February 17, 2012
Air Australia Grounded
Air Australia has become the third carrier this year to run out of money and halt operations. The airline has issued a release explaining the situation to customers that can be read here. In an illustration of the degree to which liquidity has become a problem for struggling carriers, the decision to suspend flights was apparently made when the carrier was unable to pay for the fuel necessary for its planes to make a return flight from Phuket. See Kristen Gelineau, Aussie Airline Goes Under, Strands 2,000 Passengers, Associated Press, Feb. 17, 2012 (available here). Insolvency and restructuring firm KordaMentha has been appointed administrator of Air Australia to assist the company through what will likely be a sale or liquidation. See KordaMentha Press Release, Feb. 17, 2012 (available here).
February 16, 2012
FCC LightSquared Decision Good News for Aviation
Perhaps the most important consequence of the FAA funding bill was the certainty and stability it provided the FAA, airlines and airports in their efforts to transition from the current radar-based air traffic control system to the forthcoming GPS-based system known as NextGen. We will discuss the funding bill's impact on NextGen in greater detail tomorrow, but first we felt the need to call attention to a separate development from earlier this week of nearly equal importance. On Tuesday, the Federal Communications Commission (FCC) announced it was revoking the conditional authority it had granted the company LightSquared in January 2011 to operate a wireless broadband network over the nation's airwaves. See Edward Wyatt, F.C.C. Bars the Use of Airwaves for a Broadband Plan, N.Y. Times, Feb. 14, 2012 (available here). LightSquared signals were found to interfere with GPS signals used by private companies, the military and the aviation industry. The potential interference caused by LightSquared technology posed major problems for the aviation industry as many current instruments using GPS would have needed to be replaced. Worse, the changes that would have been required before implementing the NextGen system would likely have significantly delayed the project and substantially increased its cost. See Bob Brewin, Leaked FAA Report Adds Fuel to Debate Over LightSquared Broadband Network, Nextgov, July 27, 2011 (available here). While this turn of events was not entirely fair to LightSquared, as fault appears to lie with the design of the affected GPS technology and not LightSquared's network, the FCC understandably concluded that the burden the LightSquared network would impose on various government and private sectors was too great to allow the company to proceed.
February 15, 2012
The Labor Provision Compromise in the FAA Bill
With President Obama's signature on the FAA legislation, the FAA finally received the long-term funding certainty it has lacked over the course of 23 temporary funding extensions and a temporary shutdown last August. The legislative disagreement prompting the August shutdown revolved around the following proposed provision:
Section 903 repeals the rule prescribed by the NMB on May 11, 2010, effective January 1, 2011. In May 2010, the NMB changed standing rules for union elections at airlines and railroads, which counted abstentions as votes ‘‘against’’ unionizing, to the current rule which counts only no votes as ‘‘against’’ unionizing, abstentions do not count either way.
For background, the Railway Labor Act (RLA), which governs labor-management relations for railways and airlines, assigns the National Mediation Board (NMB) to oversee those relations and settle disputes over union elections and certifications. On May 11, 2010, the NMB announced a new rule, that going forward it would certify unions where the majority of the voting employees voted to establish a union, as opposed to its previous stance where it had required a majority of eligible employees (including the employees that did not vote) to vote in favor of union establishment. Essentially, employees who had abstained from voting were previously counted as votes against union formation, and were now left out of the final count. As this rule change makes union formation considerably easier, airlines were predictably opposed to the change. On their behalf the Air Transport Association (now Airlines for America) filed suit challenging the new rule. ATA argued that the NMB's new rule violated Section 2, Fourth of the RLA “The majority of any craft or class of employees shall have the right to determine who shall be the representative of the craft or class for the purposes of this [Act].” See 45 U.S.C. § 152, Fourth (available here). However, the D.C. District Court and D.C. Appeals Court both upheld the NMB's ruling on the grounds that the quoted section of the RLA did not clearly and unambiguously indicate that the majority of any craft or class referred to the majority of employees eligible to vote as opposed to the majority of employees that actually vote. See Air Transport Ass'n of America, Inc., v. National Mediation Bd., 719 F.Supp.2d 26, D.D.C. 2010 (available here); Air Transport Ass'n of America, Inc., v. National Mediation Bd., 663 F.3d 476, C.A.D.C. 2011 (available here). The failure of the court challenges prompted Republican legislators, presumably representing the interests of the airline industry, to seek to overturn the rule change by statute as proposed above. Democratic legislators, representing labor interests, refused. To avoid further delays to an FAA funding bill the parties compromised by removing the provision, adding the following language in its stead:
The conference committee agreed to amend title I of the Railway Labor Act by inserting after section 10 that the Mediation Board has authority from time to time to make, amend, and rescind, in the manner prescribed by section 553 of title 5, United States Code and after opportunity for a public hearing, such rules and regulations as may be necessary to carry out the provisions of this Act.
