Wednesday, November 30, 2011
In a potentially important development for the ongoing dispute over aviation emissions, ICAO announced today that it intends to bring its members to an agreement on carbon emissions-reduction measures next year. See Alessandro Vitelli and Mathew Carr, UN Aviation Regulator Presses for 2012 Carbon Market Deal, Bloomberg, Nov. 30, 2011 (available here). We'll analyze this development in detail in tomorrow's blog post.
Tuesday, November 29, 2011
AMR, the parent corporation of American Airlines and American Eagle Airlines, announced this morning that it has filed for Chapter 11 bankruptcy protection. See Michael J. De La Merced, American Airlines Parent Files for Bankruptcy, New York Times Dealbook, Nov. 29, 2011 (available here). American is the last of the legacy carriers to file for bankruptcy protection and the only major U.S. airline not to have done so following the 2001 terrorist attacks. The possibility of a bankruptcy filing had been the subject of increasing speculation by analysts in recent months. American will continue operating while under bankruptcy protection as many of the other carriers have done. The nation's third-largest carrier by number of destinations (fourth-largest by number of passengers) is expected to use bankruptcy to shed labor costs and unwanted aircraft leases, but reportedly intends to continue with its recent purchase of new aircraft from Boeing and Airbus in the hopes of reducing costs by transitioning to a newer, more fuel-efficient fleet. This announcement provides an opportunity to revisit past discussions of deregulation and its effects on the domestic airline industry in upcoming blog posts. For now, those interested in the immediate consequences of the bankruptcy filing may enjoy two recent papers by Federico Ciliberto and Carola Schenone about the effects of past airline bankruptcies. The authors conclude that carriers tend to lower prices and experience fewer cancellations and delays while operating in bankruptcy, but once out of Chapter 11 these measures return to, and in the case of prices exceed, pre-bankruptcy levels. By contrast, reductions in route structure, flight frequency and capacity are also common in bankruptcy but are typically permanent. See Federico Ciliberto and Carola Schenone, Are the Bankrupt Skies the Friendliest?, August 2010 (available from SSRN here); Federico Ciliberto and Carola Schenone, Bankruptcy and Product-Market Competition: Evidence from the Airline Industry, August 2010 (available from SSRN here).
Monday, November 28, 2011
Air Transport World recently reported that Copa Airlines and Avianca-Taca are set to join the Star Alliance in April 2012. See Kurt Hofmann, Copa, Avianca-Taca to Join Star Alliance in April 2012, ATW Online, Nov. 22, 2011 (available here). This is eminently sensible as LATAM, the entity to be created by the in-process LAN-TAM merger, is expected to join oneworld once the merger is complete.
Wednesday, November 23, 2011
Tuesday, November 22, 2011
The latest idea in domestic aviation regulation comes courtesy of Senator Mary Landrieu (D-La.) who has introduced legislation intended to prevent airlines from charging for checked bags. See Chris Isidore, Bill Would Scrap Checked Baggage Fee, CNN Money, Nov. 22, 2011 (available here). Landrieu put forth two alternative proposals, one that would completely prohibit airlines from charging passengers for the first checked bag, and a second that would tax airlines for baggage fees, ostensibly to help offset TSA expenses resulting from the increased volume of carry-on bags since bag-check fees were introduced. It is unclear at this point whether the bill is simply pre-holiday pandering, or if concerns about TSA costs and support from consumer and travel advocacy groups will give it a legitimate chance of passage. Restricting the use of baggage fees and forcing airlines to distribute costs more widely through the less-targeted mechanism of higher ticket prices hardly seems like a good idea. U.S. carriers are estimated to have collected $3.4 billion in baggage fees last year, revenue the airlines cannot afford to lose. To put the cost of the proposal in perspective, the Air Transport Association estimated that participation in the EU ETS would cost U.S. carriers $3.1 billion in total from 2012-2020. Thus, were this bill to receive serious support, it would seemingly undermine any claims by the U.S. government that its objections to participation in the EU ETS are motivated by concern for the industry's ability to bear the costs of emissions regulations.
