August 11, 2011
BBC Take on ETS
The BBC has an excellent story detailing the controversy over the European Union's plans to bring aviation into its Emissions Trading Scheme in January 2012. See Damian Kahya, Air Wars: Fear of Trade War Over EU Airline Carbon Cap, BBC News, Aug. 10, 2011 (available here).
August 10, 2011
LAN/TAM Merger Hurdles
Consolidation in the Latin American aviation market may be put on hold as Chile's Constitutional Court has been asked by Pal Airlines to block the pending merger between Chile's LAN and Brazil's TAM. See Anthony Esposito, Chile LAN, Brazil TAM Merger Could Face New Roadblock, Wall St. J., Aug. 9, 2011 (available here). Chilean antitrust authorities, which are already reviewing the merger, are expected to rule on the deal later this month.
If the merger proceeds, TAN/TAM will become Latin America's largest airline and one of the ten largest carriers in the world. The deal is also historic since it marks one of the largest crossborder consolidations in the airline industry without the aid of a supranational governance authority. European air carrier mergers and acquisitions, such as Air France/KLM or Lufthansa's purchase of Austrian Airlines, were facilitated by the Union's common air transport regulations and the creation of a single aviation market. In most areas of the world, however, crossborder mergers are severely limited by national investment caps and treaty-based restrictions which require a State's airlines to be owned and controlled by its citizens before the carrier is eligible to perform international services. The pending LAN/TAM merger constitutes one of the most significant departures from this nationalistic norm since the creation of the Chicago Convention in 1944.
August 8, 2011
Emirates Against the ETS
Not surprisingly, the Arab world's largest air carrier, Emirates, has attacked the European Union's Emissions Trading Scheme on the ground that it will cost the carrier up to $1 billion over the next decade. See Emirates Eyes EU Carbon Tax of $1 Billion Over 10 Years, Reuters, Aug. 8, 2011 (available here). Moreover, the Arab Air Carriers Association has asked the EU not to include aviation in the ETS.
It's unlikely that Emirates' criticisms will do much to dissuade the EU. Emirates is one of the few leading international airlines which does not enjoy open access to the Union's 27 Member States. In fact, EU airlines such as Lufthansa and Air France have lobbied to block the Dubai airline from receiving additional traffic rights. Moreover, several EU airlines are upset that Emirates utilizes the unofficial "sixth freedom" to move European passengers to its hub in Dubai for final transit to destinations in Africa and Asia. Emirates has also been subjected to the charge that it relies on illegal subsidies to keep costs down, including export credits to purchase state-of-the-art aircraft.
Even if Emirates alone cannot change the Union's regulatory course, it can contribute another high-profile voice to the already powerful criticisms which have been mounted against the ETS. Though some airlines are hanging their hopes on a successful outcome to the Air Transport Association's legal challenge which is currently pending before the Court of Justice of the European Union, there's a greater chance that the matter will ultimately be settled in the diplomatic arena.