Posts Tagged ‘AA/BA’
Do JAL’s suitors understand that sometimes you can’t always get what you want?
JAL's future could be solely a Japanese question (Photo C. Stewart 2009)
At the American Airlines Fall Management Conference, CEO Mr Gerard Arpey stated that JAL would not benefit by leaving the OneWorld alliance. A day later AA CFO Tom Horton followed-up by saying JAL would “have have difficulty clearing regulatory hurdles if they sought antitrust immunity for closer business ties with another alliance. ” In fact, AA has clearly alluded it would oppose any such move.
There is no argument that JAL is in serious financial trouble, and perhaps even less of an argument that Japan may yet be the next sovereign national default. That could even be part of the AMR strategy, as they begin to see their chances with a mutual AA/BA eclipsed slightly by BA/Iberia- and the delay U.S. governments official ruling on this important subject.
Even in that light, Mr. Arpey’s recent comments represent, at best, a fundamental misunderstanding of his Japanese partner’s cultural approach to business. At worst they demonstrate yet again a narrow U.S.-centric view of the global aviation industry. Even if JAL would make a comment, which they wouldn’t, statments of this calibre would generally only serve to further isolate AMR from this important strategic partner both culturally and financially.
I personally know the ladies and gentlemen of AMR to be clever, erudite, and savvy people. I respect them. In my opinion, however, I have seen them demonstrate a repeated weakness through the years. This weakness comes in two parts. First is to unabashedly apply US style business approaches in places where an alternate approach may be advisable, and the second is to rely on US O/D traffic on most int’l routes to an excess that isolate them from some local markets. Ironically, this appears to not a mistake shared by all of their US competitors.
I do not believe that AMR, DL and the rest of JAL’s recent suitors could have been unaware of Japan’s much stricter foreign ownership rules, which make U.S. ownership appear positively liberal. They also could not have been oblivious to the complexities of lobbying a new Diet that has barely taken office for a change in laws related to restrictions on simple equity stakes. Add into mix the potential suitors intense interest in Haneda, and then overlay the already contentious presence of Macquarie Bank in Haneda financing chain, and I think what you will find is a perfect storm. In my view, it is a storm that has already taken both JAL and the new Japanese Government to a more isolationist stance.
I would even go so far as to hypothesise that JAL simply and strategically used the OneWorld and SkyTeam interest to their own political advantage, never fully intending the follow through with a financing offer without first doing what the foreign carriers could not- lobbying their own government.
JAL knew that the guaranteed financing was in place prior to the landslide election victory by the Opposition Democrats. Now that that money had evaporated in a single August evening, a sense of careful self preservation became the focus. JAL had to demonstrate contrition for their failures through management shake-ups and uncomfortable cultural issues around lay-offs and pension issues, and painful semi-public audits.
Simultaneously, however, it also began to draw a picture the new Hatoyama government what life might be like with another major Japanese company, some say even the “flag-carrier”, being funded by non-Japanese- and with access covenants that may not have been in best interest of any Japanese carrier.
The manner in which the Opposition Democrats have responded to the JAL crisis only further proves that there are discrete and delicate cultural issues at play here that must not be ignored. The most telling demonstration of this is the first radical change in government in over fifty years was swept to power on a wave of promises to reform government handouts to corporations chose to break with their own platform of reforms within weeks of taking office. This very public break with policy came in the form of mixture of guarantees and promises of further support measures for JAL on the condition of reform.
One of the most painful reforms is the requirement for JAL to cut their pension by a two thirds consent of it’s retirees. It is this requirement that has JAL seeking professional mediation.
While most western carriers such as BA and AA are no strangers to pension shortfalls, this is a more difficult issue in Japan. Japanese culture still holds on to the idea, even if it is an illusion, that a company has a tacit understanding to look after the employee during the course of their lives. While the reality has been quietly changing over the past decade, and represents one of the core changes occuring in Japanese society, it is difficult for for the culture as a whole to adapt to this particular change.
Overall JAL has most likely “shelved these discussions” with AMR and DL and moved on to chart it’s own course. It is a mixture of national pride, culture, and their potential to turnaround that make it plausible that JAL can chart an independant course.
As for AMR and Mr. Arpey, you would think that he of all people should know that threats, no matter how veiled, rarely will win you many friends in Japan- much less help you conclude a successful deal.
