April 20, 2012
AMR Unions Back Merger With US Airways
Unions representing American Airlines pilots, flight attendants and ground workers made big news this morning by releasing a joint statement announcing their support for a merger between American, currently in bankruptcy, and US Airways. See Press Release, Allied Pilots Association, Allied Pilots Association, Association of Professional Flight Attendants and Transport Workers Union Join in Support of American Airlines-US Airways Merger, April 20, 2012 (available here). For now, American Airlines' management retains the exclusive right to present a reorganization plan to the bankruptcy court, but if other unsecured creditors side with the unions, the court could begin hearing other plans. See David Koenig and Joshua Freed, US Airways Makes Deals With 3 AMR Unions, Associated Press, April 20, 2012 (available here). In its response, American management characterized the union's statement as an opening salvo before the beginning of the bankruptcy Section 1113 process next week, in which American will attempt to reject and alter its collective bargaining agreements with the unions. See Andrea Ahles, American Responds to Union Support of Possible US Airways Bid, Sky Talk, April 20, 2012 (available here).
April 19, 2012
What Does China's Emissions Reduction Proposal Mean For EU ETS?
EU officials have expressed a willingness to consider whether China's recently announced plans to reduce carbon emissions from aviation could constitute an "equivalent measure" that would exempt Chinese carriers from required participation in the EU ETS. See Barbara Lewis, EU Climate Boss: Studying China's Airline CO2 Plan, Reuters, April 19, 2012 (available here). China is proposing to redirect revenue from an existing passenger tax on international flights to the newly created Civil Aviation Development Foundation, which will be responsible for reducing aviation emissions among other duties. The tax will not be increased, so any claimed emissions reductions from the plan will have to come from the initiatives produced by the Civil Aviation Development Foundation as opposed to a deterrent effect from the tax itself. The authority to exempt carriers from States that adopt equivalent emissions reduction measures is granted by recital 17 of the preamble to Directive 2008/101/EC, the directive that incorporated aviation into the EU Emissions Trading Scheme. The complete text of recital 17 is as follows:
The Community and its Member States should continue to seek an agreement on global measures to reduce greenhouse gas emissions from aviation. The Community scheme may serve as a model for the use of emissions trading worldwide. The Community and its Member States should continue to be in contact with third parties during the implementation of this Directive and to encourage third countries to take equivalent measures. If a third country adopts measures, which have an environmental effect at least equivalent to that of this Directive, to reduce the climate impact of flights to the Community, the Commission should consider the options available in order to provide for optimal interaction between the Community scheme and that country’s measures, after consulting with that country. Emissions trading schemes being developed in third countries are beginning to provide for optimal interaction with the Community scheme in relation to their coverage of aviation. Bilateral arrangements on linking the Community scheme with other trading schemes to form a common scheme or taking account of equivalent measures to avoid double regulation could constitute a step towards global agreement. Where such bilateral arrangements are made, the Commission may amend the types of aviation activities included in the Community scheme, including consequential adjustments to the total quantity of allowances to be issued to aircraft operators.
Because "equivalent measures" has never been defined, this provision has long been identified as one that offers the EU and opposing States some potential flexibility to reach a compromise. However, according to the text, a "third country"such as China would need to adopt measures, "which have an environmental effect at least equivalent to that of" the EU ETS. It is unclear how the EU will determine the environmental effect of China's Civil Aviation Development Foundation without at least some understanding of the emissions-reducing measures the Foundation will produce. In the event that EU officials aren't satisfied that China's proposal will have an equivalent environmental effect, recital 17 indicates that the EC has the option of amending the application of the ETS to China's carriers without exempting them completely, presumably by granting the carriers more allowances free of charge as compensation for China's less-than-equivalent emissions reduction efforts. Such a gesture may not be enough to convince China to drop its complaints against the EU scheme, as those complaints have often been couched in terms of sovereignty and the EU's authority to extend the scheme to Chinese carriers rather than the actual cost of the scheme. Regardless, this will serve as an interesting initial test of whether "equivalent measures" can provide a solution to the current impasse.
