Friday, March 30, 2012
European Commission regulators have approved IAG's acquisition of bmi from Lufthansa, subject to certain conditions. See Alessandro Torello & Matthew Curtin, EU OKs IAG's Proposed Buy of bmi, Subject to Conditions, Wall St. J., March 30, 2012 (available here). IAG will need to surrender 14 daily slot pairs at Heathrow airport and agree to carry connecting passengers for the long-haul flights of other airlines operating out of Heathrow. The deal will give IAG control over a majority of the slots at Heathrow, which is especially important in light of the airport's capacity constraints.
Thursday, March 29, 2012
The recent incident involving a JetBlue pilot has prompted scrutiny of the medical requirements pilots must satisfy to retain their licenses. The rarity of such incidents suggests that regulations requiring evaluation by a mental health professional would be overkill. Today's Washington Post provides a good summary of the subject. See Alan Levin, JetBlue Pilot's Meltdown Raises Questions About FAA Mental-Health Screenings, Washington Post, March 29, 2012 (available here).
Wednesday, March 28, 2012
Air France-KLM has ended direct flights to the Philippines, becoming the final European carrier to do so. See Air France-KLM Cuts Last Direct Flight Connecting Manila With Europe, Citing High Taxes, Associated Press, March 26, 2012 (available here). The airline announced last October that it would be ending service if airline taxes were not reduced. See Aviation Law Prof Blog, Oct. 20, 2012 (available here).
Saturday, March 24, 2012
Friday, March 23, 2012
Yesterday, Advocate General Yves Bot of the Court of Justice for the European Union (CJEU) delivered his opinion in Case C-12/11, Denise McDonagh v Ryanair Ltd. The case pertains to the disruption of air service caused by the eruption of an Iceland's Eyjafjallajökull volcano in April 2010. Denise McDonagh's Ryanair return flight to Ireland was canceled and she was stranded for a week during the ash cloud crisis. McDonagh brought a claim against Ryanair in the Dublin Metropolitan District Court alleging that Ryanair failed to provide her with care, in particular meals and hotel accommodations, while she was stranded, as required by Articles 5 and 9 of EC Regulation No 261/2004. The Dublin Court referred the case to the CJEU to consider whether the unusual nature of the circumstances, namely the volcanic eruption, exempted Ryanair from having to provide care in this situation, whether the regulation contains an implied limitation on the amount of care Ryanair needed to provide, and if there were no exemption or limitation, whether the regulation was in violation of the principles of proportionality or non-discrimination, or the principle of equitable balance of interests enshrined in the Montreal Convention, and thereby invalid. Advocate General Bot's opinion finds in McDonagh's favor on all counts. According to the opinion, the regulation explicitly exempts carriers from the requirement to provide compensation but still requires them to provide care when cancellations are caused by "extraordinary circumstances," and a volcanic eruption clearly falls within the definition of "extraordinary circumstances." The opinion also neglects to read into the regulation any implied limitation into the duty to provide care. Both of these readings of the regulation are difficult to argue with. The opinion doesn't find the regulations to violate any of the principles in question, rebuffing the claims about proportionality by reference to carriers' ability to pass costs on to consumers through ticket prices, and citing a prior case, Case C‑344/04 IATA and ELFAA  ECR I-403, where the court had previously dismissed arguments against the regulation on the grounds of non-discrimination or the Montreal Convention. It is worth noting that EC officials are contemplating changes to the regulation that would limit carriers' liability to provide care, suggesting that the Advocate General's interpretation of the existing regulation is correct, but that Ryanair has a legitimate argument that liability should be limited. See Rose Jacobs and Joshua Chaffin, Ryanair Set Back in Volcanic Ash Case, Financial Times, March 22, 2012 (available here). The Advocate General's opinion is not binding, but full court judgments typically hew closely to Advocate General opinions. Those who wish to read the Advocate General's opinion can do so here.
Blog readers interested in a brief, on-target overview of the state of the European aviation market would be well-served by this piece in yesterday's Financial Times. See Tony Barber, Europe's Airline Brew Must Find a Way to Lose Some Froth, Financial Times, March, 22, 2012 (available here).
