Thursday, September 26, 2013

Latest on ICAO Emissions Negotiations

Reuters has a report out today describing the latest developments regarding ICAO's efforts to manage aviation emissions. The proposal currently under consideration appears to be a commitment to some form of global market-based-mechanism, the details of which would be drafted and finalized by 2016, and which would take effect beginning in 2020.

According to the report, there remains disagreement about the interim rules on emissions regulation. As has previously been reported, the EU would be permitted to keep its scheme, but only charge allowances to foreign carriers for the portions of flights over the collective territory of EU member states. The United States is reportedly objecting to plans that would exempt many developing countries from the obligation to comply with the EU regulations.

September 26, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 25, 2013

Delta/Virgin Atlantic Joint Venture Receives Antitrust Immunity

The United States Department of Transportation earlier this week issued its final order approving antitrust immunity for Delta Airlines and Virgin Atlantic Airways to engage in a joint venture on routes between North America and the United Kingdom. The agreement between the carriers will include codesharing, proration of fares, lounge access and frequent flier programs. The entire docket regarding this application for antitrust immunity can be found here.  

September 25, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 24, 2013

Ukraine Upgraded to Category 1

The FAA announced last week that a July review found the Ukraine's civil aviation authority to be compliant with ICAO's safety oversight standards and practices, earning the country an upgrade under the FAA's International Aviation Safety Assessment program. Ukraine, which had been classifed as Category 2 since 2005, has been granted Category 1 status. Ukraine does not currently offer service to the United States.

September 24, 2013 | Permalink | Comments (0) | TrackBack (0)

Monday, September 23, 2013

F.A.A. Expected to Revise Portable Electronic Device Policy

The New York Times reports that an F.A.A. aviation rulemaking committee is expected to formulate rule changes later this week that would allow passengers to use electronic devices such as e-readers and tablets during takeoff and landing. Restrictions are likely to remain in place on cell phone and Wi-Fi use. A brief explanation of the current policy can be found here.

 

 

September 23, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, September 12, 2013

Principato to Present Third Annual IALI/Chaddick Lecture

Greg Principato, past president of Airports Council International-North America, will present at the International Aviation Law Institute (IALI) and Chaddick Institute for Metropolitan Development's third annual lecture on October 21 at DePaul University. The title of his speech will be "Trouble on the Tarmac: Redirecting U.S. Aviation Policy to Promote Economic Growth."

Principato served eight years as president of Airports Council International-North America, before stepping down in June 2013. During his 30 plus-year career, he worked on a wide variety of aviation issues. His many achievements include serving as executive director of the 1993 National Airline Commission, helping negotiate a new air service agreement between the United States and Japan, working to develop a new global standard for aircraft noise, and helping negotiate an international airline alliance.

Each year, IALI and Chaddick invite an expert in national aviation policy and advocacy to discuss the role of commercial airports and their impact on U.S. cities and the national transportation network. Past presenters include Christa Fornarotto, the Federal Aviation Administration’s associate administrator for airports, and Professor John Kasarda, author of the book Aerotropolis: The Way We’ll Live Next.

Attendance is by invitation only. For more information, please contact IALI Executive Director Stephen B. Rudolph.

September 12, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 11, 2013

New Filings in US/AMR Merger Case

Late last week the Department of Justice filed an amended complaint against the proposed merger of US Airways and American Airlines. The two carriers have submitted their responses, which are available through the always excellent Airline Biz Blog at Dallas Morning News. Airline Biz Blog is also reporting that the two carriers are seeking to push back the original December 17 date by which they had planned to complete the merger. We'll have more detailed thoughts on the contents of these latest filings later in the week.

September 11, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 10, 2013

Russia, Kyrgyzstan Agree to Add Frequencies

According to ATW Online (subscription only), Russia and Kyrgyzstan are working on an amended bilateral air services agreement that would increase the number of weekly frequencies permitted on flights between Moscow and the Kyrgyz cities of Bishkek and Osh. The new agreement will also reportedly include additional rights for air cargo carriers. 

September 10, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, September 5, 2013

EU Likely to Limit ETS Scope

The reports coming out of yesterday's ICAO Council meeting have been far from conclusive about what to expect with regard to an emissions resolution at the upcoming Assembly session. The most significant development is that the EU has indicated it will amend regulation 101/2008 to only apply to emissions generated in the airspace of EU Member States. This concession is reportedly conditional on the Assembly committing to having a global emissions plan in place by the 2016 Assembly, but it is probably safe to assume that the change will happen. The Assembly will produce some kind of resolution, though the details appear to remain very much up in the air at this late date. The best indications are that there will be some kind of pledge to adopt a plan at the 2016 Assembly meeting that would go into effect in 2020, but the details of that plan will be left open for future discussion. The EU wants the Assembly to commit to a plan that includes marked based measures, while some in the industry are still holding out hope that ICAO representatives refrain from endorsing anything stronger than a scheme involving carbon offsets.

