Ques: Can you tell us a bit about Locke Lord's aviation practice?
Ans: The Locke Lord aviation offering provides global coverage for a global industry. From major aircraft accidents to satellite risks to corporate financing and leasing arrangements, Locke Lord covers a wide range of issues affecting the aviation industry today. Our aviation lawyers have provided assistance to the aviation industry and its insurers for 40 years and include experienced pilots and engineers. We provide services related to airline, airport, general aviation, product liability and aviation coverage counseling. We have extensive experience handling litigation, mediations and arbitrations. Our lawyers also have extensive experience with aircraft acquisition, sales, financing, leasing, regulatory compliance and risk management for aviation transactions.
With offices strategically located across the United States, London and Hong Kong we can service our clients’ needs across the globe, either through our own offices or our comprehensive international network of correspondents and contacts. Locke Lord has the ability to deal with matters that touch and concern the industry around the world seamlessly, through one firm.
Ques: Where do you see the global aviation industry five years from now and what are the various avenues within the sector where you anticipate growth?
Ans: In five years the global aviation industry will continue moving toward being just that: truly global. We will continue to see the rapid expansion of the industry into and within formerly underserved areas such as Africa and Southeast Asia - opening up communities to trade and travel like never before. Related to this will be the continuing growth of the low-cost carrier operating domestically in countries around the world, as well as increasingly expanding into international routes. India is a perfect example of this type of growth, with domestic passenger capacity set to increase and airlines developing to meet that demand. These features are, in India for example, coupled to an increasing level of internet penetration meaning more bookings can be made by passengers via the internet, another factor which we have seen in the EU has been instrumental in driving costs and fares down.
We will see an increase in airline mergers and partnerships and a rise in so-called "super airlines" with massive fleets and worldwide operations. I also believe that will see an evolution from single-hub airports to the adoption of multi-hub approaches as capacity and physical space at existing airports gets increasingly less, along the lines of the airport arrangements already in place and serving cities like New York, Washington and Shanghai.
One area of the industry anticipated to impact aviation operations across the spectrum is the use of unmanned aviation systems (UAS). Currently limited to military or other public use in most countries (for example weather drones) , this sector of the industry is expected to expand rapidly as UAS operations are extended into the private sector - particularly with regard to the shipment of cargo. Looking farther afield, another exciting development to look forward to is the growing private investment in space systems. As cash-strapped governments cut back their aerospace programs, private interests have stepped in to design innovative new systems for both space travel and satellite delivery - developing exploration and operating strategies that not long ago were found only in an Arthur C Clarke or Isaac Asimov novel.
Ques: Can you tell us your opinion on the European Union's unilateral decision to impose clean air tax on all airlines taking off and landing within the EU?
Ans: The planned EU Emission Trading System (ETS) would require all commercial airlines to pay carbon taxes for their emissions when entering and leaving EU air space. In November 2012, the EU announced it would temporarily suspend the ETS scheme following strong opposition from 26 of the 36 members of the International Civil Aviation Organisation (ICAO), including the United States, Russia, China, and India. However, the EU has continued to push for a global emissions scheme. The goal of reducing airline carbon emissions is a noble one - but one which comes with many factors that must be considered and balanced. As we have seen, the EU's scheme has caused much consternation and debate amongst the world's airlines. There are natural concerns that the cost of the scheme on airlines will ultimately be passed on to passengers and shippers - leading to a decrease in both as fares increase and passenger numbers - as a consequence - fall. I think that it is fair to say that we, in the aviation industry, are all holding out for a global solution to the problem of airline carbon emissions which addresses the issue of emissions but also fosters the growth of the aviation industry.
Currently (as at the beginning of February 2014), the position in the EU is still somewhat up in the air but the European Commission has proposed that the following scenario apply (which will need to be approved by the European Council and voted on by the European Parliament before becoming law):
- flights to and from aerodromes within the European Economic Area (EEA) have to monitor and report their emissions for the calendar years 2012 and 2013;
- flights into and out of the EEA were given an exemption for 2012 but the Commission has tabled in the Council proposed revisions to the existing Directive extending the exemption for 2013; and
- corporate jets will have reduced thresholds for 2014-2020 also as part of the proposed Directive.
The Commission has stated that it hopes to have these proposed changes agreed by the end of March 2014, failing which there may well be an issue as to what is meant to happen for 2013 – the reporting and surrender deadlines for emissions emitted in 2013 occur at the end of March and April 2014 respectively.
Ques: What is your take from the competition law aspect on the proposed American Airlines and US Airways merger?
Ans: With increased growth of low-cost airlines and increased competition in the aviation industry for new routes and limited airport slots we will see a corresponding increase in mergers, particularly among more established airlines - such as American Airlines and US Airways. In June, the European Commission (EC) cleared the merger finding that the proposed venture would not result in any anti-competitive effects. However, the EC examined the merger solely based on transatlantic routes from the EU to the United States. In August, the Antitrust Division of the US Department of Justice (DOJ) filed a formal complaint against the merger based on alleged anti-competitive effects in the US domestic aviation market. The DOJ is specifically concerned that the combined company would have almost one-quarter of the US domestic market share and that this would increase the likelihood of coordinated practices among the remaining domestic airlines - resulting in higher fares, higher fees, decreased industry growth and innovation, and reduced service. Mergers of these types must be explored carefully to ensure that the industry as a whole does not become less competitive for airlines and more costly for passengers. That said, a merger settlement was reached with the DOJ towards the end of 2013, part of which involved both US Airways and American Airlines relinquishing several hundred take-off and landing slots which are intended for reallocation to low cost carriers (e.g. Southwest Airlines and Jet Blue), the intention on the part of the regulator being to ensure that competition is maintained on as many of these routes as possible (and that costs on these routes are therefore kept down)
Ques: What according to you are the biggest legal hurdles being faced in the aviation sector today?
Ans: Currently, the biggest hurdles to the aviation industry are government regulatory burdens - particularly in relation to consumer protection. Much of this regulation is applied differently in different countries, resulting in an industry (which by its very nature operates in multiple jurisdictions) often having to comply with costly and inconsistent and/or conflicting laws. The most obvious and well-known example of these type of regulations is EU Regulation 261/2004 which seeks to protect consumers from denied boarding, flight delay and cancellation by placing obligations of care and compensation on airlines operating into, out of, and within the EU. Other examples are in the area of EU data protection where the underlying directive (Directive 95/46) is applied differently in the various EU Member States, causing confusion as to how personal data is protected in the different jurisdictions which make up the EU, regulations regarding tarmac delays that differ between the United States and the EU, and the EU ETS Scheme mentioned earlier. The Montreal Convention and the various other international agreements on aviation operations are meant to address the challenges of imposing a domestic patchwork of regulation on an industry that is inherently global. I believe that this ongoing (and, some might say, increasing) legal fragmentation places the biggest challenge on airlines, aviation service providers and passengers in today’s market and, in all likelihood unless something is done to curtail it, , in the near future as well.
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