Tuesday, October 8, 2013

New ICAO Council

Last week, as is done every three years, the ICAO general Assembly elected a new Council. This is highly important as the Council sets the policy agenda for the organization. The importance is magnified this time around because the incoming Council will oversee the development of the global emissions plan to be introduced in 2016.

The Council election process is segregated into three tiers, with the first grouping consisting of States of chief importance in air transport. All of the States in this tier retained their place on the Council. The second grouping consists of States which make the largest contribution to the provision of facilities for international civil air navigation (excluding States in tier 1). Norway, Portugal and Venezuela were newly elected in this grouping. The third tier is used to ensure adequate geographic representation of all areas making up the ICAO community. Most of the turnover on the Council occurs within this grouping. This year, Bolivia, Chile, Dominican Republic, Kenya, Libya, Nicaragua, Poland, and United Republic of Tanzania were newly elected within this category.

The full Council, including incumbents and newly elected States, is as follows: Australia, Argentina, Bolivia, Brazil, Burkina Faso, Cameroon, Canada, Chile, China, Dominican Republic, Egypt, France, Germany, India, Italy, Japan, Kenya, Libya, Malaysia, Mexico, Nicaragua, Nigeria, Norway, Poland, Portugal, Republic of Korea, Russian Federation, Saudi Arabia, Singapore, South Africa, Spain, United Arab Emirates, United Kingdom, United Republic of Tanzania, United States, and Venezuela.

October 8, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, October 4, 2013

ICAO Concludes Assembly with Emissions Accord

The ICAO Assembly ratified an emissions agreement on the final day of its triennial meeting. The plan commits ICAO to drafting by 2016 a detailed global market-based-mechanism for limiting carbon emissions from aviation. The MBM would enter into effect starting in 2020. In somewhat of a surprise, ICAO voted not to permit the EU to apply its ETS to foreign airlines, even if limited to the portion of the flight taking place over EU airspace. Legally, the EU has the right to regulate its own airspace, and as such the EU Parliament could choose to ignore ICAO's position on this issue. It is highly unlikely to do so, however, as the rest of the international community clearly does not intend to comply with the EU regime. Next week the blog will provide some more detailed commentary on the results of the 2013 assembly, but for now a summary can be found here

October 4, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 2, 2013

EC May Have to Redraft Flight Time Rules

The European Parliament Transport Committee voted to reject the European Commission's draft rule changes regarding on-duty time limits for pilots and crew. The rules are designed to enhance safety by prohibiting work schedules that lead to dangerous levels of pilot fatigue. The Committee appears to have opposed the draft changes because it felt they weren't strong enough. The proposal will be voted on by the full Parliament later this month. If rejected again, the Commission will have to rewrite the proposed changes or leave the current standards in place.

October 2, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 1, 2013

Texas Drops Out of DOJ Suit Against American/US Airways

Texas, one of six states to join the Department of Justice's complaint against the proposed American Airlines/US Airways merger, has withdrawn from the lawsuit after the carriers agreed to continue existing services to the state's airports. Texas' withdrawal is unlikely to have a significant bearing on the trial.

Also today, the presiding judge has denied the DOJ's request for a postponement due to the federal government shutdown. The DOJ attorneys assigned to the case are now expected to continue working on the case despite the shutdown.


October 1, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, September 27, 2013

EC Calls Out Italy, Cyprus and Greece for Non-compliance with Single European Sky

The European Commission has asked Italy, Cyprus and Greece for an account of their progress toward the establishment of Functional Airspace Blocks (FABs) as required by 2004 legislation designed to create a Single European Sky. The plan is intended to reduce congestion, costs and emissions while increasing efficiency by making air traffic control less fragmented between EU member states. The FABs were supposed to be in place by the end of 2012.

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

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)