Great Links:
Why AA/BA Antitrust Immunity Makes More sense that Virgin’s resitance to it
Why AA/BA Antitrust Immunity Makes More Sense now than ever…
Art © TWC 2009
The History
When American Airlines (AA) and British Airways (BA) filed for antitrust immunity in 2002 there was little hope that an agreement could be reached with the US and EU Regulatory authorities. New entrants into the EU-US market were prohibited, and AA and BA were opposing businesses nearing an effective monopoly hold on daily departures between Heathrow and the US.
In 2007, the first phase of the new EU-US Open Skies accord was reached. Since then several new entrants have started flights in this lucrative market. This agreement has allowed these new market entrants to fundamentally change the competitive landscape at Heathrow and other airports throughout the EU. Ultimately the passengers now have a wider choice of carriers, service levels, and new non-stop destinations than ever before. As a result, consumers on both sides of the Atlantic should urge their lawmakers to approve the AA/BA application for immunity.
The Opposition from Virgin
In spite of these competitive changes some consumer groups, and competitors such as Virgin Atlantic (VS), vehemently oppose the proposal. Virgin Atlantic claim that if the deal were to be approved that AA/BA would have a “stranglehold on London Heathrow-US services, and be able to coordinate schedules enough to inflate demand, and as a result also inflate fares. While the anti-trust immunity would arguably have some impact on frequency and schedule as the two carriers coordinate, in the end consumer demand and pressure from new competitors will keep fares in check and provide passengers an alternative choice of carriers on a scale not previously available.
The Politics
Since the implementation of the Open Skies agreement, we have seen many carriers such as Air France, Delta, and US Airways, and Northwest begin to challenge the established carriers in the Heathrow-US market. While the economic downturn has temporarily scaled down the expansion efforts of some like Air France, these are an example of the healthy competition that comes from open markets. Since then Congressman Orbester has made his protectionist position clear via US HR 831, while UK Transport Minister Hoon Geoff Hoon stopped short of threats to dissolve the current EU-US open skies agreement as he reinforced European calls for further liberalisation in stage two talks during a speech to the International Aviation Club in Washington two weeks ago.
Hoon indicated that if no second-stage agreement is reached next year, either party has the right to withdraw traffic rights secured under phase one – an option highlighted by previous UK transport officials but not by Hoon. It was the stance of his predecessor Ruth Kelley the former Transport Minister.
During the meeting of aviation professionals Hoon said that “[we] should stay clear of retaliation,”. “I have no doubt the United States should not be afraid of opening up its aviation business to further competition.”
In our opinion it is entirely likely that with the European and Local elections in June, and current turmoil over UK domestic policy issues such as MP’s expenses, and the recent defeat in the House on the issue of Gurkha’s, it is possible that this Labour Government, and its ministers, will not be present around the final negotiating table.
In his speech Hoon indicated that protectionism offers cold comfort in an economic downturn. That same day United States Congressman James Oberstar (D-MN) was receiving an award for “service to aviation’ while at the same time being the main architect of H.R. 831 calling for limited the power of the DoJ and calling for tougher reviews, restrictions, and rollbacks on airline alliances and
immunity.
What is the rest of the world doing?
In a related story, Canada raised it’s foreign-ownership limits this week to just short of 50%, while Inida continues to liberlise it’s foreign ownership criteria.
Another concern for the UK, and EU, is the US reaction to including commercial flights in the EU carbon emissions scheme, which we at TWC have lobbied against.
The New Threat at Heathrow
There is also a serious potential contender in the London-US market. BMI (BD) and their majority owner Lufthansa have been raising their profile to business travelers over the past few months As Heathrow’s second largest airline could direct links to US be far off? Lufthansa’s recent increase in its BMI stake is further evidence of the emerging strength and competition in the Heathrow market by the Star Alliance, who already operate with antitrust immunity.
The past few years have also seen some important experimentation with trans-Atlantic links between other London airports, such as Stansted and Luton, with mixed results. Fairly radical change came at Gatwick as a near mass exodus of carriers shifted their Gatwick operations to Heathrow soon after the final agreement on Open Skies was in place. Virgin Atlantic also has a unique opportunity to redefine the overall London-US airport experience as it leads a consortium proposing the purchase of Gatwick Airport from the British Aviation Authority (BAA). If it succeeds in its bid, they will have the opportunity to potentially shift consumer preference away from Heathrow with a superior airport experience.