Monday, November 21, 2011
For yet another take on the ETS issue, blog readers may be interested in Lorand Bartels' The Inclusion of Aviation in the EU ETS: WTO Law Considerations (Nov. 15, 2011) (available from SSRN here). From the abstract:
The aviation industry will be included in the EU’s emissions trading system (ETS) from 1 January 2012. Airlines will have to acquire and ‘surrender’ allowances for the carbon emissions produced by their flights. The scheme is comprehensive: it applies to EU and non-EU airlines (subject to a potential exemption), to passenger and cargo flights, and to flights between EU airports and between EU and non-EU airports. An airline that fails to surrender allowances is fined €100 per allowance and must make up the shortfall the following year.
The EU’s scheme has already given rise to legal action in connection with the EU’s international civil aviation obligations. But, due to its impacts on trade in goods and services, the scheme also has implications for the EU’s obligations under the WTO law: specifically, under the General Agreement on Tariffs and Trade (GATT) and the General Agreement on Trade in Services (GATS). In particular, this raises the question of the scope of application of the GATS Annex on Air Transport Services. As this article shows, it is challenging to design a carbon scheme that is both administratively feasible and justifiable under WTO law.
Friday, November 18, 2011
EU carriers that have long complained about the charges levied on their routes overflying Russian territory may soon have reason to celebrate. The Russian government has pledged to end the charges, assuming Russia's admission to the WTO next month proceeds as planned. See Daniel Michaels, Russia Seen Close to Ending Air Tax, Wall St. J., Nov. 15, 2011 (available here). The Siberian overflight charges, as they are called, are far higher than standard air service charges and significant portions of the charges are used to subsidize Russian carrier Aeroflot. For those reasons, the charges clearly violate Article 15 of the Chicago Convention. The EU obtained an agreement from Russia to end the practice in 2006, but the Russian government backed out of implementing the agreement. The EU's recent efforts to tie Russian admission to the WTO to elimination of these charges appears to have produced the desired result as Russia will begin implementing a modified version of the earlier agreement January 1, with plans to have the charges completely eliminated by 2014. Of course this is an issue where follow up will be crucial.
Thursday, November 17, 2011
For those who are interested, the volume of scholarship responding to the Advocate General's advisory opinion in the ETS case continues to grow. Benoit Mayer contributes A Defense of the EU Emission Trading Scheme in Aviation Activities (Nov. 7, 2011) (available from SSRN here). From the abstract:
From 1 January 2012, directive 2008/101 extends the EU Greenhouse Gas Emission Trading Scheme to aviation activities. The validity of this directive has been questioned in a preliminary ruling brought by American air carriers. This article discusses the allegations of an extraterritorial legislation and a 'European unilateralism' in the light of the recent conclusions of Advocate General Kokott. Beyond purely legal arguments, it highlights the underlying economic and political considerations that are part to the debate. Lastly, it pleads for further consideration to be given to good faith in the assessment of the European so-called 'unilateralism.' As the European Union has no economic interest in implementing this regime, one should take its environmental motivation duly into account; and mitigating climate change is certainly a legitimate purpose recognized in international law, therefore allowing certain forms of legislation with an extraterritorial effect.
Wednesday, November 16, 2011
The Indian government is reportedly considering a change to its airline ownership rules. See Santanu Choudhury and Amol Sharma, India is Urged to Ease Airline-Ownership Rules, Wall St. J., Nov. 15, 2011 (available here). Indian law prohibits foreign carriers from investing in Indian carriers, though foreign investors who aren't affiliated with foreign carriers are able to own up to a 49 percent stake. Kingfisher Airlines chairman Vijay Mallya has asked the government to remove the prohibition on investment by foreign carriers and the Indian government has taken it under consideration. Strict restrictions on foreign investment remain a problem throughout the aviation industry, so any loosening of such restrictions would be welcomed by many.
