February 3, 2012
House Passes FAA Funding Bill
Earlier today, the House of Congress voted 248-169 in favor of H.R. 658, the FAA Reauthorization and Reform Act.* See Pete Kasperowicz, House Approves First Long-Term FAA Funding Bill in Eight Years, The Hill, Feb. 3, 2012 (available here). We made note of the legislation's key provisions in Wednesday's blog post. The Senate is expected to vote on the measure next week.
*Edited on 2/6/12. The post originally listed the title of the bill as the FAA Air Transportation Modernization and Safety Improvement Act, a title pertaining to previous legislation. The post has been edited to provide the correct title.
Malev Halts Operations
As speculated in Monday's blog post, Hungarian flag carrier Malev has ceased operations. See Hungarian Airline Malev Collapses, BBC, Feb. 3, 2012 (available here). The shut down was prompted by the refusal of airport officials in Tel Aviv to allow a Malev plane to depart without payment. The carrier's desperate financial condition became clear three weeks ago when the European Commission ruled that Malev had been receiving aid from the Hungarian government from 2007-2010 in violation of EU competition law. See European Commission press release available here. Malev was ordered to repay an amount on par with its entire 2010 revenues, demonstrating the degree to which it was reliant on State aid. Earlier this week, the Hungarian government declared Malev a "strategically important company" which temporarily protected it from bankruptcy proceedings. That protection was short-lived, as bankruptcy procedures are now likely to begin. The government has announced plans to compensate or find alternate arrangements for today's stranded passengers along with those holding tickets for flights departing within the next three days. See Nicola Clark & David Jolly, Hungarian National Airline Halts Flights, N.Y. Times, Feb. 3, 2012 (available here). Reportedly, Hungarian low-cost carrier Wizz Air intends to expand operations in the wake of Malev's collapse. In addition, Ryanair has announced plans to establish a base in Budapest, while Deutsche Lufthansa and British Airways are also considering expanding services to Hungary. See Gergo Racz, Airlines Move to Fill Gap in Hungarian Aviation Market, Wall St. J., Feb. 3, 2012 (available here). Malev’s failure comes exactly one week after the demise of Spanair.
February 2, 2012
EUtopia Law Blog Post on CJEU Aviation Emissions Ruling
Blog authors Brian F. Havel and John Mulligan have written a post for EUtopia law, a blog devoted to developments in EU law, about the Court of Justice of the European Union (CJEU) judgment in Case C-366/10 Air Transport Association of America and Others v Secretary of State for Energy and Climate Change. The post, titled Flying too high? Extraterritoriality and the EU Emissions Trading Scheme: the Air Transport Association of America judgment, is available here.
For a more expansive analysis of the judgment, please be sure to look for the authors' forthcoming article in the Spring 2012 issue of Air & Space Law.
January 31, 2012
FAA to Receive Four-Year Funding Extension
House and Senate negotiators have reached agreement on a bill to provide the FAA with $15.9 billion in annual funding for the next four years, for a total of $63 billion. See Lawmakers Agree on a $63 Billion, Four-Year FAA Bill That Boosts Air Traffic Modernization, Associated Press, Jan. 31, 2012 (available here). While the full text of the legislation won't be released until tomorrow, key details have emerged. The NextGen air traffic modernization program will continue to be funded at $1 billion annually. Funding for the Essential Air Services program, which subsidizes air transport services to 150 rural communities, will be reduced to $190 million per year and no new communities will be allowed to enter the program. The key compromise on labor provisions reported last week increases the number of workers within a bargaining unit required to petition for union certification from 35 percent to 50 percent. Labor unions have announced their opposition to the provision, but at this point the bill is expected to pass. See Unions Denounce FAA Spending Bill Compromise, Want Senate to Reject It, Associated Press, Jan. 31, 2012 (available here).
January 30, 2012
Spanair Sign of Things to Come?
Spanair, Spain's fourth-largest airline, abruptly shut down operations on Friday, prompting threats of legal action from the Spanish government concerning the thousands of passengers whose flights were canceled without warning. See Raphael Minder & Nicola Clark, Spain Threatens Fine After Airline's Quick Close, N.Y. Times, Jan. 30, 2012 (available here). Spanair's story typifies numerous trends playing out in the EU aviation market that can be expected to continue throughout the coming year: decreased state investment, increased foreign investment, consolidation and contraction. Spanair's collapse was largely precipitated by the withdrawal of state funding and Qatar Airways' decision not to invest in the Spanish carrier. See Manuel Baigorri, Steve Rothwell & Alex Webb, Spainair Collapse Puts Europe's State-Owned Airlines on Alert for Investors, Bloomberg News, Jan. 30, 2012 (available here). The financial crisis and EU competition rules against state subsidies are combining to leave Europe's less profitable small-to-midsize carriers in financially perilous condition. Spanair's dashed hope for a lifeline from Qatar exemplifies the Gulf carriers' new role as one one of the few viable sources of investment for these carriers, evident last month in Etihad's purchase of a 29 percent stake in Air Berlin. Among Europe's three large carriers IAG has been the most open about exploring takeover opportunities. Such opportunities should be plentiful as SAS, TAP, LOT and Aer Lingus have all reportedly made shares available. Finally, airlines unable to find investors may share Spanair's fate. Hungarian carrier Malev appears likely to be the next airline to follow Spanair and suspend operations. Monday the Hungarian government designated Malev as a strategically important company, a legal move that will prevent creditors from filing bankruptcy proceedings. Malev reportedly has until the end of the week to produce a liquidity management plan. See Gergely Szakacs, Hungary's Malev Airline Runs Out of Cash, Reuters, Jan. 30, 2012 (available here).