The Upshot
We agree that consolidation is no silver bullet, and it will not solve any carriers problems overnight. That said, we feel that there is no cogent argument for opposing the AA/BA request for the same immunity that has been granted many other alliances in the EU and US already. We believe that its approval will level the playing field between the airline alliances, increase competitive pressures, and ultimately benefit consumers as a result.
Immunität gegen AA/BA Sinn macht
Einblick in die Luftfahrtindustrie:
Warum die Immunität gegen kartellrechtliche Wettbewerbsbeschränkungen für AA/BA Sinn macht
Art © TWC 2009
Als American Airlines (AA) und British Airways (BA) im Jahr 2002 die Immunität gegen kartellrechtliche Wettbewerbsbeschränkungen („Antitrust Immunity”) beantragten, bestand wenig Hoffnung, dass sich die Regulierungsbehörden der USA und der EU auf ein Abkommen einigen würden. Neuzugänge auf den EU-US-Markt waren nicht zulässig, und die Fluggesellschaften AA und BA waren in Bezug auf die aktuelle Monopolstellung im Bereich täglicher Flugverbindungen zwischen Heathrow und den USA zudem harte Gegenspieler.
2007 trat die erste Phase des neuen „Open Skies“-Abkommens zwischen der EU und den USA in Kraft. Seitdem bieten eine Reihe neuer Fluggesellschaften auf diesem lukrativen Markt Flugverbindungen an. Dank des Abkommens gelang es den neuen Anbietern, die Konkurrenzlage in Heathrow und auf anderen Flughäfen innerhalb der EU grundlegend zu verändern. Für die Fluggäste bedeutete dieser Wandel ein umfangreicheres Angebot an Fluglinien, ein höheres Serviceniveau und weitaus mehr Nonstop-Flüge als je zuvor. Verbraucher auf beiden Seiten des Atlantiks sollten ihre Gesetzgeber daher dazu auffordern, dem Antrag von AA und BA auf Immunität stattzugeben.
Doch trotz dieser wettbewerbsfördernden Neuerung lehnen einige Verbrauchergruppen und Mitbewerber wie Virgin Atlantic (VS) das Abkommen entschieden ab. Virgin Atlantic kritisiert, dass AA und BA im Fall einer Genehmigung der Immunität den Flugverkehr zwischen London Heathrow und den USA fest im Würgegriff halten würden und somit eine uneingeschränkte Kontrolle über die Flugpläne hätten, sodass die Nachfrage und, damit verbunden, auch die Flugpreise in die Höhe getrieben werden könnten. Obgleich die „Antitrust”-Immunität sich bedingt durch die Koordination der beiden Fluglinien durchaus positiv auf die Flugfrequenz auswirken könnte, würden die Flugpreise aufgrund der Nachfrage von Seiten der Verbraucher und des Konkurrenzdrucks durch neue Mitbewerber letztendlich reglementiert werden. Die Immunität gegen kartellrechtliche Wettbewerbsbeschränkungen bedeutet für Fluggäste daher ein alternatives Angebot an Fluglinien, das in einem vergleichbaren Mass zuvor nicht zur Verfügung stand.
Seit der Implementierung des „Open Skies“-Abkommens lässt sich beobachten, dass zahlreiche Fluggesellschaften wie Air France, Delta, US Airways und Northwest Airlines die etablierten Fluglinien auf dem Heathrow-US-Markt nahezu herausfordern. Obgleich der Wirtschaftsabschwung die Entwicklungsbemühungen mancher Fluglinien wie etwa der Air France vorübergehend eingeschränkt hat, ist dies ein gutes Beispiel für die gesunde Konkurrenz, die ein offener Markt bewirken kann.
Unter den potenziellen Anwärtern auf dem London-US-Markt befindet sich im Übrigen auch ein ernst zu nehmender Kandidat. Die Fluggesellschaft BMI (BD) hat ihr Profil im Verlauf der letzten Monate mehr und mehr auf Geschäftsreisende ausgerichtet. Für die zweitgrösste Luftlinie in Heathrow macht eine direkte Verbindung in die USA sicherlich Sinn. Die jüngste Übernahme zusätzlicher BMI-Anteile durch Lufthansa ist auf dem Heathrow-Markt ein weiterer Beweis für die wachsende Stärke und Konkurrenz der Star Alliance, die bereits Immunität gegen kartellrechtliche Wettbewerbsbeschränkungen geniesst.
