Aviation Law Prof Blog

China Debuts ARJ21

The Commercial Aircraft Corporation of China (Comac) celebrated today the successful operation of its first regional jet, the ARJ21, by Chengdu Airlines, between Chengdu and Shanghai. The flight represents a significant milestone for the Chinese government, which hopes to see Comac supply a significant share of the fleet for China's domestic aviation market, which is expected to be one of the world's fastest growing markets over the coming decade. More hurdles remain however, as alterations will need to be made before the aircraft can pass certification by U.S. or European authorities necessary for operation in those markets, and Comac remains behind schedule in its development of a larger aircraft suitable for long-haul operations.

Brexit

The consequences of last week's referendum, in which the United Kingdom voted in favor of leaving the European Union, will be a leading source of concern for the European aviation market for the foreseeable future. IATA already has a brief report available on the potential consequences for airline traffic and regulation. Other sources had earlier written about the potential consequences in anticipation of this possibility, and those analyses should prove useful now that the decision to leave has been made. Even when restricting one's examination solely to the consequences for the aviation sector, ignoring knock-on effects from developments in the currency markets or changes to customs policy, the potential complications arising from the referendum are enormous. The following, non-exhaustive list offers some quick thoughts on the most important legal and policy questions that will need to be resolved with regard to aviation:

• Traffic rights with the EU. The immediate assumption since last Thursday's referendum has been that the United Kingdom will want to maintain as much of its existing trade relationships with the EU as possible, but that the EU will be loathe to allow unfettered access to its markets without an agreement that also includes free movement of persons and labor, a concession that is likely to be highly politically problematic for the new UK government. Aviation is one area where an agreement may be reachable despite this impasse, as the EU has been willing to extend the liberal terms consistent with membership in the European Common Aviation Area (ECAA) to even those neighboring States with which the EU still has barriers to immigration. Unrestricted access to the EU market is of fundamental importance to British carriers, particularly EasyJet, which may seek to open European affiliates should European traffic rights be threatened. Of course, the competitive threat posed by British carriers may provoke greater resistance than is typical for expansion of the common aviation market to smaller, less threatening neighbors.
• Traffic rights with the rest of the world (particularly the U.S.). Of nearly equal importance will be the establishment of new Air Services Agreements with those non-EU countries with which the UK had been relying on it's membership in the EU as part of broader, multilateral agreements. The most prominent example being the US-EU Open Skies Agreement. Non-EU States such as Norway, have been allowed to sign on as parties to these agreements, so perhaps the UK's status with regard to these treaties could be reconfirmed relatively unchanged. If, however, a new agreement must be negotiated from scratch, access to Heathrow could reemerge as a source of conflict.
• Ownership and control - Community carrier clause. Perhaps more than even the full grant of all nine freedoms of the air, the creation of the idea of a "community carrier" reflecting the internal abolition of restrictions on airline ownership and control, has been the signature advance enabled by the integration of the European aviation market. British Airways' parent company, IAG, of course also owns Spain's Iberia. Airline ownership groups have grown quite adept in recent years at organizing their holdings to work around the industry's antiquated limits on cross-border ownership, but this is at least one more complication that will require attention.
• Participation in EASA and airworthiness certification. The UK is at present a member of the European Aviation Safety Agency (EASA), which consists of all EU Member States along with Switzerland, Norway, Iceland, and Liechtenstein. This relationship is an integral part of the UK's ability to administer a safe airspace. The UK Civil Aviation Authority relies on EASA's work when issuing airworthiness certificates to aircraft and the UK observes the so-called blacklist EASA produces for foreign carriers that fall short of compliance with international safety standards. Detaching itself from this relationship would require a significant expansion of resources and capacity for UK air safety administration.
• Participation in the Single European Sky (SES). Despite continuous delays, the Single European Sky initiative promises to eventually revolutionize the management and regulation of European airspace. As long as the UK remains in the ECAA, the consequences on SES should be minimized.

Brazil Moves to Allow Greater Foreign Ownership of Airlines

An astute commentator to yesterday's post pointed out that, like India, Brazil has also taken major steps this week toward removing barriers to foreign investment in airlines. A bill that would permit 100% ownership by foreign investors, including foreign airlines, passed Brazil's Chamber of Deputies earlier this week. Reportedly, the permission would be subject to a reciprocity requirement that Brazilian investors are offered the same opportunities.

