Monday, June 27, 2011

Foreign Plaintiffs, Forum Non

Blog readers interested in a preview from the latest volume of the International Aviation Law Institute's journal, Issues in Aviation Law and Policy, can download a copy of Allan I. Mendelsohn's article, Foreign Plaintiffs, Forum Non Conveniens, and the 1999 Montreal Convention (available here).

June 27, 2011 | Permalink | Comments (0) | TrackBack (0)

Sunday, June 26, 2011

China Goes to the Next Level

In an effort to strong-arm the European Union into granting Chinese air carriers an exemption from the Union's Emissions Trading Scheme, the Chinese Government has blocked a $3.8 billion Hong Kong Airlines order for 10 Airbus aircraft.  See Pilita Clark, China Blocks Billion-Dollar Airbus Order, Fin. Times, June 24, 2011 (available here).  While the move is not enough to seriously impact Airbus's financial position, other States may follow suit unless the EU makes compromises on the applicability of the ETS to third-country carriers.

June 26, 2011 | Permalink | Comments (0) | TrackBack (0)

Thursday, June 23, 2011

U.S. Issues Formal Objection to ETS

As expected, the United States registered its formal objection to the European Union's plans to apply its Emissions Trading Scheme to American air carriers in 2012.  See Pilita Clark, US Rejects EU Emissions Zone, Fin. Times, June 22, 2011 (available here).  According to the Financial Times, the U.S. Department of State and other agencies set forth a series of questions with the intent of finding a way to exempt U.S. airlines from the ETS regulation.  So far, however, the EU appears to be standing by its decision to only exempt foreign carriers from countries which have emissions measures which are equivalent to the ETS.

It remains to be seen just what "equivalent measures" the U.S. or other countries would have to devise to satisfy EU regulators.  Would the U.S., for instance, have to devise a cap-and-trade system for the airlines with emissions-reduction benchmarks identical to those set forth in the EU's legislation?  If the U.S. is afforded latitude to apply a less onerous standard, how far can it dial the regulation down before it is no longer "equivalent"?   

June 23, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, June 20, 2011

Consolidation and Rationalization

Blog readers may be interested in Antigoni Lykotrafiti's working paper, Consolidation and Rationalization in the Transatlantic Air Transport Market--Prospects and Challenges for Competition and Consumer Welfare (TILEC Discussion Paper No. 2011-033, June 20, 2011) (available from SSRN here).  From the abstract:

The Discussion Paper examines the regulation of the air transport sector from the perspective of competition law, focusing specifically on EU-US air transport relations. Emphasis is placed on the ongoing negotiations between Europe and the United States for the creation of a transatlantic open aviation area, where American and European airlines will operate freely without restrictions on traffic rights, subject solely to common rules agreed between the parties. In 2007, the first-ever EU-US Air Transport Agreement was reached, followed, in 2010, by a second-stage agreement. All efforts are now concentrated on the conclusion of the final agreement. Given that the transatlantic air transport market accounts for almost 60% of world traffic, the conclusion of the final agreement will signal the creation of the biggest liberalized airspace in the world. The prospects and challenges thereof are expected to be major and are examined from the perspective of the consumers, the airline industry and the law itself. The first part of the paper is a flight into the past, tracing the regulation of air transport from the birth of civil aviation up until today. The second part is a flight into the future, aspiring to foresee how smooth or turbulent the transition to the new regime is going to be. Given that the successful application of the final agreement is dependent upon effective regulatory cooperation aimed ultimately at regulatory convergence, the analysis looks into the prospects and challenges associated with regulatory convergence at both sector-specific and general competition law level.

June 20, 2011 | Permalink | Comments (0) | TrackBack (0)

Friday, June 17, 2011

Opposition to EU ETS Continues

The full-court press against the European Union's plans to bring non-Union airlines under its Emissions Trading Scheme in 2012 is underway.  According to several news outlets, the United States plans to issue a formal objection to the ETS at the upcoming meeting of the Joint Committee established by the 2007 U.S./EU Air Transport Agreement.  See Daniel Michaels, Airline-Emissions Plan Draws U.S. Fire, Wall St. J., June 17, 2011 (available here).  Thus far, the EU claims it will not back down from the controversial (and possibly illegal) regulation.