April 18, 2012
France-Russia Bilateral Agreement Amended
According to Air Transport World, France and Russia have made an adjustment to the bilateral air services agreement between the two countries. See Polina Borodina, Russia, France Amend Bilateral Agreement, Air Transport World, April 17, 2012 (available here). The agreement had previously allowed only Aeroflot and Air France, SkyTeam partners with a codeshare agreement, to provide service on the route between Paris Orly and Moscow. Each country will now designate one additional carrier to provide competition on the route.
April 17, 2012
An Institutional Defense of Antitrust Immunity for International Airline Alliances
The ongoing international political and legal dispute concerning the European Union’s Emissions Trading Scheme appears to have diverted the public’s attention from the last “great” aviation regulatory controversy: antitrust immunity (ATI) for international airline alliances. Even so, the matter has not been closed among academics, aviation lawyers, and government officials. While some continue to defend alliances on pure economic grounds, arguing that their network benefits far outweigh the alleged cost of shielding them from U.S. antitrust law, many voices continue to condemn these joint ventures, and the Department of Transportation (DOT) immunization authority which makes them possible, on highly conceptual grounds. The first, and perhaps most prevalent track, is to argue that immunized alliances are contrary to a theoretical construct of efficiency, and thus ought to be condemned. The second, and more obscure, track is the legalist critique, i.e., the argument that the DOT has failed to properly interpret and apply the statutory authority which undergirds its immunization powers when reviewing alliance applications. The often unstated premise of this attack is that the DOT, as an administrative agency, ought to be tethered to thick concept of the rule of law which demands interpretive consistency and, perhaps, other canonical reverences when wielding its authority.
In a forthcoming article, An Institutional Defense of Antitrust Immunity for International Airline Alliances, 56 Cath. Univ. Law Review __ (2012), the International Aviation Law Institute’s Senior Research Fellow, Gabriel Sanchez, argues that these conceptual critiques of the DOT’s immunization practices fail to account for institutional variables such as the Department’s epistemic advantages in setting and executing international aviation trade policy; as such they promote an unrealistic (and normatively undesirable) belief that the DOT ought to forego these policy goals in order to maintain some proposed notion of conceptual fidelity—economic or legalistic. Further, the article considers possible reforms to the DOT’s immunization powers and procedures which emanate from these aforementioned critiques and highlights their institutional deficiencies. For example, the idea that the Department of Justice’s Antitrust Division ought to share joint custody over alliance immunization is unattractive because it injects greater uncertainty into the procedures while placing additional drags on aviation trade negations by potentially comprising the longstanding practice of trading ATI for liberal Open Skies accords.
None of this means that ATI is a permanent phenomenon of international air services trade. Should the political winds change radically in the U.S. and public tolerance for immunized alliances change, Congressional reforms to the DOT’s powers would not only be expected, but democratically legitimate as well. However, the chances of this occurring are slim. In the post-World War II era, Congress has consistently demonstrated great deference to the Executive and its agencies in trade matters, furnishing various forms of “fast track” authority to conclude international trade agreements and set sectoral trade policy; public opposition to this political “outsourcing” has been slight. Given that ATI is part and parcel of U.S. aviation trade, the chances of legislative interference in this area remains, for better or worse, slim.
April 16, 2012
Virgin Atlantic Announces Intent to Appeal BMI Decision
Virgin Atlantic Airways indicated it plans to appeal the European Commission's decision to approve IAG's purchase of bmi. See Sir Richard Branson, Why Virgin Will Continue to Fight BA's Anti-competitive Purchase of BMI, The Telegraph, April 14, 2012 (available here). Virgin will need to file its appeal quickly as the sale is expected to take effect later this week. See Virgin Atlantic to Appeal Against BMI Sale to BA, BBC, April 15, 2012 (available here). Should the appeal happen, it would be heard by the Court of Justice for the European Union.