of Justice. Expect more statements opposing the ETS over the next two days from the participants in the New Delhi meetings. Neither side is likely to soften its stance before the ECJ ruling, expected next month.
Monday, September 26, 2011
To begin what should be an eventful week in ETS news, the European Commission today made public the benchmark values by which free greenhouse gas emissions allowances will be allocated. See EC press release available here. The benchmarks should give airlines a clearer idea of the costs of the EU's plan to limit greenhouse gas emissions, scheduled to enter into effect in 2012. Rhetoric over the ETS is likely to heat up as non-EU states are scheduled to meet later this week in New Delhi to draft a declaration opposing the plan. See Tarun Shukla, India to Lead Campaign Against EU's Carbon Levy, Livemint.com, Sept. 22, 2011 (available here).
Friday, September 23, 2011
Blog readers may be interested in a recent op-ed from former OMB Director Peter Orszag advocating for privatization of the nation's air traffic control system. See Peter Orszag, Private Air-Traffic System Can Soar, Bloomberg Business Week, Sept. 21, 2011 (available here). The notion of freeing air traffic control from the uncertainty of government funding disputes has been on the political radar since at least 1993, when it received prominent mention in the Baliles Commission's recommendations for strengthening the airline industry. Orszag, much like the Baliles Commission, proposes creating a nonprofit entity/government corporation to take over air traffic control. Given the political difficulties that have held up progress on the GPS-based NextGen air traffic control system since the time of the commission, privatization is a debate that is at least worth revisiting.
Thursday, September 22, 2011
Air Transport World reported earlier today that the Chilean antitrust tribunal TDLC had conditionally approved the merger between Chile's LAN airlines and Brazil's TAM. See Aaron Karp, LAN, TAM Gain Conditional Antitrust Approval for Merger, Air Transport World, Sept. 22, 2011 (available here). The two carriers would combine to form LATAM Airlines Group. It will be worth watching how the merger impacts the major transnational alliances as LAN currently belongs to oneworld while TAM is a member of Star Alliance. The TDLC made withdrawal from one of the alliances a condition of approval, though the two airlines have yet to agree to TDLC's conditions.
Wednesday, September 21, 2011
Blog readers may be interested in Michael E. Levine's new paper, Regulation and the Nature of the Firm: The Case of U.S. Regional Airlines (Journal of Law and Economics, Forthcoming; NYU Law and Economics Research Paper No. 11-24, July 18, 2011) (available from SSRN here). From the abstract:
In his pathbreaking article, Ronald H. Coase postulated that the structure of production was determined by the comparative advantage between contracting and hierarchy in securing and coordinating complementary resources (human or material) when the efforts of more than one person were required for production. While Coase considered the possibility that the regulatory context in which activity takes place might also influence the way it is structured, he considered the problem only very generally. This paper suggests that airline deregulation has profoundly affected the structure of firms that operate airline networks by affecting the contractual conditions under which airlines purchase labor inputs, by removing constraints on the extent and nature of the firm’s route network and by changing the competitive environment in which airline firms operate. Where a stable uniform firm structure existed under regulation, airline networks now are organized with a variety of firm structures and individual networks have changed as particular conditions have changed over time. No single structure dominates, although some are more common than others.
Tuesday, September 20, 2011
An article from Reuters today suggests that the ongoing financial difficulties in Europe could pose problems for the aviation industry which relies heavily on French and German banks for the financing of aircraft purchases. See Tim Hepher, French Bank Retreat Raises Aircraft Finance Fears, Reuters, Sept. 20, 2011 (available here). According to the article, the market for second-hand aircraft is more likely to be affected than the market for new aircraft. Of course, one way to lower financing costs would be to eliminate the nationality rule and allow airlines freer access to global capital as discussed in The Emerging Lex Aviatica 42 Geo. J. Int'l L. 639 (2011) available here.
Monday, September 19, 2011
In a September 13 press release, the U.S. DOT, FAA, and Australia's Department of Resources, Energy and Tourism announced a Memorandum of Understanding between the agencies to cooperate on developing clean and sustainable aviation fuels. See FAA press release available here. The agencies will share information and costs and conduct joint research into the viability and effectiveness of alternative fuel sources and programs. While the agreement is a far cry from the types of multinational compacts that will be required for significant progress on reducing aviation emissions, any attempts at international cooperation are encouraging to the extent that they demonstrate a recognition by the contracting states that emissions are a problem facing the global aviation industry, and one that will likely be solved more quickly through multistate efforts.
Friday, September 16, 2011
Blog readers who enjoyed (or who have not yet read) Brian F. Havel and Gabriel S. Sanchez's article, Toward a Global Aviation Emissions Agreement, may be interested in today's lead story at GreenAir.com. The story, available here, summarizes the authors' arguments and includes additional quotes and comments from Sanchez. For those interested in a draft version of the actual article, it can be found at SSRN here.
