Friday, June 29, 2007

2007-2009 China Route Proceeding - Too Much Too Soon?

2007-2009 China Route Proceeding

On June 21, the U.S. DOT set out the procedures it would follow in the "2007/2008/2009 U.S.-China Air Services and Combination Frequency Allocation Proceeding."  For the 2007 part of the case the DOT has tentatively determined that the new designation will go to a combination carrier and that the newly designated carrier will be given the seven combination frequencies up for allocation.  The front-runner for this award is Delta which has already announced that it will file for Atlanta-Shanghai service.  United may have a strong case for the 2008 award for seven combination frequencies for nonstop service between the U.S. and Guangzhou as it has already made its argument for San Francisco-Guangzhou service in a previous route proceeding.  As many airlines are currently arguing in the proceeding, it seems a bit premature to dole out the 2009 awards as part of the current proceeding, as the market may change a great deal between when the awards are made and when a carrier actually begins operations on that route.  Click here for the order instituting the proceeding.  The following is a Wall Street Journal article discussing the route case Download wsj_delta_is_leading_contender.doc.

Ryanair-Aer Lingus Merger Blocked By EU Competition Authorities

This week the European Commission formally blocked the proposed merger between Ryanair and Aer Lingus.  The Commission stated that the combination would harm consumers and be anti-competitive.  The combined carrier would have a monopoly on 22 routes and a dominant position (a market share greater than 60%) on 13 more routes.  The merger would have reduced consumer choice and would have led to higher prices for the more than 14 million passengers in the EU using these routes to and from Ireland each year.  The Commission also deemed Ryanair's offer of remedies to be inadequate because the amount of slots given up would not lead to meaningful competition.  To read the Commission press release click here and for the Commission Q and A memo click here.   For a Ryanair press release announcing that the carrier would appeal the decision and giving reasons for the appeal click here.

First Antitrust Immunity Filing Under New U.S.-EU Agreement

SkyTeam carriers Air France, Alitalia, CSA Czech Airlines, Delta Air Lines, KLM and Northwest Airlines recently filed an application with the DOT seeking antitrust immunity on transatlantic routings.  The carriers withdrew a similar application in January 2006 after the DOT indicated that they would reject the application.  Now that the new U.S.-EU open skies agreement is in effect, it will be interesting to see if the DOT softens its objections to granting antitrust immunity to an agreement involving two U.S. carriers. Here is a Wall St. Journal article discussing the application Download wsj_airlines_seek_u.S. Clearance.docClick here for the actual filing the carriers made with the DOT.

Labor Issues Roundup

Airline labor relations garnered a great deal of news coverage this week.  Northwest has had many canceled flights and disruptions to its operations due to the failure of its pilots to work beyond the amount required by their contract (the contract maximum is 90 hours per month while the FAA allows up to 100 hours).  The union denies that there is a sickout taking place.  A USA Today article discusses the problems at NWA.  There was also an amendment added to the FAA reauthorization bill that would allow FedEx workers to unionize under the National Labor Relations Act instead of the Railway Labor Act.  A Memphis Commercial Appeal article discusses the amendment.  Finally, according to a press release from SkyWest, a federal district court in California refused ALPA's request to ban SkyWest from funding its in-house pilots union (the SkyWest Airlines Pilot Association). See the full court decision here.

EU Adds to Blacklist

The EU added all 51 Indonesian carriers to the list of airlines that are prohibited from flying to the European Union.  In addition, new carriers from Russia, the Ukraine, and Angola were added to the list.   The EU will now allow Pakistan International Airlines to conduct operations to the EU with B-747 and Airbus A-310 aircraft in addition to the B-777 operations that were already approved.  Click here for AP article discussing changes to the blacklist.

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