Thursday, December 19, 2013
The Bipartisan Budget Act of 2013, also known as the Murray-Ryan bill, has now passed both chambers of the U.S. Congress and will be signed into law by President Obama. The agreement, which increases the Sept. 11 passenger security fee from $2.50 to $5.60 per one-way trip, represents a failure of airlines' recent lobbying efforts on two fronts. First, U.S. airlines have argued, ineffectively it turns out, that air transport taxes are already too high. Perhaps more importantly, the industry has been pushing the idea that all of the various fees associated with air transport amount to taxes by another name. While primarily semantic in nature, the argument is an important one as Republican negotiators made rejection of tax increases a precondition of negotiations. Thus the ability to classify revenue raised from air transport fees as distinct from tax revenues appears to have played a significant role in how the air transport sector came to be chosen as a place from which to derive budget savings.
It wasn't all bad for the airlines as an underreported provision in the legislation repeals a security fee charged directly to carriers instead of to passengers. And of course, there are those who argue airlines are still getting off easy.
Friday, December 13, 2013
Shortly after the Federal Communications Commission, the agency responsible for regulating mobile wireless voice communication, invited public comment on a proposal to permit the use of in-flight mobile wireless service, the Department of Transportation suggested it may use its own regulatory authority over the airline industry to prohibit cell phone usage on consumer protection grounds. The FCC's proposal would only allow cell phones to be used on aircraft equipped with specialized on-board wireless equipment. Carriers would be free to restrict or prohibit phone use as a matter of corporate policy.
The DOT's authority to act in this area is unclear. Presumably the authority to act would derive from 49 U.S.C. § 40101(a)(9) which authorizes the Secretary of Transportation to prevent "unfair, deceptive, predatory or anticompetitive practices in air transportation." That strikes me as quite a reach on the agency's part. Subpart (a)(12) of the same code section directs the Secretary to rely on competition to "decide the variety and quality of ... air transport services." Cell phone usage appears to fit much more clearly under within this latter description.
Even if the DOT concludes it lacks the authority to regulate the use of cell phones, the matter may not end there. Some legislators have introduced a bill that would grant the DOT the authority it needs to ban phone calls in-flight.
Wednesday, December 11, 2013
On Tuesday, the U.S. Supreme Court heard oral arguments in a case concerning the scope of immunity granted to airlines under the Aviation and Transportation Security Act (ATSA). That act shields carriers from civil liability for reports of suspicious activity made to the Transportation Security Administration (TSA). But that immunity does not extend to reports "made with actual knowledge that the disclosure was false, inaccurate, or misleading" or with "reckless disregard as to the truth or falsity of that disclosure."
William Hoeper, a pilot for Air Wisconsin was visibly upset after a failed certification test ended his employment with the airline. He was later that day removed from his return flight by TSA agents after Air Wisconsin reported that Hoeper was armed and unstable. Hoeper successfully sued Air Wisconsin under Colorado law for defamation, infliction of emotional distress and false imprisonment. The question before the court is whether the Wisconsin Airlines' report to the TSA, which appears to have clearly overstated the danger Hoeper represented, satisfies the reckless disregard for the truth standard necessary to pierce Wisconsin Airlines' immunity under the ATSA.
Friday, December 6, 2013
A quick roundup of notable aviation-related developments from around the globe:
- EU adds Nepalese airlines to safety blacklist.
- Russian authorities suspect that pilots in a recent crash may have been flying under fake licenses.
- The LaGuardia landing slots American Airlines agreed to give up as part of its merger approval agreement with the Department of Justice will be purchased by Southwest Airlines and Virgin America.
- Southwest is also ending service to three cities.
- China's declaration of an air defense identification zone over the East China Sea probably warrants its own blog post sometime next week. My initial take is that its implications for civil aviation operations are minor, but this is an interesting demonstration of how air space as a territorial concept, subject to possession and control, remains both important and distinct from how the concept applies to land and sea areas.
- Ongoing U.S. budget negotiations may result in doubling of airline security fees.
Thursday, December 5, 2013
Having had a few days to review Tuesday's oral arguments in Northwest v. Ginsberg, I'm ready to share some initial thoughts. I should begin with a quick overview of the case for anyone who isn't familiar. In 2008 Northwest Airlines informed Ginsberg that he would be denied the privileges accompanying his platinum elite status in the airline's frequent flier program and would lose his accumulated miles because he had abused the program through repeated complaints and requests for upgrades and other compensation. Ginsberg's suit alleging that Northwest actions amounted to a breach of contract was dismissed by the district court, largely because the terms of the frequent flier agreement granted the airline sole discretion over whether a flier's actions warranted expulsion from the program. Ginsberg, had however, put forth an additional claim that Northwest violated the implied covenant of good faith and fair dealing recognized under Minnesota common law. This claim was dismissed by the district court which held that such claims were preempted by the Airline Deregulation Act (ADA). On appeal, the Ninth Circuit overruled the district court and ruled that the ADA did not preempt claims brought under the implied covenant of good faith and fair dealing. It is on this point alone that the Supreme Court heard arguments earlier this week, so there won't be any forthcoming decisions on whether Northwest actually breached its contract or violated an implied covenant. Rather the legal question at issue concerns defining the scope of the ADA's preemptive effect.