Tuesday, November 15, 2011
Blog readers may be interested in EU Climate Change Unilateralism: International Aviation in the European Emissions Trading Scheme (Nov. 1, 2011) available from SSRN here. This piece by Joanne Scott and Lavanya Rajamani examines whether the EU emissions plan for aviation satisfies the principle of Common but Differentiated Responsibilities and Respective Capabilities. We'd also like to thank the authors for mentioning the blog in a footnote. From the abstract:
The EU is engaged in an ambitious, controversial and high-stakes experiment to extend the reach of its climate change law. It is seeking to use its market power to stimulate climate action, and to substitute for climate inaction, elsewhere. In some quarters, this has been greeted with dismay. While we are sympathetic to the EU’s objective, we argue that its current approach is flawed. In contrast to other observers, we do not condemn the EU on the basis that its approach is unilateral, extra-territorial or liable to infringe the sovereignty of other states. We argue instead that in its current guise, the aviation decision may not sufficiently reflect or give adequate weight to the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDRRC). This is a key component of international climate change law and while its meaning and implications remain contested and vague, it makes it clear that developed countries should take the lead in addressing the causes and effects of climate change. We argue that the concept of CBDRRC retains relevance in the context of unilateral action, and that EU policy should be interpreted, applied and where necessary adjusted in the light of this principle to ensure that it is given proper weight. We argue that it is possible to achieve an alignment between CBDRRC and the principle of non-discrimination which is found in many parts of international law.
Monday, November 14, 2011
Earlier today the Department of Transportation issued the first fine for a violation of the tarmac delay rule that took effect in April 2010. American Eagle Airlines was fined $900,000 for delays longer than three hours on 15 flights at Chicago O'Hare International Airport on May 29, 2011. The DOT press release is available here.
Friday, November 11, 2011
Wednesday, November 9, 2011
Blog readers interested in an interpretation of international law that is more favorable to the EU's emissions plan may want to read Kati Kulovesi's 'Make Your Own Special Song Even if Nobody Else Sings Along': International Aviation Emissions and the EU Emissions Trading Scheme (Nov. 4, 2011) (available from SSRN here). From the abstract:
This article focuses on the escalating international row over the decision by the European Union to include aviation emissions in its Emissions Trading Scheme from 2012 onwards. The main point of controversy is that the ETS will apply to foreign airlines to the extent they operate flights to and from EU airports. The article sheds light on the background of the dispute by providing an overview of the slow progress on aviation emissions under the UNFCCC and the International Civil Aviation Organization. It describes the main features of the EU scheme and discusses the pending request for a preliminary ruling from the Court of Justice of the European Union concerning the compatibility of the ETS with international law. The article concludes that there is a good case to be made for the legal design of the EU’s scheme for aviation emissions under international law. Furthermore, from a climate-policy perspective, the scheme can be seen as a necessary first step towards controlling rapidly growing aviation emissions. At the same time, the continuing global impasse on climate change mitigation raises concerns over fragmentation of climate change law and the spread of unilateral climate policies and retaliatory measures.
Tuesday, November 8, 2011
China Air Transport Association (CATA) Deputy Secretary General Chai Haibo indicated Monday that the CATA and multiple Chinese carriers were planning to file a lawsuit challenging the EU's plan to incorporate foreign carriers into the ETS. See Zhang Xiang, China Urges EU to Drop Aviation Emission Scheme, Lawsuit Looms, Xinhua News, Nov. 8, 2011 (available here). It is unclear where this legal challenge would be filed or whether it would include legal claims distinct from those brought by the American carriers in their suit before the ECJ. The article also includes the following paragraph:
The emission charges should not be imposed on airlines but on European and U.S. companies which supply most of the engines used on major airlines' planes, as engines are the real culprits for carbon emissions, Zhang Hongbiao, an official in charge of technologies with Aviation Industry Corporation of China, told the China Economic Weekly.
The quote suggests China's opposition to extraterritorial regulations would not extend to regulations applied only to its primary manufacturing competitors. China is like most of the actors in this ETS drama in that its commitment to international law principles arguably might seem to vary in proportion to the anticipated impact on its domestic economic interests, but a successful international law regime requires consistent adherence to the principles enshrined in its treaties.