September 5, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 3, 2013

Conflicting Reports on Emissions Standoff Before ICAO Meetings

Bloomberg and Reuters published dueling stories yesterday on the status of emissions talks going into tomorrow's ICAO Council meeting and the triennial assembly later this month. The quotes within the two articles displayed varying levels of optimism regarding what ICAO will be able to accomplish. There were also indications that the EU is willing to permanently amend its emissions trading policies to apply only to Member States' airspace. Hopefully we will know more by the end of tomorrow.

September 3, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, August 30, 2013

Labor Day Weekend Links

Here's what you should know before beginning your three-day weekend:

  • A November 25 trial date has been set for the antitrust challenge to the American/US Airways merger. 
  • More good news for American Airlines: the judge overseeing the carrier's bankruptcy appears willing to confirm its reorganization plan before the antitrust challenge is resolved.
  • The U.S. Department of Transportation has released a show-cause order supporting antitrust immunity for the Delta/Virgin Atlantic joint venture.
  • ICAO has rescinded India's significant safety concern designation.
  • Chilean carrier LAN won a legal dispute with the Argentinian government over use of an airport.

August 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, August 29, 2013

More Reading on Coordinated Effects, Mavericks and the AMR/US Merger

As an addendum to my earlier posts on the concepts of coordinated effects and mavericks as applied to the DOJ's challenge to the American/US merger, I wanted to pass along a 2002 speech by former U.S. Department of Justice Antitrust Division Deputy Assistant Attorney General William J. Kolasky entitled Coordinated Effects in Merger Review: From Dead Frenchmen to Beautiful Minds and Mavericks. The speech provides an excellent overview of both concepts and, though its more than a decade old, it sheds some light on how coordinated effects have been viewed within the agency.

August 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 28, 2013

New Zealand Aggressively Pursuing Open Skies Agreements

CAPA Centre for Aviation posted a very helpful article yesterday describing the extent to which New Zealand has worked to implement its new air transportation policy emphasizing an expansion of open skies agreements, even in cases where the liberalization of traffic rights has not been reciprocal.

August 28, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 27, 2013

All Nippon Becomes First Foreign Carrier to Invest in Myanmar Market

Japanese carrier All Nippon Airways has announced plans to purchase a 49 percent stake in Myanmar-based Asian Wings Airways. It is the first investment in a Myanmar-based carrier by a foreign airline. Asian Wings has been a purely domestic carrier to date, but is scheduled to begin international operations later this year.

August 27, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, August 23, 2013

DOJ, Carriers Commence Antitrust Showdown by Arguing Over Trial Date

Welcome to the redesigned blog! I hope everyone likes the new look.

The top end-of-week story is that American Airlines and US Airways have filed a motion requesting a November 12 start date for their antitrust trial. This is three months earlier than the February start date the DOJ would prefer. The disagreement isn't trivial, as American cannot resolve its bankruptcy proceedings without first settling the merger question. The DOJ, by contrast, wants more time to prepare its arguments. 

 

August 23, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, August 22, 2013

Airline Merger Reading

For those still struggling to understand the DOJ's surprising decision last week to challenge the proposed American/US Airways merger, I'd recommend two white papers from Diana Moss of the American Antitrust Institute. The arguments therein appear to be largely in line with the DOJ's thinking. The titles (with links to ssrn pages) and abstracts are below:

Airline Mergers at a Crossroads: Southwest Airlines and Airtran Airways

The proposed merger of Southwest/AirTran could meet with relatively little antitrust enforcement resistance based on the Department of Justice’s (DOJ) public statements in recent airline mergers. For example, claimed efficiencies are likely to get significant weight. Moreover, concerns over eliminating competition on Southwest/AirTran overlap routes could be mitigated because the number of routes is relatively small, there is rivalry (from low-cost carriers (LCCs) and legacies) on some of those routes, and entry may be relatively easy at some affected airports.

However, the proposed merger of Southwest and AirTran – the first major merger of LCCs – raises novel issues that may not be captured by analysis that focuses mainly on overlaps between the merging partners in city-pair or airport-pair markets. These novel issues include how the merger could potentially result in: (1) a transition from a point-to- point/hybrid system to a hub-and-spoke network model; (2) changes in the two LCCs’ price discounting strategies; (3) changes in entry or expansion patterns in new and existing markets; and (4) changes in short-term output and/or longer-term capacity decisions. These questions deserve attention in an antitrust review of the proposed merger.