India Allows Full FDI

Earlier this week, India announced that it will allow businesses in a number of sectors, including airlines,  to be 100 percent foreign-owned, with the caveat that foreign carriers will still not be permitted to own more than 49% of an Indian airline. Foreign investors seeking majority stakes will also have to work around restrictions in air services agreements which typically allow States to deny exercise of traffic rights by carriers with foreign ownership.

Final Small UAS Rule Released

The DOT and FAA announced today the release of the final rule for Small Unmanned Aircraft Systems. We'll provide more commentary tomorrow. The full 624-page rule can be read here. A 3-page summary has also been prepared. As expected, the rule only permits Visual Line-of-Sight operations, and only during daylight and under the 400-feet altitude limit. Commercial operations are permitted, including to transport objects, but are not permitted across State lines. Remote pilots must be at least 16-years old and certified by the FAA, but do not need to have a pilot's license as needed for manned aircraft.

India Removes '5' from '5/20 Rule'

India has finally announced long-anticipated changes to its aviation policy. Significantly, airlines will no longer be required to operate domestically for five years prior to serving international routes, though they still must deploy 20 aircraft or 20 percent of capacity, whichever is higher, on domestic routes. This essentially amends the infamous 5/20 rule, so that fleet size is the only threshold a new airline must cross before expanding to international operations. The change is expected to increase interest and investment by foreign airlines in locally-owned subsidiaries or partnership ventures. Other changes rumored to be under consideration such as privatization of Air India or auctioning of traffic rights are absent from the newly announced policy.

Alberta's Carbon Tax Limited to In-Province Flights

The Canadian province of Alberta will introduce a tax on carbon beginning in 2017. Policy details have emerged over the past few months, and we have now learned how the tax will be applied to aviation. With the likely intention of avoiding the arguments about extraterritoriality that embroiled the EU's attempts to incorporate aviation into its carbon scheme, Alberta has decided to only levy the tax on flights between Albertan cities, such as Calgary to Edmonton. This should eliminate the possibility of a legal challenge from Canadian carriers objecting to being charged for portions of flights over other Canadian provinces, arguments that would mirror those used by the U.S. carriers in their suit against the EU. Foreign airlines will not be affected by the tax at all, given the lack of cabotage rights necessary to fly between two Canadian cities. Alberta has, however, expressed a desire to link its carbon policy with other provinces that adopt similar measures, leaving open the possibility that the tax could eventually apply to flights between Alberta and, for example, British Columbia once its' planned carbon tax is in effect.

India Considering Auctioning Bilateral Rights?

The Modi government in India has been developing a new aviation policy, and while public release of the proposal was thought to be imminent, reports today suggest the release date may have been postponed. The plans are rumored to include a possible elimination of the 5/20 rule, which prohibits Indian carriers from flying internationally without at least 5 prior years of domestic operation and a fleet of at least 20 aircraft. Some form of price cap on tickets is also reportedly under consideration, though the stringency of the cap and mechanism by which it will be effected is unclear. Most interestingly, the delay in the release of the policy is reportedly related to the government's deliberations over the possibility of auctioning off air traffic rights for foreign carriers. This would be a significant departure from existing international practice, by which traffic rights are exchanged through bilateral trade agreements, typically on a reciprocal basis. It is unclear precisely how India's plan would work, presumably the rights would only be made available to carriers from States with which India already has an existing bilateral air services agreement. The International Air Transport Association has expressed reservations about such a plan.

DePaul Alumnus Quoted in NY Times Drone Story

Today's New York Times reports on the increasing number of small businesses offering drone-related services. In addition to providing examples of specific companies such as HoneyComb, which provides drone-operated agricultural monitoring, the article describes the uncertain regulatory landscape in which these businesses must operate. Jeffrey Antonelli, a graduate of DePaul Law School whose practice includes helping small business owners navigate federal laws regarding the operation of unmanned aerial vehicles, is quoted for the story.

Should the U.S. Privatize Airport Security?

While air traffic control privatization was the en vogue idea for reforming U.S. aviation policy for most of the past year, developments over the past few weeks have shifted attention to the growing problem of airport security lines as the country enters the summer travel season. Reports of three-hour waits to pass through security, and stranded passengers have prompted promised improvements from the Transportation Security Administration (T.S.A.), including expedited hiring and increased overtime. These small measures will likely earn the embattled agency little reprieve from mounting criticism on all sides. An undercover investigation last year found airport security screening to be frightfully ineffective at preventing weapons from being smuggled onto aircraft. Meanwhile, the agency has recently been beset by complaints of mismanagement and retaliation against whistle blowers. This backdrop leaves the T.S.A. with a multitude of problems to correct and little outside confidence in the agency's ability to fix everything at once. Opinion pieces have begun to call for replacement of T.S.A. operations with private security screening contractors as is already done at 22 U.S. airports, and even to question the reason for the agency's existence. Congress has been highly critical during hearings into the T.S.A.'s ongoing struggles and even airlines, which have in the past been understandably restrained in vocally complaining about the post 9/11 security apparatus, have encouraged disgruntled passengers to vent their frustration at the agency as opposed to the airlines.