The ADA prohibits States from enacting or enforcing laws, regulations or other provisions related to price, routes or services. This issue was last addressed by the Supreme Court in American Airlines v. Wolens, which held that the ADA did not preempt common law contract claims in which a plaintiff is "seeking recovery solely for the airline's alleged breach of it's own self-imposed undertakings."
The first, and easiest conclusion to draw from the oral arguments is that the Supreme Court is likely to issue a reversal of the Ninth Circuit opinion. The Ninth Circuit court attempted to analyze the intent of the ADA, concluding that the law was only intended to preempt the types of direct regulation of prices, routes and services that had been common at the State level prior to the ADA's passage. This conclusion whatever it's merits, is difficult to square with the existing Supreme Court precedent set in Wolens, which ruled the ADA preempted the application of a consumer fraud statute to frequent flier programs because of the resulting effect on airline prices. At oral argument the Supreme Court justices gave no consideration to the Ninth Circuit's narrower interpretation of the ADA's preemptive intent. Instead the justices seemed most concerned with applying the Wolens standard to this case and perhaps articulating a new standard which would arguably broaden the ADA's preemptive effect.
It is that latter question, that is most difficult to predict. What will be the standard for determining ADA preemption going forward? My guess is that it won't be significantly altered from Wolens. Most of the justices, as well as the parties, appeared to agree that implied covenants of good faith and fair dealing would not be preempted if used as merely a tool of contract interpretation within a routine breach of contract claim, but would be preempted in cases where they introduced public policy concerns separate from the terms of the contracting parties' voluntary agreement. Justices Roberts and Breyer sounded the most interested in a new standard with broader preemptive effect. Roberts expressed repeated concern that allowing preemption to be determined on a state-by-state basis depending on whether implied covenants were used as interpretive tools or public policy instruments would undermine the uniformity intended by the ADA. Breyer, who helped create the ADA during his time as counsel for the Senate Judiciary Committee, worried about States' ability to regulate airline prices under the guise of contract law, suggesting that even that area of State law claims left available under Wolens might be too broad.
Finally, despite Wolens and now Ginsberg, there remains a real possibility that this won't be the last time the Supreme Court addresses the ADA's preemptive effect on lawsuits involving frequent flier programs. Multiple justices seemed perplexed by the implications of frequent flier programs' expansion into cross-industry consumer benefits operations, where members can earn and redeem points by using credit cards and hotels unconnected to their use of airline services. The justices sounded inclined to reserve the question as to how far the ADA should be read to preempt claims brought against these programs if they are found to promise contractual benefits more expansive than mere airline price discounts, because the argument was not advanced in Ginsberg's complaint. With a different set of facts, we could be back here again in another ten years.
Wednesday, December 4, 2013
The Supreme Court heard oral arguments in Northwest v. Ginsberg yesterday. At issue is whether the Airline Deregulation Act preempts a passenger's state law claim that the airline violated the implied covenant of good faith and fair dealing. The full transcript of the oral arguments is available here. SCOTUSblog's case file is an excellent source for background reading on the case. Tomorrow we will post our thoughts and reactions to the oral arguments, and perhaps offer a prediction about the eventual ruling.
Monday, December 2, 2013
The big aviation news item over the weekend was last night's unveiling of Amazon's Prime Air concept, which would utilize unmanned aerial vehicles to deliver packages within 30 minutes. In a pleasant surprise, a fair share of the subsequent reporting has been appropriately skeptical regarding the near-term feasibility of such an enterprise. The FAA roadmap for integrating unmanned vehicles into U.S. domestic airspace doesn't currently envision widespread usage by private commercial actors in the near future, beginning instead with adoption on a limited basis by public entities such as police and fire departments. More importantly, the FAA will likely require the first iteration of civilian drones to be remotely piloted, as opposed to the completely autonomous operation Amazon envisions. So why did Amazon begin promoting a new business concept that faces such significant obstacles before its eventual realization? The most intriguing answer I've seen to that question was put forth by NY Magazine's Kevin Roose, who suggested that Amazon was trying to garner popular enthusiasm for the idea in order to increase public pressure on the FAA not to impede progress. Given public queasiness about drones, its possible such a campaign could backfire if that is indeed Amazon's intent. However, Roose is right to observe that UAV regulation is a largely under-the-radar public policy issue that could only benefit from more public attention. If Prime Air helps to generate that attention, then we should be grateful.