The conference committee agreed to amend Paragraph Nine of section 2 of the Railway Labor Act to require that in any runoff election for which there are 3 or more options (including the option of not being represented by any labor organization) on the ballot and no such option receives a majority of the valid votes cast, the Mediation Board shall arrange for a second election between the options receiving the largest and the second largest number of votes.
The conference committee agreed to amend section 2 of the Railway Labor Act by raising the showing of interest threshold for elections to not less than fifty percent of the employees in the craft or class.
The first paragraph alters the NMB's process by which it creates new rules for settling disputes under the RLA, so that any new rules are subject to a public hearing. This brings NMB rule-making more in line with that of other agencies as outlined in 5 U.S.C. § 153. The second paragraph merely adds more detailed procedure for runoff elections. It is the third paragraph that contains the compromise on the part of Democratic legislators and has provoked the ire of labor unions. See Greg Sargent, Unions Set to Blast Dems for Selling Out on FAA Reauthorization, Wash. Post, Jan. 30, 2012 (available here). However, the Transportation Workers Union has reportedly declared the compromise acceptable for the purposes of securing funding certainty for the FAA. See Keith Laing, Transportation Union Blesses Deal on FAA, The Hill, Jan. 23, 2012 (available here). Previously, organizers had to obtain signatures from 35% of the employees in order to hold a union election. The new provision will require signatures from 50% of the employees, a much tougher threshold to meet. The most likely result of the compromise is less union elections, but the elections that are called are much more likely to result in union certification.
All block quotes come from the H.R. 658 Conference Report available here.
Edited for grammar 2/16/12.
February 14, 2012
Obama Signs FAA Bill
President Obama has signed the four-year, $63.6 billion FAA funding bill into law. See Keith Laing, Obama Signs $63B FAA Funding Bill Into Law, The Hill, Feb. 14, 2012 (available here).
February 13, 2012
President's 2013 Budget Includes Higher Aviation Fees
The White House has released its 2013 budget request, and while the proposals are unlikely to become law this year, it's worth highlighting a few aviation-related provisions. The Obama administration is proposing a $100 departure fee for airlines and business jets to help fund air traffic control. Additionally, the budget proposes increasing the security screening fees added to passenger tickets to a minimum of $5 in 2013, with a $.50 annual increase for the next five years, and authorizing the Secretary of Homeland Security to adjust the fee, currently set by statute, through regulation. According to the Budget document, the current fee structure only brings in 43% of revenue needed to cover security measures. The Budget request also cuts grant funding to large and medium airports by $926 million, but compensates the larger airports by granting them the flexibility to secure funding through higher passenger facility charges. These proposals are found on pages 30 and 160 of the Fiscal Year 2013 (available here).
Again, none of these proposals are likely to receive consideration by Congress. Aviation-related spending for the near future is primarily a settled issue given the recent passage of a four-year FAA funding bill. Budget documents can nonetheless provide useful insight into administration priorities, and airlines and airports will probably register at least mild criticism of the fee proposals over the next few days.