For example, combining the Southwest and AirTran systems may stretch the limits of Southwest’s model, pushing the merged company away from a point-to-point or hybrid system and more toward a hub-and-spoke model. If so, then the combined company may be less able to inject the competitive discipline through lower fares, more choice, and entry and expansion than each LCC alone has brought to the industry. With the ranks of the LCCs reduced through a Southwest/AirTran merger, it is also important to consider how effective the rivalry offered by the remaining LCCs will be.

Eliminating AirTran also means removing from the market the second largest LCC (based on its presence as a low fare carrier on top routes) and the source of some of the most aggressive price discounting and market entry. Combining the maverick-like AirTran with Southwest could change incentives for the merged company to discount. And because Southwest and AirTran, as LCCs, are closer competitors to each other than to the legacy airlines, potential post-merger price increases (or smaller discounts) may not be captured by standard market share and concentration analysis.

Finally, post-merger output restrictions and/or capacity reductions are demonstrated effects of airline mergers that have been largely overlooked in antitrust reviews. Not only do they raise fares, but they reduce choice for consumers. Well-publicized cutbacks at Cincinnati after Delta/Northwest and conditions imposed on United/Continental at Cleveland by the state of Ohio indicate the gravity of these effects. Mergers of LCCs should be no exception to an examination of the potential for post-merger output and capacity reductions. This is particularly true if the merger eliminates competition on routes/airports and the carriers are adept at managing capacity – as is the case in Southwest/AirTran.

This White Paper by the American Antitrust Institute (AAI) is the first of what is intended to be a series by the AAI on competition in the U.S. airline industry. It is based on publicly available information – no confidential information was provided to the AAI in the course of preparing this analysis. While we do not make a recommendation as to the legality of the proposed Southwest/Air Tran merger, the paper raises important questions that deserve investigation before a decision is made.  

 

The Proposed Merger of US Airways and American Airlines: The Rush to Closed Airline Systems

Should US Airways make a bid for American Airlines, currently in bankruptcy proceedings, the deal could present a conundrum for antitrust authorities. The transaction would create the largest domestic airline, reducing the number of legacy mega-carriers to three – Delta Air Lines (Delta), United Continental, and US Airways-American Airlines (US Airways-American). This consolidation would occur against an industry backdrop marked by a dwindling fringe of low-cost carriers (LCCs) and growing questions as to whether legacy look-alike Southwest Airlines-AirTran Airways (Southwest) exerts any significant competitive discipline in the industry. The merger could therefore hasten a troubling metamorphosis of the domestic airline industry from one in which hub airports were designed to accommodate multiple, competing airlines to a few large, closed systems that are virtually impermeable to competition and create a hostile environment in which LCCs and regional airlines have difficulty thriving and expanding.

This White Paper, produced jointly by the American Antitrust Institute (AAI) and Business Travel Coalition (BTC), asks: What competitive issues should be the focus of antitrust investigators in reviewing the proposed merger of US Airways and American?

The paper takes the position that a U.S. Department of Justice (DOJ) investigation into the proposed merger of US Airways and American should be informed by mounting evidence on the effects of previous airline mergers, namely Delta-Northwest and United- Continental. The White Paper presents a brief analysis of these combinations and highlights a number of preliminary observations that deserve a more in-depth look. These range from the effects of previous mergers on creating costly post-merger integration problems, substantially reducing rivalry on important routes, producing above-average fare increases, and driving traffic to major hubs and away from smaller communities.

The White Paper continues on to evaluate key competitive issues raised by the proposed merger of US Airways and American that deserve some attention in an antitrust investigation. One is the expected outcome – similar to previous legacy mergers – that the proposed combination could eliminate competition on a number of important overlap routes, creating very high levels of concentration and potential harm to consumers. The risk that the proposed merger could adversely affect small communities through reduced levels of, or lower quality, air service is also worth a close look. Another observation is that the merger is unlikely to be one of complementary networks (as might be argued) and could instead create regional strongholds and solidify US Airways-American’s control over key airports. Any arguments that the merger is necessary to create another “equal-size” competitor to the existing Big 3 systems are also not compelling. The analysis concludes by examining the potential effect of the merger on buyer market power and disclosure of information regarding ancillary service fees.

The joint AAI/BTC White Paper offers a number of concluding observations and recommendations. Among them is that our analysis of the US Airways-American merger– coupled with potential warning signs from previous legacy mergers – indicates that there may be enough smoke surrounding the proposed combination to indicate a potential fire. The merging parties therefore bear a heavy burden is demonstrating that their merger would not be harmful to competition and consumers. 

August 22, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 21, 2013

China, UAE Expand Air Services Under New Agreement

Representatives from China and the United Arab Emirates have reached agreement on new terms governing air transport between them. According to reports the frequencies to and from multiple Chinese cities will be increased and at Haikou, Sanya and Yinchuan frequency limits will be abolished altogether. The agreement is also reported to include fifth freedom traffic rights (along with third and fourth, of course) to be used out of the latter three cities. 