Thursday, September 15, 2011
Earlier today the European Court of Justice ruled that British Airways must calculate holiday pay for pilots according to the pilots' overall earnings as opposed to their base pay. See UK Pilots Claim 'Victory' Over BA on Holiday Pay, BBC, Sept. 15, 2011 (available here). The European Civil Aviation (Working Time) Regulations require that employees receive at least four weeks of paid leave per year, at issue was how that paid leave was to be calculated. The British Airlines Pilots' Association (BALPA) brought the suit claiming that the rate at which holiday pay was being calculated did not reflect the pilots' true compensation, and the Court apparently agreed. Now that the European Court of Justice has come down in favor of the pilots, the case returns to the UK Supreme Court for a final ruling. Similar claims against other British carriers such as EasyJet and Virgin Atlantic have been on hold awaiting the outcome of this case. Blog readers interested in reading the Court of Justice's opinion can do so here.
Wednesday, September 14, 2011
A recent story out of India demonstrates yet again the domestic tensions Open skies policy must overcome. India's Civil Aviation Ministry yesterday defended India's existing bilateral air services agreements against criticism from the Comptroller and Auditor-General (CAG). See Shisher Sinha, Aviation Ministry Not to Review Bilateral Air Service Pacts, The Hindu Business Line, Sept. 13, 2011 (available here). The CAG released its Performance Audit of Civil Aviation in India last week. The report criticized the handling of the merger between the two state-run carriers, Air India and Indian Airlines as well as Air India's fleet expansion. Additionally, the CAG reported that India's bilateral service agreements granting Sixth Freedom rights to countries such as Dubai and Bahrain were hurting Indian carriers and recommended rolling back some of the rights granted to Gulf carriers. Despite the internal pressure, the Aviation Ministry announced that it would not consider any changes to existing agreements, claiming it would be extremely difficult to roll back rights that have already been granted and doing so would have serious diplomatic consequences.
Tuesday, September 13, 2011
Earlier today the House passed a bill that would extend FAA funding at current levels through January 31, 2012. See Seung Min Kim, House OKs Stopgap FAA Funding, Politico, Sept. 13, 2011 (available here). The current funding extension is set to expire Friday. It is expected, but not certain, that the Senate will also approve the legislation this week. The two political parties are believed to still be far apart on funding levels for a long-term extension, but it appears likely that a repeat of the recent 13-day partial FAA shutdown will be avoided.
Monday, September 12, 2011
Blog readers with a particular interest in airline safety regulations will want to pay close attention to developments in Russia over the coming months. President Dmitry Medvedev yesterday announced plans to have regulations in place by November 15, that would allow authorities to shut down the operations of carriers determined to be unsafe. See Dmitry Medvedev Orders Airline Shutdown After Crash, The Daily Telegraph, Sept. 12, 2011 (available here). Additional proposals to increase penalties for safety violations and expand the authority of inspectors are expected to be submitted to the Federal Assembly in December. The Russian government's suddenly acute focus on the domestic airline industry is likely to have ramifications on international aviation beyond stricter safety regulations. Prime Minister Vladimir Putin is reportedly overseeing further industry changes which could include shrinking the number of domestic carriers and significant fleet renewal, possibly including purchases from western companies. See Paul Abelsky, Russian Airplane Crash Clouds Putin Goal of Building World-Class Economy, Bloomberg.com, Sept. 9, 2011 (available here); and See Russia Orders Airline Shutdown After Crash, The Hindu, Sept. 11, 2011 (available here). The possible turn to western aircraft would be a notable departure from Russian policies in recent years which, through taxes and government disapproval, have discouraged purchase of foreign aircraft. See Adam Taylor, Here's the Huge Problem With Russia's Airline Industry, Business Insider Europe, Sept. 8, 2011 (available here).
Friday, September 9, 2011
Coinciding with the upcoming 10th anniversary of the September 11, 2001, attacks, IATA has produced a new report, The Impact of September 11, 2001 on Aviation (available here). The brief report includes figures on the economic impact on the industry, as well as ongoing security, insurance and data sharing costs, and offers a suggestion for streamlining security procedures going forward. It could serve as a quick point of reference for any researchers in need of statistics on the subject.
Thursday, September 8, 2011
Blog readers interested in a concise summary of where air transport liberalization stands today would do well to check out Breaking the Surly Bonds of Economic Regulation, by Chris Lyle, formerly of the ICAO (available from Air Transport Economics here).
Wednesday, September 7, 2011
The Canadian government has yet to take action on the Flight Rights Canada initiative to inform airline passengers of their rights through signs and posters at the nation's airports according to a news report yesterday. See Sara Schmidt, Conservatives Ground Pledge to Protect Passenger Rights, Postmedia News, Sept. 6, 2011 (available here). The article provides a nice account of how political support for regulatory changes can erode between the time new regulations are first announced and the time they are implemented.
Tuesday, September 6, 2011
Speakers at last week's 17th Annual Aviation & Allied Business Leadership Conference in Dar es Salaam, Tanzania called for increased cooperation among African carriers according to recent news reports. See Leaders Urge More Investments, Cooperation in Aviation Industry, allAfrica.com, Sept. 5, 2011, (available here). President of the United Republic of Tanzania, Jakaya Mrisho Kikwete, argued African nations will need to move away from protectionism in favor of greater liberalization and integration among their aviation industries in order to compete with European carriers. Other key topics included safety and security and the need for increased investment. Additionally, Tanzania's Transport Minister Omari Nundu announced that Air Tanzania Company Limited (ATCL), Tanzania's national airline which has been grounded since March 2011, was ready to resume flying. See Daniel Semberya, Kikwete Advises on Air Transport Investment, East African Business Week, September 5, 2011 (available here).