Thursday, March 22, 2012
The European Union and Israel have completed a comprehensive aviation agreement that will replace the current bilateral air services agreements between Israel and EU Member States. See Press Release, European Commission, EU-Israel Aviation Agreement: Israel Joins Europe in Aviation, March 22, 2012 (available here). The agreement calls for the gradual opening of markets among EU Member States and Israel so that by 2017 all EU airlines will be able to fly to Israel directly from any point within the EU, Israeli carriers will be able to fly to any airport within the EU, and there will be no restrictions on frequency. Israel will be required to bring its safety, air traffic management, environmental and consumer protection regulations in line with EU standards. The agreement is part of a broader effort by the EU to create a Common Aviation Area with States that are not part of the EU. Comments from Israeli officials last month raised concerns that Israeli carriers and unions might derail an agreement, but those fears appear to have been overblown. See Aviation Law Prof Blog, Feb. 27, 2012 (available here).
Wednesday, March 21, 2012
Earlier this week, UPS reached an agreement to purchase Netherlands-based delivery services company TNT Express. Given the acquisition presumably includes TNT's air cargo services, the deal will need to comply with the ownership and control rules established in Annex of the U.S.-EU Air Transport Agreement. See Air Transport Agreement, Annex 4, U.S.-EU, Apr. 30, 2007, 46 I.L.M. 470 (available here). While this aspect of the deal has to this point gone underreported, a Financial Times article suggests that UPS might sell control of the air operations in order to comply. See Robert Wright & Matthew Steinglass, TNT is Vital Piece in UPS Jigsaw Puzzle, Financial Times, March 19, 2012 (available here).
Tuesday, March 20, 2012
Airport capacity is a serious concern in the United Kingdom, especially following the controversial cancellation of plans to expand Heathrow. See Aviation Law Prof Blog, March 5, 2012 (available here). UK Prime Minister David Cameron touched on alternatives in a recent speech, indicating the idea of building an airport in the Thames estuary, at one time out of favor, will receive serious consideration going forward. See David Cameron Says Aviation Review Will Look at Pros and Cons of Thames Estuary Airport Idea, Daily Mail, March 20, 2012 (available here). The Prime Minister described it as one of multiple options under consideration, but acknowledged that a solution is necessary for what continues to be an extremely contentious issue.
Monday, March 19, 2012
India is set to become the second State to instruct carriers not to comply with European Union officials in regards to the Emissions Trading Scheme. See Anurag Kotoky, India to Ask Airlines to Shun EU Carbon Scheme, Reuters, March 19, 2012 (available here). China was the first State to announce its carriers would not participate. See Aviation Law Prof Blog, Jan. 4, 2012 (available here). According to the report, Indian officials have discussed suspending EU carriers from flying to India and charging exorbitant overflight fees should the dispute escalate. The government official quoted in the Reuters story delivers the most aggressive threats levied against the EU to date, including, "We have lots of measures to take if the EU does not go back on its demands. We have the power of the economy, we are not bleeding as they are," and, "If things continue like this, then European airlines will be forced to avoid flying over India and go over the Indian Ocean and the Bay of Bengal. That's not viable for them. They won't have fuel to do that." While last week brought hopeful updates on the possibility of ICAO brokering a global solution, today's news is a reminder of what is at stake should ICAO fail.
Friday, March 16, 2012
A story from Reuters today provides more details on the four regulatory approaches being considered by ICAO to solve the global impasse over emissions regulation. See Allison Martell, ICAO Sees Difficult Path to Airline Emissions Plan, Reuters, March 16, 2012 (available here). From the article:
The four options being considered are mandatory offsetting of emissions from airlines, mandatory offsetting with some revenue-generating mechanism, and two cap and trade systems. Under one, all aviation emissions could be traded. Under the other, only increases or decreases from an initial emissions baseline could be traded.
The ICAO governing council met on Wednesday, and will reportedly meet again in June to eliminate one or more options. Reconciling the "common but differentiated responsibility" principle that has been a standard feature of international agreements on climate change with non-discrimination provisions within the Chicago Convention, such as Article 11, remains a major sticking point in reaching an agreement.
Thursday, March 15, 2012
The International Aviation Law Institute's journal, Issues in Aviation Law and Policy (IALP), has produced its first-ever special edition. The edition contains transcripts of the first three interviews from the Institute's acclaimed "Conversations with Aviation Leaders" oral history series. The series explores the origins, history and record of U.S. airline deregulation as told through the voices and memories of its participants. To date, there have been five interviews, all of which can be viewed at the Institute's website here. By transcribing these interviews, IALP has turned these valuable conversations into more easily searchable and citeable scholarly resources. Later interviews will be collected in a subsequent special edition next winter. The current edition contains interviews with:
- Michael E. Levine - Distinguished Research Scholar at the New York University School of Law, former Executive Vice President of Marketing and International at Northwest Airlines, and former CEO of New York Air, who was a leading staff member of the Civil Aeronautics Board both before and after the deregulation of the U.S. airline industry.