August 21, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 20, 2013

Why Have Airline Emissions Not Received More Attention in the U.S.?

A blog post yesterday from the Huffington Post characterizes the international debate over aviation emissions, fairly I think, as being "under the radar." The subject certainly has not received anywhere close to the amount of attention in the United States that has been devoted to construction of the Keystone pipeline. This is somewhat understandable, as a pipeline offers not only a much more visceral symbol but also a more tangible objective for advocates on both sides of the issue to rally around. Additionally, evidence to date suggests that both the U.S. media and public are only willing to devote a limited amount of bandwidth to the subject of climate change, and that coverage is easily taken up with stories on Keystone and natural disasters. Still, the lack of discussion of the subject in the U.S. has occurred despite the contentious international disagreement over the European Union's emissions trading scheme and the potentially momentous unveiling of ICAO's global emissions reduction proposal next month. This can't entirely be explained by the absence of aviation emissions from the political agenda as both legislative chambers passed a bill barring U.S. carriers from complying with the EU emissions regulation, which the President signed into law.

With much of his legislative agenda stalled in a divided congress, international aviation is one area, like the Keystone pipeline, where President Obama can support measures to combat climate change primarily through executive action. It is true that the current U.S. Senate will not ratify a Kyoto-like agreement on aviation emissions, but the executive branch should be able to assert a large influence on international policy on aviation emissions through more subtle diplomatic channels such as U.S. representation within ICAO and bilateral negotiations with EU officials over the ETS issue. By the end of the year we'll hopefully know a lot more about the administration's actions on both fronts. I'm skeptical, however, that anyone will take notice given how muted the responses from both sides of the political aisle were to the European Union Emissions Trading Scheme Prohibition Act. Regardless of what U.S. policy should be with regard to carbon emissions from international aviation, the issue undoubtedly warrants greater public attention.

August 20, 2013 | Permalink | Comments (0) | TrackBack (0)

Monday, August 19, 2013

Haneda Slots Decision Looms Large

Between the resolution of the DOJ's attempt to block the American Airlines/US Airways merger and the 2013 ICAO Assembly Session, the aviation industry won't be lacking for major developments these next few months. Reuters reminds us of another highly consequential decision scheduled to come down soon: the Japanese government is expected to award 20 additional landing slots at highly congested Haneda airport in October. The distribution of those slots between oneworld member JAL and Star-aligned ANA will obviously be of great interest throughout the industry.    

August 19, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, August 16, 2013

Reactions to DOJ Suit

To close the week, here is a compilation of various commentary and news updates on the DOJ's surprising decision to challenge the American Airlines/US Airways merger:

  • A highly critical take on the DOJ's decision.
  • And a more positive view.
  • Former American Airlines CEO Robert Crandall isn't a fan of the move
  • Loose lips sink planes? The DOJ complaint makes extensive use of quotes from US Airways executives. 
  • A good recap of negotiations leading up to the DOJ announcement.
  • Texas Attorney General Greg Abbott explains why Texas joined the DOJ suit.
  • Some are skeptical about the prospects for a settlement.
  • Lawyers from the two carriers discuss plans to fight the suit.
  • Meanwhile, the judge overseeing American's bankruptcy process postponed his decision on the carrier's reorganization plan with the merger up in the air.
  • A judge has been assigned to the antitrust case.
  • Staffing decisions related to the merger are being put on hold, at least temporarily.
  • Airline stocks prices fell.
  • Finally, this story suggests that American and US are largely the victims of bad timing. I think there's some truth to that. The industry is more consolidated now than when earlier mergers were approved. It is also more profitable. On the government side, the DOJ has had time to witness the consequences and feel some regret over the approval of earlier mergers and to gain comfort with enforcing the new Horizontal Merger Guidelines. Related, though unmentioned in the article, the DOJ's argument about coordination of baggage fees wasn't available for some of the earlier mergers.  

August 16, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday Non-merger Links

It's been a busy news week, so I thought it best to break up the end-of-week aviation link omnibus into two posts. Here's a collection of aviation pieces that may have been missed amidst the merger madness. We'll have a collection of reactions to the DOJ decision posted later this afternoon.

  • Matt Yglesias takes on cabotage restrictions. For a longer analysis, we recommend Robert Hardaway's Of Cabbages and Cabotage.
  • Justin Fox questions the success of U.S. airline deregulation.
  • Is high speed rail hurting Chinese airlines? A good companion piece to last week's story on Chinese flight delays.
  • Ryanair has dismissed the pilot who publicly criticized the carrier's safety practices.
  • More Dreamliner technical glitches.
  • Investigation ongoing into cause of UPS cargo plane crash that killed both pilots earlier this week.

August 16, 2013 | Permalink | Comments (0) | TrackBack (0)