A number of other States, including China and Russia, have publicly criticized the proposal and suggested that they would take retaliatory measures unless their respective airlines are exempted from the system.  Meanwhile, several U.S. airlines will have their legal challenge to the regulation heard by the European Court of Justice early next month.  While it is perilous to predict how the ECJ will rule, it's no secret that the Court has seldom curtailed the European Commission's ever-expanding custody of the Union's external aviation law and policy.  Should the ECJ let the ETS stand in its present form, the U.S. and other States could still attempt to leverage dispute settlement provisions in their respective air services agreements with the EU to win regulatory forebearance.  Alternatively, or in addition, they could bring a formal complaint before the International Civil Aviation Organization. 

Even if all of the formal challenges to the ETS fail, the EU (and its airlines) will still have to reckon with the aeropolitical costs.  Few, if any, of the objecting States are likely to welcome future EU overtures for new rounds of aviation trade talks until the ETS issue is settled.  More importantly, countries such as China and Russia, which have never been shy about threatening to erect trade barriers to win concessions on a host of geopolitical and economic issues, could use the ETS as a pretext for ratcheting back the already restrictive market access rights they provide to EU airlines.  The U.S. could follow suit, though given the fact that all of its major airlines are currently integrated into complex alliances with EU carriers, it's unlikely the U.S. would take any strong action which might jeopardize those relationships.  Still, it is not out of the question that the U.S. could target airlines or other EU industrial sectors in an effort to divert the Union from its present regulatory course.

June 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 15, 2011

Word of the Day

Mark Giagrandi, one of the Research Librarians at DePaul University College of Law, brought to our attention a blog post by The Atlantic's Alex Madrigal on "15 New Words From the 1927 Webster's International Dictionary."  What was one of the words?

airplane, n: A form of aircraft, heavier than air, which is driven through the air by a screw propeller, and which obtains support by the dynamic reaction of the air against the wings.Airplane is commonly used to designate airplanes with landing gear suited to operation from the land. If the landing gear is suited to operation from the water, the specific term seaplane is generally used. Cf. SEAPLANE, below. Airplanes are classified as monoplanes, biplanes, triplanes, quadruplanes, or multiplanes, according to the number of parts into which their main supporting surface is divided. The form airplane has been officially adopted by the United States Army and Navy, Bureau of Standards, etc.; aëroplane is still generally used by British writers.

June 15, 2011 | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 14, 2011

AEA Attacks ETS

Ulrich Schulte-Strathaus, Secretary General of the Association of European Airlines, issued a strongly worded rejoinder in today's Financial Times in response to the paper's June 7 editorial supporting the expansion of the European Union's Emissions Trading Scheme to aviation.  See Ulrich Shulte-Strathaus, Airlines' Concerns Over EU ETS, Fin. Times, June 14, 2011 (available here).  According to Schulte-Strathaus, the ETS will cost EU airlines approximately 3.5 billion euro per year and that the revenues captured from the plan to auction a percentage of the airlines' carbon allowances won't be reinvested to mitigate climate change.  Also of concern to the EU airlines are the tensions the ETS plan is creating with foreign countries. 

The United States and China have been vocal in their objection to the application of the ETS to their respective air carriers.  Though neither has committed to a concrete course of action thus far, both States have indicated that they may seek retaliatory measures against EU airlines unless the Union is willing to limit the scope of the ETS.  Several U.S. airlines, acting in concert with the Air Transport Association, are attempting to challenge the legality of the ETS regulation before the European Court of Justice.  If that action fails, there will be considerable preassure on the U.S. Government to take strong action to protect the commercial interests of American carriers, up to and including revoking the market access privileges of EU airlines.  The result could be a financially destructive trade war that unravels the manifest consumer benefits of the landmark 2007 U.S./EU Air Transport Agreement.  Moreover, China--which has long resisted any encroachment on its sovereignty--could take similar action.  If so, Europe's airlines will find themselves facing economic bombardment on two fronts--battles from which they won't escape unscathed.