- Dr. Alfred E. Kahn - Late Robert Julius Thorne Professor of Political Economy, Emeritus, at Cornell University and former Chairman of the Civil Aeronautics Board, known as the "Father of Airline Deregulation."
- Robert L. Crandall - Former CEO of American Airlines, a strong early critic of airline deregulation, whose innovations include the computer reservation system and the first frequent-flyer program.
Wednesday, March 14, 2012
An appellate body of the World Trade Organization (WTO) has issued its report on allegations that Boeing received illegal subsidies in the form of municipal bonds and tax breaks as well as federal contracts, and, as has been typical throughout this dispute, both sides have declared victory. See Tom Miles & Tim Hepher, WTO Upholds Ruling on Boeing Subsidies, Reuters, March 13, 2012 (available here). The ongoing trade dispute between the world's two largest aircraft manufacturers began in 2005 when the United States filed a complaint against the EU alleging illegal subsidies to Airbus. The European Communities responded with a similar complaint against the U.S. for allegedly violating the Agreement on Subsidies and Countervailing Measures (SCM) and GATT 1994 through aid to Boeing. The initial panel report issued March 31, 2011 found Boeing to be the recipient of at least $5.3 in illegal subsidies. Yesterday's appellate body report upheld most of the initial panel's findings, in particular finding that NASA contracts and bonds issued by Wichita, Kansas violated articles of the SCM. The appellate body reduced the overall value of illicit subsidies to between $3 and $4 billion. The U.S. will now have six months to end all subsidies and comply with the ruling, though the issue of compliance will likely lead to further proceedings. An appellate body has already ruled on the allegations of subsidies to Airbus and the two sides are currently arguing over whether Airbus has adequately complied with that ruling. See Aviation Prof Blog, Jan. 16, 2012 (available here). The complete appellate body report along with a summary of key findings can be found here.
Tuesday, March 13, 2012
Aircraft manufacturer Airbus, along with several EU carriers including the three largest, Air France-KLM, IAG and Lufthansa, released letters yesterday urging EU leaders to suspend unilateral action regarding aviation emissions until a global agreement had been reached. See Press Release, Airbus, Stop ETS Trade Conflict, March 12, 2012 (available here). The European Commission, Germany and the UK all responded by insisting the ETS will continue to apply to aviation until ICAO produces an acceptable alternative. See Andrew Parker, Kiran Stacey & Gerrit Weismann, Brussels Rejects Air Industry Move on Carbon, Financial Times, March 13, 2012 (available here). The companies are concerned by the prospect of a trade war arising from the ongoing dispute, citing threats of retaliatory measures from foreign States such as China's recent suspension of $14 billion in Airbus orders. Interestingly, Chinese officials have denied taking any retaliatory action against Airbus and indicated they will not use the dispute to influence aircraft purchases by Chinese carriers. See Airlines Free to Buy EADS Planes, Gulfnews, March 11, 2012 (available here). This detracts somewhat from the tough talk that had been coming out of China, and may indicate that the opposition States are not as eager to play hardball as previously thought. Airbus and the collaborating carriers expressed support for reaching a global aviation emissions solution through ICAO, which would eliminate the possibility of the EU aviation industry being targeted for retaliation. There are conflicting reports about what it will take for EU leaders to back down. The Financial Times report suggests EU leaders do not intend to soften their stance until an adequate ICAO-brokered agreement is firmly in place, but others have suggested that EU resolve is weaker than the rhetoric and that a mere proposal, rather than agreement, will be enough. See Mathew Carr, EU Will Back Down on Airline Carbon After ICAO Plan, SocGen Says, Bloomberg, March 13, 2012 (available here). With ICAO anticipating taking the rest of this year to produce a proposal, as well as most of 2013 to secure agreement from Member States, EU leaders will need to specify what they need to see from ICAO before carriers are forced to pay their 2012 ETS bills next Spring. See Aviation Law Prof Blog, March 2, 2012 (available here).
