January 13, 2012
AMR Merger Speculation Heats Up
Though a deal is likely months away multiple news outlets today reported that three entities are considering making a play for AMR. See Gina Chon, Susan Carey & Mike Spector, Rivals Eye American Airlines, Wall St. J., Jan. 13, 2012 (available here). Delta, US Airways and private equity firm TPG Capital are all reportedly evaluating an acquisition of the bankrupt carrier. According to the Wall Street Journal story, Delta believes it can make the concessions necessary for a merger to win approval by U.S. regulators. However, not all analysts believe such a deal could survive antitrust scrutiny and some have suggested that Delta's involvement may be intended to complicate other potential deals. See Mary Schlangenstein, AMR as 'Last Plum' Stirs Interest After Airline Ranks Cut, Bloomberg Business Week, Jan. 13, 2012 (available here). Additionally, a merger with Delta could face difficulties with foreign competition authorities as losing AMR to Delta's SkyTeam alliance would be a serious blow to oneworld, leaving only two viable international alliances. See Doug Cameron, Delta, AMR Might Not Clear Foreign Regulators, Wall St. J. Deal Journal, Jan. 13, 2012 (available here). A merger with US Airways would be a much easier decision for regulators given that US Airways is only the fifth-largest U.S. carrier (Delta is second, AMR third) and does not have any overlapping hubs.
January 12, 2012
EC Finds Hungary Provided Illegal Aid to Malév
Earlier this week the European Commission announced that financing Hungary had provided to its flag carrier, Malév Hungarian Airlines, from 2007-2010 did not comply with the requirements of the Treaty on the Functioning of the European Union (TFEU). See European Commission Press Release, Jan. 9, 2012 (available here). Hungary has been ordered to recover the illegal aid from the airline, estimated to be approximately $350 million. See Kurt Hofmann, EC: Malev Must Pay Back Illegal State Aid, Air Transport World, Jan. 10, 2012 (available here). The aid would not have violated the EU's competition rules had the financing been granted on market terms available to a private carrier, or had the aid been accompanied by a restructuring plan that would have qualified the aid for the rescue and restructuring exemption. Unfortunately for Malév, the EC determined that neither of those conditions was satisfied.
January 11, 2012
India Encouraging Carriers Not to Comply with EU ETS
India, like China, has asked its carriers not to cooperate with EU officials in the collection of emissions data required by the Emissions Trading Scheme (ETS). See India Protests EU Airline Emissions Tax, UPI, Jan. 11, 2012 (available here). One new twist to India's opposition, as contrasted with that of China or the U.S., is that Indian Environment Minister Jayanthi Natarajan, in a letter to EU Commissioner for Climate and Energy Connie Hedegaard, threatened that continued application of the ETS to non-EU carriers could negatively affect future climate change negotiations. Viewed in combination with threats by China to cancel purchases from Airbus and threats from the U.S. to issue retaliatory charges against EU carriers, ETS opponents appear willing to probe any conceivable EU pressure point that might give them the upper hand in this dispute.
January 10, 2012
Survey Shows Increasing Industry Concern Over Regulations
Sabre Airlines Solutions released the results of its bi-annual survey of airline executives earlier today. See Sabre Airlines Solutions Press Release, Jan. 10, 2012 (available here). Executives named Fuel Prices as the top challenge that negatively impacts an airline's business revenues, followed by Government Regulations and Airport/Passenger Security. According to the press release, this is the highest Government Regulations has ever ranked in the survey results, a possible result of the attention given to the expansion of the EU ETS to the aviation sector as well as recent regulatory changes by the U.S. DOT. Concern about government regulations was reportedly highest in Asia-Pacific, Europe, Middle East and Africa.
January 9, 2012
U.S. Considering Retaliatory Measures Against EU
According to an Obama administration official quoted in a Reuters article last week, the administration is considering taking retaliatory measures in response to the EU's imposition of ETS regulations on U.S. carriers. See John Crawley & Andrew Quinn, U.S. Weighs Retaliation Over Europe Aviation Law, Reuters, Jan. 6, 2012 (available here). While more attention has been given to the pending legislation that would prohibit U.S. carriers from complying with the EU scheme, any substantive U.S. response is likely to be carried out by the DOT and Secretary of State, presumably under the authority of International Air Transportation Fair Competitive Practices Act of 1974, currently codified in 49 U.S.C. § 41310. However, that statute applies to discriminatory practices, making its applicability to the EU ETS, which applies equally to all carriers, questionable. Thus, congressional legislation may be a necessary prerequisite to ensure the administration has the proper authority to act before going forward.