Wednesday, November 29, 2006

Takeover Mania and News Roundup

Takeover Mania

Over the past two weeks, the takeover bug appears to have bitten the airline industry hard.  An interesting article from the investing website Motley Fool comments on the Air France-KLM / Alitalia merger talks and on other potential deals in the airline sector.

Below are resources discussing the latest developments regarding each of the proposed takeovers:

AF-KLM / Alitalia Merger Talks

- Business Week article discussing talks’ impact on stock price of AF-KLM

- ATW article stressing exploratory nature of the discussions

- Times Online article discussing political backdrop to talks

- AFX News Limited article discussing Chirac support of talks

Qantas Takeover Talks

- ATW article addressing the Australian government review process for any deal

- The Age article discussing latest developments in negotiations between Qantas and and private equity consortium

US Airways - Delta Proposed Merger

- Houston Chronicle article discussing potential antitrust review of US Airways - Delta combination

- JP Morgan analyst report discussing change in market concentration (HHI) in top 100 markets resulting from US Airways - Delta and other potential domestic US airline mergers

Ryanair Bid For Aer Lingus

- Forbes article discussing Ryanair’s recent decision to up its stake in Aer Lingus to 25%

AA - Allied Pilots Association Dispute Over Potential China Route

According to an AP article today: "American Airlines has recently rebuffed a demand by its pilots’ union to immediately negotiate terms of the carriers’ proposed service between Dallas and China."

EU Emissions Trading Scheme - Impact On US-EU Open Skies Deal

According to a Dow Jones wire story: "The European Union’s plan to include airlines using European airports in its emissions trading scheme could unravel all free-trade benefits currently being negotiated in a U.S. - European air travel deal..."

ECJ Advocate General’s Opinion On Netherlands - US Bilateral

A recent AFX article mentioned that: "A top EU judge [found] that the Dutch government’s aviation agreement with the US runs counter to EU law."

- Full text of Advocate General’s opinion (click on Case C--523/04 when new window opens)

Canadian International Aviation Policy Document

A Globe and Mail story recently noted that: "Ottawa is taking a small step toward allowing more overseas flights to and from Canada, but the big breakthrough for Air Canada to fly point-to-point within the United States may be at least 10 years away."

- Full text of "Blue Sky" policy

EU-Russia Overflight Breakthrough

AFX reported that: "The Finnish EU presidency said the EU and Russia have reached an agreement to abolish the taxes paid to Russia by European airlines flying over Siberia, which cost 330 mln eur in 2006."

NWA - Flight Attendant Union Labor Dispute Appeal

The Minneapolis St. Paul Business Journal reported yesterday that: "Flight attendants at Northwest Airlines Corp. asked a federal appeals court to void a lower court ruling and allow them to strike while they are in contract mediation talks with the airline." We discussed earlier developments in this labor dispute in August and September blog postings.

- NWA Brief

- AFA Brief

DOT Inspector General Review Of Airline Customer Service

According to the USA Today: "The government should crack down on airlines that chronically operate flights late, and force carriers to make their frequent-flier plans more transparent, the official watchdog of at the U.S. Department of Transportation said in a report [last] Wednesday."

- Full text of Inspector General’s report

November 29, 2006 | Permalink | Comments (1) | TrackBack (0)

Friday, November 17, 2006

US Airways-Delta Merger Proposal and News Roundup

US Airways-Delta Merger Proposal

The surprise bid that US Airways launched for Delta this week may mark the beginning of overdue consolidation in the US domestic airline industry.  However, unlike the end-to-end merger of America West and US Airways, we think that the potential for antitrust problems with this merger proposal is much greater.  The largest antitrust problems may be with the airlines’ overall presence in the Southeast (DL hub at ATL, US hub at CLT) and particularly with smaller markets in the Southeast where service is predominately by the two carriers (e.g. Huntsville, Alabama).  Likely there will also need to be some divestiture of shuttle assets in the Northeast as the new Delta would only face American’s RJ operation as competition on these routes.  Given that Delta has exclusivity for presenting a reorganization proposal to the bankruptcy court until February 2007, we would not be surprised to see competing bids for the airline emerge.  Both United and Northwest would make an excellent fit with the Delta route system as each of the carriers are strong in the Pacific, a key weakness of Delta’s international route system (DL is strong in Europe and to a lesser extent Latin America).