Monday, November 7, 2011
Blog readers interested in the latest on the ETS controversy should read today's article at Air Transport World. See Karen Walker, EU MP: Europe Will Not Back Down on ETS, Air Transport World, Nov. 7, 2011 (available here). The story quotes European Parliament Transport Committee chairman Brian Simpson, speaking at the 55th annual meeting of the Association of Asia Pacific Airlines, who makes three provocative assertions. First, he states that many EU governments view the ETS as a potential revenue source, which would belie Advocate General Juliane Kokott's characterization of the regulation as distinct from a tax, and would strengthen ETS opponents' argument that the ETS violates the Chicago Convention. Second, Simpson says that he has suggested a compromise limiting application of the emissions regulation to only the portion of flights by non-EU carriers that is conducted in EU airspace. The proposed compromise would be effective for two years while ICAO worked to facilitate a global emissions agreement. This compromise would put the ETS on much sounder legal footing by limiting regulation to EU airspace where the EU's authority to regulate is much clearer. Though, if what Simpson says about the ETS as a revenue-generating mechanism is true, even applied just to EU airspace the ETS could presumably be considered a tax in violation of Article 15 of the Chicago Convention. Finally, according to Simpson, his compromise has been rejected by EU leaders because they anticipate that other nations, aside from the U.S., will capitulate and comply with the ETS when it enters effect January 1. This suggests that EU leaders are willing to undertake a trade war if the U.S. is the only holdout.
Friday, November 4, 2011
Institute Director Brian F. Havel spoke at the 23rd annual European Air Law Association conference in Rome earlier today. Professor Havel was assigned to a panel on EU-Russia air transport relations that included former U.S. Department of State negotiater John Byerly, Carlos Mestre of the EU Commission, and former Meridiana Fly CEO Massimo Chieli. His speech analyzed the rule of law in EU-Russia air transport relations with an emphasis on air space sovereignty. He discussed the long-festering issue of Siberian overflight charges which the EU has repeatedly argued exceed the air services charges permissible under Article 15 of the Chicago Convention. The EU hopes the issue is nearing resolution based on promises obtained from Russia earlier this month to finally implement the terms of an agreement that was reached in 2006. Professor Havel proposed that the overflights issue should not be viewed in isolation but contained disturbing similarities to the current dispute over the EU's attempts to extend its emissions regulations to foreign carriers. Both controversies involve attempts to leverage control over sovereign airspace to serve domestic interests, a pattern of practice that could threaten the international comity and expectation of First Freedom rights upon which a healthy international aviation system depends.
Thursday, November 3, 2011
Yesterday, a majority of the ICAO governing council agreed to adopt a resolution put forth by non-EU states calling on the EU to address aviation emissions through ICAO rather than unilaterally. The paper itself has not yet been made available, but by all accounts the details are of little consequence. The resolution is non-binding and EU representatives have already indicated that their position on including non-EU carriers in the ETS has not changed. See Ewa Krukowska, UN Body Urges Europe to Omit Foreign Airlines From CO2 Curbs, Bloomberg, Nov. 3, 2011 (available here). Ultimately, yesterday's decision was yet another minor political step on the path to a resolution. Now that ICAO has weighed in, it will be interesting to see if the ETS opponents begin a formal disagreement proceeding with ICAO as specified in Article 84 of the Chicago Convention, or if both sides bypass ICAO and begin threatening trade sanctions.
Wednesday, November 2, 2011
ICAO has just approved a working paper opposing the EU's plan to include foreign carriers in its emissions trading scheme. See UN Body Urges EU to Scale Back Airline Carbon Plan, Reuters, Nov. 2, 2011 (available here). Further analysis will be provided as details of the resolution are made available.
Tuesday, November 1, 2011
The Volume 11, Fall 2011 issue of the International Aviation Law Institutes's journal, Issues in Aviation Law and Policy (IALP), will be available later this month. The following articles will appear in the issue:
- Brian F. Havel & Gabriel S. Sanchez, Do We Need a New Chicago Convention?
- Elena Carpanelli, The "Siberian Overflights" Issue
- Paul E. Stinson, Implied Field Preemption of the Aviation Claims Under the Federal Aviation Act: How the Landscape is Changing
- Carlos Ruiz, Pulling Back the Throttle in the Exercise of Personal Jurisdiction over Air Carriers
- Francesco Fiorilli, Ensuring Global Competitiveness in the Airline Industry
- Vanja-Ivan Savić, Responsibility in the Cockpit or Downtown? How Legal Theory Determines if an Airline Is to be Treated as a Criminal
Blog readers interested in subscribing to IALP, ordering back issues, or perusing a list of published articles may do so at the Institutes's website here.