June 14, 2011 | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 7, 2011

Canada Clarifies "Control"

The Canadian Transportation Agency has issued an official Interpretation Note on the criteria it will apply when determining whether or not an airline is "controlled in fact" by Canadian citizens for the purposes of acquiring operating authorization.  The full note is available online here.

Not surprisingly, the criteria is open-ended, vague, and highly impressionistic.  For instance, the note states that "[c]ontrol in fact depends upon the facts of each situation and so can only be evaluated on a case-by-case basis. As each case is unique, all managerial, financial and operational air carrier relationships, or proposed relationships, must be considered before making a determination."  Further, despite providing a "list of factors" the CTA will consider in its control analysis, the note adds an important caveat that the list provided "is not exhaustive."  As such, almost any foreign involvement in a Canadian carrier remains subject to government fiat.

June 7, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, June 6, 2011

Short-Term Liquidity and Capacity Constraints

Blog readers may be interested in Matthew Gustafson et al.'s working paper, The Effect of Short-Term Liquidity and Capacity Constraints on Industry Cooperation (Mar. 16, 2011) (available from SSRN here). From the abstract:

A recent $1.7 billion anti-trust settlement makes the airline industry a natural setting to analyze how short-term liquidity and capacity considerations affect a firm's decision to cooperate. To this end, we employ a unique dataset of aggregate airfare rate increases and provide novel empirical evidence on how firms in the airline industry appear to cooperate. Specifically, we use the peculiar mechanism by which airlines perform aggregate price increases to argue that these rate hikes represent attempted cooperation. This allows us to investigate how liquidity considerations and capacity constraints affect the cooperation decision. In line with anecdotal evidence, we find that financially constrained airlines are more likely to hike rates. This indicates that as short-term financial health deteriorates firms are more willing to sacrifice long-term reputation and take on increased future litigation risk for cooperation today. In addition, our results support the idea that airlines with low idle capacity levels stand to gain more from cooperation. Finally, we analyze the cooperation decision from the competitor's perspective. We find that competitors with lower idle capacity and worse financial health are more likely to cooperate with the hike leader.

June 6, 2011 | Permalink | Comments (0) | TrackBack (0)

Thursday, June 2, 2011

Economic Self-Flagellation

Though not directly aimed at aviation, Daniel Ikenson's new paper, Economic Self-Flagellation: How U.S. Antidumping Policy Subverts National Export Initiative, Trade Pol'y Analysis, May 31, 2011 (available here), is well worth reading.  From the executive summary:

In January 2010, President Obama announced a goal of doubling U.S. exports in five years. The "National Export Initiative" has since become the centerpiece of the administration's trade policy agenda.

One major oversight of the NEI is its failure to include any sensible reforms to the U.S. antidumping regime. Four out of every five U.S. antidumping measures restrict imports of inputs consumed by downstream U.S. producers in their own production processes. Yet the statute forbids the administering authorities from considering the economic impact of antidumping restrictions on those firms or on the economy at large. Such restrictions raise the costs of production for downstream firms, rendering them less competitive at home and abroad.

June 2, 2011 | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 1, 2011

Cosmopolitanism Cited

Brian F. Havel and Gabriel S. Sanchez's recent article,“Restoring Global Aviation’s Cosmopolitan Mentalité,” 29 B.U. Int'l L.J. 1 (2011), was cited twice by Judge Nicholas Garaufis of the U.S. District Court for the Eastern District of New York in his opinion, European Community v. RJR Nabisco, Inc., 2011 U.S. Dist. LEXIS 51,651 (E.D.N.Y. May 13, 2011).  Readers interested in downloading the article may do so at SSRN here

June 1, 2011 | Permalink | Comments (0) | TrackBack (0)