Many of the arguments for privatizing air traffic control apply equally to the T.S.A. As with air traffic control, a conflict of interest exists in that the agency charged with writing and enforcing rules is also responsible for carrying them out, requiring the agency to police itself to a degree. Critics have depicted the T.S.A. as a sprawling, difficult-to-manage bureaucracy, a common argument in privatization fights. For those more inclined to blame Congress than the agency itself, the T.S.A.'s current problems can be attributed to some of the same concerns about unreliable and politicized funding that is raised when it is suggested that air traffic control would benefit if isolated from the general appropriations process. And as with air traffic control, there are many successful foreign examples of alternative models for organizing airport security screening operations. If anything, the argument for privatization might be stronger with respect to airport security, because decision-making could be more localized than is possible with air traffic control. While there has not been any indication yet that congress intends to seriously consider privatizing airport security, if this summer becomes the public relations disaster that the past few weeks portend, it could be the catalyst that makes airport security privatization next year's fashionable aviation policy idea.

Introducing the Value Alliance

Eight low-cost carriers (LCCs) from the Asia Pacific region today announced they have formed value alliance, the world's largest LCC alliance. Value alliance includes Cebu Pacific, Jeju Air, Nok, NokScoot, Scoot, Tigerair Australia, Tigerair Singapore, and Vanilla Air, representing six different countries in the Asia Pacific region. The alliance will reportedly involve code-sharing and combined ticketing and marketing efforts, but not extend to frequent flyer programs or involve coordination on routes or prices. Despite speculation about future mergers in this Bloomberg report, the alliance is intended to operate at a level of integration that would not necessitate regulatory review.  The alliance's primary purpose appears to be to help its members better compete with AirAsia and Jetstar, the two leading LCC franchises in the region.

Kazakhstan Fixes Operator Certificates with ICAO's Help

Today's news highlights the international system working how it is intended. The International Civil Aviation Organization (ICAO), through its Universal Safety Oversight Audit Programme (USOAP), identified failings in Kazakhstan's air operator certification process substantial enough to warrant a Significant Safety Concern (SSC) designation. ICAO brought in a multinational team of experts as part of its No Country Left Behind initiative, and the identified problems have now been declared resolved.

Air New Zealand Settles U.S. Class-action Lawsuit over Price-fixing Allegations

Air New Zealand has agreed to pay $35 million to resolve a class action suit brought by freight forwarding companies accusing a number of global carriers of conspiring on fuel and security charges related to air cargo transport between 2000-2006.

ICAO Kicks Off Crucial Meeting on Emissions Plan

Beginning with a preliminary briefing today, the International Civil Aviation Organization will spend the remainder of the week hosting a high-level meeting to which all contracting States and a number of important environmental and air transport organizations have been invited. The purpose of the meeting is to discuss a draft Assembly Resolution text containing a global Market-Based Measure (MBM) for aviation greenhouse gas emissions in advance of the upcoming 39th session of the ICAO Assembly later this year. ICAO has completed all of its Global Aviation Dialogues (GLADs) soliciting input on the subject from various stakeholders and regions, and this week's meeting is the last major emissions event currently scheduled prior to the Assembly. By the end of the week, we should hopefully know more about the likelihood of there being a meaningful Assembly Resolution vote in October. For now, ICAO has provided a fairly detailed and informative FAQ page on the issue which includes the draft text that will be discussed at this week's meeting.

Spring 2016 Issue of IALP

The Volume 15, Spring 2016 issue of the International Aviation Law Institute's journal, Issues in Aviation Law and Policy (IALP), will be available for purchase at the end of this month. The issue will feature a commentary by Matt Andersson, How Economic History Can Guide Aviation Policy, as well as the following articles:

• John D. Goetz & Sarah L. Thompson, The Trans-Pacific Partnership and Its Effect on International Aviation
  
• Elena Carpanelli, Cooperative Ventures Between Air Carriers: Time to Reform the International Rules?
  