Monday, March 12, 2012
International Airlines Group (IAG) reportedly offered to relinquish slots at Heathrow airport to expedite regulatory approval of its planned purchase of BMI British Midland, and by doing so extended the deadline for the European Commission to render its initial decision from March 16 to March 30. According to reports, the European Commission is expected to reject the concessions and begin a full competition probe. See Alex Barker & Andrew Parker, IAG Faces Lengthy BMI Takeover Probe, Financial Times, March 12, 2012 (available here). IAG received good news last week when the UK Office of Fair Trading announced it would not conduct a separate review of the transaction. See Press Release, Office of Fair Trading, OFT Statement on IAG/BMI Merger, March 5, 2012 (available here). However, if the EC proceeds with a full review the acquisition will be substantially delayed.
Friday, March 9, 2012
Australia's Qantas has broken off partnership talks with Malaysia Airlines. See Matt O'Sullivan, Qantas Shelves Asia Airline Plan, Sydney Morning Herald, March 10, 2012 (available here). The two companies had been discussing a joint venture to establish a new carrier in Kuala Lumpur. Qantas is eager to establish a larger presence in the fast-growing Asia-Pacific market, but will have to wait to do so after this latest setback.
Wednesday, March 7, 2012
Blog readers might be interested in The Economic Regulation of a European Hub Airport: An Iron Triangle?, by Philippe Villard (available from SSRN here). From the abstract:
This article examines the economic regulation of a hub European airport and the relationship system between actors involved in, or subjected to, this regulation. Studying the case of Aéroports de Paris, it is argued that airport economic regulation is produced by the strong conjunction of interests between the hub airport’s operator, the dominant airline, and public authorities. These three categories of actors form an “iron triangle” framing and shaping the terms of economic regulation to satisfy their interests, and the shift from a cost-plus to a price-cap regulation does not dramatically threaten the maintenance of the triangle. All other actors (nondominant, domestic airlines, and international air carriers) are excluded from the iron triangle even if they remain deeply affected by its decisions. Finally, this article calls for an analytical generalization of this theorization for semiprivatized European hub airports.
Monday, March 5, 2012
Heathrow operator BAA is reportedly considering bringing a legal challenge against the UK Government's opposition to a third runway at the London airport. See Diane Evans, BAA Could Mount Legal Challenge Over Heathrow Runway, TravelMole, March 5, 2012 (available here). The Department for Transportation will release a highly anticipated aviation policy paper later this month, and much of the focus will be on its proposed solutions to the UK's lack of airport capacity. Over the weekend business and union leaders sent a letter to the Sunday Telegraph urging the Government to reconsider plans for a third runway at Heathrow which were scrapped when the current governing coalition came into power. See Government Urged to Allow Airport Expansion, BBC, March 3, 2012 (available here). Should BAA pursue legal action, it is likely to argue that the Government failed to follow due process in ruling out airport expansion without proper consideration and would seek judicial review of the Government's decision.
Friday, March 2, 2012
According to ICAO Secretary General Raymond Benjamin, the organization's governing council has narrowed down to four the list of options under consideration for a global aviation emissions solution, and intends to submit a final proposal by the end of 2012. See Allison Martell and Susan Taylor, U.N. Aviation Body Says Emissions Proposal by Year-end, Reuters, March 2, 2012 (available here). ICAO is under pressure to produce a global agreement for controlling industry emissions to quell the continued controversy over the European Union's extension of its Emissions Trading Scheme to foreign carriers. While the application of the EU scheme to the aviation industry began this year, carriers are not required to pay for their emissions until Spring of 2013, giving ICAO a brief window in which to devise an alternative solution. The above-cited article also quotes Benjamin as saying ICAO intends to press the issue of market liberalization during an upcoming March 2013 conference, and suggests the call for elimination of foreign ownership restrictions is growing louder.
Thursday, March 1, 2012
A new article by blog authors Brian F. Havel and John Q. Mulligan, The Triumph of Politics: Reflections on the Judgment of the Court of Justice of the European Union Validating the Inclusion of Non-EU Airlines in the Emissions Trading Scheme, is now available in the current issue of Air and Space Law, which can be purchased from Kluwer Publishing here. A near-final draft of the article, which critiques the CJEU's judgment in case C-366/10 Air Transport Association of America v Secretary of State for Energy and Climate Change, can be found on SSRN here.