AP article discussing merits of plan and antitrust issues

Houston Chronicle article focusing on Doug Parker (US Airways' CEO)

Reuters article on impact on regional airlines

Reuters article on United potentially bidding for Delta

New York Times article outlining deal

UK CAA Report on "No-Frills" Airlines

A report published on November 15 by the UK Civil Aviation Authority examines the impact that no-frills airlines have had on the the airline market, on passengers and on broader society.  One of the most interesting findings of this report is that the annual average rate of growth of short-haul traffic is similar to that before the arrival of no-frills airlines.  The study found that no-frills airlines have simply taken market share away from incumbent carriers.  These findings seem to run contrary to the popular wisdom in Europe that no-frills airlines have had a negative impact on the environment by stimulating new demand for air travel.

Press release about study

Full study

EU Plan To Include Airlines in Emissions Trading Scheme

A leaked draft proposal from the European Commission this week shows that the Commission intends to include aviation in the EU ETS scheme and that the plan would apply to all airline flights arriving or departing the EU.  The official draft proposal is expected before Christmas. discussion

Incoming House Transportation Committee Chair Wants "Rethink" of DOT NPRM on Actual Control of US Air Carriers

On Tuesday, Rep. James Oberstar reaffirmed his opposition to the US DOT’s NPRM on actual control of US air carriers, making it less likely that the DOT will issue a final rule in time for the EU Council of Transport Ministers' meeting in December 2006.

FT Article by Doug Cameron

November 17, 2006 | Permalink | Comments (0) | TrackBack (0)

Friday, November 3, 2006

Prof. Alfred Kahn Oral History Project Interview and News Roundup

Prof. Alfred Kahn Oral History Project Interview

On October 27, staff from the International Aviation Law Institute traveled to Ithaca, New York to interview Prof. Alfred Kahn.  He was the second public interviewee in the Institute’s airline industry oral history project "Conversations With Aviation Leaders."  Kahn, currently the Robert Julius Thorne Professor of Political Economy, Emeritus, at Cornell University, is considered to be the "father" of airline deregulation and presided over the beginning of its implementation as Chairman of the Civil Aeronautics Board from 1977-1978.  As our "Barbara Walters" for this project, Dr. Dorothy Robyn (from the Brattle Group in Washington D.C.) moderated a rollicking discussion about Prof. Kahn’s role in the events, law and public policy issues surrounding the emergence of U.S. airline deregulation in the 1970s.  Even at 89, Prof. Kahn’s insights threatened to exceed the capacity of our videotaping equipment!  We will have a full webcast of the interview posted on the Institute’s website in the next few weeks and will include the link to the webcast in an upcoming blog posting.

FT Article by Dr. Robyn and Alfred Kahn, "The Sky Must Be No Limit To Global Competition"

News Roundup

1) Ryanair Takeover Bid For Aer Lingus

According to a Reuters article by Jodie Ginsberg: "Ireland's Aer Lingus issued a detailed and forthright rejection of a takeover bid by low-cost rival Ryanair on Friday and urged its shareholders to snub an offer valuing it at 1.48 billion euros (990 million pounds)."

2) UK CAA Paper on Airline Ownership and Control

On October 26, the UK CAA published a discussion paper examining the rules governing the ownership and control of airlines.

Link to Press Release

Link to Paper

3) Airline Business Article on GATS

Chris Lyle has an insightful article in the October issue of Airline Business where he argues that working through the GATS may be the only way to achieve a global regulatory framework for air transport.

4) What Pilots Can Teach Hospitals About Patient Safety

This interesting article from Kate Murphy of the New York Times notes that hospitals that adopt cockpit resource management techniques from aviation have fewer malpractice suits.  Additional benefits are a lower rate of post-surgical infections, quicker patient recovery times and increased employee satisfaction.

November 3, 2006 | Permalink | Comments (1) | TrackBack (0)