• Jeremy Straub & Joe Vacek, A Liability Model for the Operation of Unmanned Aerial Vehicles
  
• Francesco Gaspari, Aviation and Environmental Protection After the 2015 Paris Agreement: From Regulatory Unilateralism Toward International Cooperation
  
• Andrea Trimarchi, An Analysis of the Grounds of Jurisdiction and Jurisdictional Issues of e-Ticketing in Light of the Warsaw/Montreal System
• Margaret M. Walsh, The Boeing Company and Forum Non Conveniens in the Circuit Court of Cook County, Illinois
  

Information about subscribing to IALP is available through the Institute's web page.

Mexico Approves New Agreements with U.S. and Between Carriers

Cofece, Mexico's competition commission, yesterday approved a proposed joint venture between Aeromexico and Delta. The two airlines seek to collaborate more closely in setting prices, capacity, and schedules, and need assurance that such efforts will not be determined to violate antritrust laws. They are still waiting for the U.S. Department of Transportation (DOT) to grant immunity from U.S. antitrust laws. Cofece has conditioned its approval on the surrender of eight slots at Mexico City Airport.

The Mexican senate has also reportedly ratified the changes to the U.S.- Mexico Air Transport Agreement signed in December.  The Aeromexico-Delta JV could prove an interesting case for the DOT's antitrust immunity process. In prior cases, the DOT has relied heavily on the existence of an Open Skies agreement between the U.S. and the countries being served before granting antitrust immunity to a pending joint venture. The new U.S.-Mexico agreement, while significantly liberalized, falls short of being a full "Open Skies" agreement.

EU Transport Officials Urged to Resolve Gibraltar Airport Dispute

The aviation community is turning to the EU in it's desire for clarity regarding the legal status of Gibraltar airport.

U.S. Looks to Extend Security Reach

Despite the likelihood that the U.S. Congress once again struggles to pass a long-term FAA reauthorization bill in a timely fashion, there is bipartisan support for legislation that would empower the TSA to play a more active role regarding security at non-U.S. airports from which flights operate to the United States. Proposed changes include authorizing the donation of security equipment to foreign airports and requiring the agency to explore inspection agreements with foreign governments. Sovereignty considerations obviously limit the extent to which the United States can dictate the operations of foreign airports, but congress appears determined to remove any internal barriers that could prevent the TSA from taking as active a role in airport security as foreign governments will allow.

Return to CAB Era?

A curious NY Times story from earlier this week, Start-Up Airline Idles on a California Runway, Stymied by Bureaucracy, describes the complaints of a 95 year-old entrepreneur who has been thus far unable to secure an operating certificate for California Pacific Airlines. The slant of the article is extremely sympathetic to the individual, a Mr. Vallas, and clearly implies the blame for his stalled airline lies at the feet of the sluggish F.A.A. bureaucracy. This tone struck me as strange given that the article quotes an F.A.A. letter describing the documentation Mr. Vallas submitted in support of his application for an operating certificate as "incomplete, inaccurate and do not appear to have been reviewed for quality." The author of the story appears to give no consideration to the possibility that perhaps Mr. Vallas' application was deserving of rejection. While nobody wants a return to era when the federal government rejected any new entrants into the air services market on the grounds that new carriers were not in the nation's interest, those rules have long since been abolished. That the F.A.A. still requires certain criteria to be met to ensure that the prospective operators of a new airline have adequate managerial experience, financial backing, and clean legal and safety backgrounds is hardly cause for complaint. It is possible that those criteria are being enforced too rigidly, but this story provides scant evidence in support of such a claim.

U.S. Finally Approves Foreign Air Carrier Permit for NAI

The U.S. Department of Transportation today issued a show cause order proposing that Norwegian Air International (NAI), an Ireland-based subsidiary of Norwegian Air Shuttle (NAS), be granted a foreign air carrier permit that will allow it to begin operating flights to the United States. Norwegian's application has been pending for an unprecedented 28 months as the U.S. has attempted to assess the applicability of Article 17 bis of the US-EU Air Services Agreement. In article 17 bis, both parties pledge support for high labor standards. Unions have accused Norwegian of establishing the subsidiary in Ireland to take advantage of lower labor costs compared to Norway. The delay has drawn repeated criticism from EU officials, who insist the Air Services Agreement requires the U.S. to approve the application of any carrier owned by nationals of an EU Member State operating under the "common carrier" designation, thereby rendering any questions of labor arbitrage a strictly internal matter for the EU. The show cause order is a precursor to a final approval, which will likely be issued in the coming months.