August 26, 2011
Opposition to United/Continental/Air Canada Alliance Worth Watching
Despite increased liberalization efforts over the last two decades, international mergers and truly globally integrated carrier networks remain blocked by the nationality rule. As such, the primary mechanism by which airlines have pursued global integration has been through alliances with foreign carriers, enabling coordination on ticketing, scheduling, brand identity and more. The U.S. DOT has promoted these alliances by aggressively granting antitrust immunity to the allying carriers. While some concerns have been raised about the potential impact these alliances may have on competition, before this year no other single State jurisdiction (setting to one side the general investigations conducted by the European Commission) had stepped in to seriously scrutinize any of these arrangements in a way that might jeopardize the entire endeavor. Thus, the June decision by the Canadian Commissioner of Competition to file an application with Canada's Competition Tribunal opposing the planned United/Continental/Air Canada joint venture in is both novel and possibly portentous. United, Continental and Air Canada had already been working together under the antitrust immunity granted by the U.S. authorities to the Star Alliance. Following the United/Continental merger in early 2010, United/Continental and Air Canada announced plans late last year for enhanced coordination between the companies including a new revenue sharing agreement. It is this latest joint effort to which the Commissioner of Competition objects. Air Canada and United/Continental filed their responses to the Commissioner's application earlier this month. A few days ago Air Canada competitor WestJet filed a request to intervene in opposition to the alliance. Those interested in following the case can do so at the Competition Tribunal's website (available here). Over the coming weeks the blog will contain further analysis of the opposing briefs and any new developments in the case.
August 25, 2011
Hurricanes and Regulations
Many of the major domestic carriers will waive specified fees and rules attached to rebooking or changing flights for customers whose travel plans are likely to be impacted by Hurricane Irene. See Ben Mutzabaugh, Airlines Waive Fees, Rules Ahead of Hurricane Irene, USA Today Travel, Aug. 25, 2011 (available here). This is fairly common in the industry for severe weather events and only seemed worth mentioning in light of yesterday's post on the new passenger protection rules. For those who view the DOT's regulations as unnecessary and burdensome, this serves as a timely example of a passenger-friendly accommodation offered by airlines without the need for regulatory prompting. Those that welcome the passenger protection regulations are likely to counter that the airlines might have avoided government involvement had they been more proactive about adopting common sense measures such as this to respond to customer inconvenience.
August 24, 2011
New Passenger Protection Rules Expand Reach of Existing Rules and Increase Fines
As a follow up to yesterday's post, here is an expanded description of the new DOT rules that just took effect. The main takeaway is that these new restrictions do little to regulate the airline industry in new ways, but instead apply existing regulations to previously unaffected entities and increase the penalties for violating certain regulations. Broken down by category, here are the changes:
Expansions of existing regulations
- The required compensation for lost, damaged or delayed luggage must now include a refund of any baggage fees paid on the affected luggage.
- Airlines must now disclose all optional fees on their web sites.
- The three-hour limit on tarmac delays for domestic flights now applies to flights at small-hub and non-hub airports.
- The four-hour limit on tarmac delays for international flights now applies to foreign carriers (mentioned in yesterday's post).
Fine increases for violating existing regulations
- Passengers who are bumped and delayed for a short time will now be entitled to compensation equal to double the price of their one-way ticket, up to $650. Previously the compensation had only been equal to the price of the ticket and capped at $400.
- Bumped passengers who experience longer delays will now be entitled to compensation equal to four times the price of their one-way ticket, up to $1,300. Previously the required compensation was for twice the price of the ticket with a limit of $800.
Aside from the potential implications, noted yesterday, of extending the tarmac delay requirements to foreign carriers, these new rules hardly break new ground. Unless one has strong feelings about the optimal penalty amounts opinions of the latest rule are unlikely to be much different than when the DOT first entered this area in late 2009.
August 23, 2011
Newest DOT Passenger Protection Regulations Go Into Effect
The most recent passenger protection regulations, announced earlier this year (covered in an April 20 blog post), are now in effect (DOT press release available here). Notably the DOT has extended the so-called "tarmac delay rules" to international flights by foreign carriers operating at U.S. airports. With the next few months likely to be dominated by discussion of the EU's (legal or aeropolitical) ability to sweep foreign carriers into its carbon emissions trading scheme, the U.S. will need to be prepared to distinguish these latest unilaterally-imposed regulations from any (legal or aeropolitical) objections it makes to the EU scheme.