In den letzten Jahren haben eine Reihe anderer Londoner Flughäfen, wie Stansted und Luton, mit unterschiedlichen Ergebnissen mit transatlantischen Flugverbindungen experimentiert. Gatwick erlebte einen vergleichsweise radikalen Wandel, als zahlreiche Fluglinien unmittelbar im Anschluss an die Gewährung des „Open Skies“-Abkommens ihre Geschäftstätigkeiten grösstenteils von Gatwick nach Heathrow verlegten. Virgin Atlantic hat die einmalige Gelegenheit, die globale Stellung der Flugverbindung „London-USA“ insgesamt neu zu definieren, denn die Fluggesellschaft steht an der Spitze eines Konsortiums, das die Übernahme des Flughafens Gatwick durch die britische Luftfahrtbehörde (BAA) plant. Sollte dieser Plan umgesetzt werden, wäre dies die ideale Gelegenheit, Fluggäste von Heathrow abzuziehen und ihnen in Gatwick ein besseres Flughafenerlebnis zu offerieren.
Insgesamt sind wir der Meinung, dass es kein triftiges Argument dafür gibt, sich dem Antrag von AA/BA für die gleiche Immunität, die bereits zahlreichen anderen Allianzen in der EU und in den USA gewährt wurde, entgegenzustellen. Wir glauben, dass die Erteilung der Immunität die Wettbewerbsbedingungen zwischen den einzelnen Airline-Allianzen ausgleichen und den Konkurrenzdruck erhöhen kann, was für die Verbraucher letzten Endes von Vorteil ist.
Haftungsausschluss: Die geäusserten Meinungen beruhen auf der laufenden Analyse des TWC-Teams und unterliegen unseren Nutzungsbedingungen. Der Autor ist zur Zeit der Erstellung dieses Artikels mit den in diesem Bericht genannten Unternehmen weder vertraglich noch durch Aktien oder Sicherheiten verbunden. Diese Analyse/dieser Bericht dient ausschliesslich Informationszwecken.
la demande d’immunité antitrust de AA/BA est justifiée
pourquoi la demande d’immunité antitrust de
AA/BA est justifiée
Art © TWC 2009
Lorsque American Airlines (AA) et British Airways (BA) ont déposé une demande d’immunité antitrust en 2002, l’espoir était mince qu’un accord puisse être conclu avec les autorités chargées de la réglementation aux USA et dans l’Union Européenne. Les nouveaux venus sur le marché UE-USA étaient interdits, et AA et BA étaient des sociétés concurrentes approchant un monopole effectif détenu sur les départs quotidiens entre Heathrow et les USA.
Au bout du compte, les passagers ont désormais un choix plus vaste que jamais de transporteurs, de niveaux de services et de nouvelles destinations sans escale. En conséquence, les clients des deux côtés de l’Atlantique devraient inciter leurs législateurs à approuver la demande d’immunité d’AA/BA.
Malgré ces changements concurrentiels, certains groupes de consommateurs et des concurrents tels que Virgin Atlantic (VA) se sont opposés avec véhémence à cette proposition. Virgin Atlantic prétend que si l’accord devait être approuvé, AA/BA auraient une mainmise sur les services Londres Heathrow-US, et pourraient suffisamment coordonner leurs plages horaires pour augmenter la demande, et donc les tarifs. Alors que l’immunité antitrust aurait, sans aucun doute, un certain impact sur la fréquence et les horaires que coordonneraient les deux transporteurs, au bout du compte, la demande des consommateurs et la pression des nouveaux concurrents permettrait de surveiller les tarifs et de fournir un choix alternatif de compagnies aériennes aux passagers à une échelle auparavant indisponible.
Depuis la mise en œuvre de l’accord Open Skies, nous avons vu de nombreuses compagnies telles qu’Air France, Delta, US Airways et Northwest commencer à défier les compagnies établies sur le marché Heathrow-USA. Alors que le ralentissement économique a temporairement réduit les efforts d’expansion de certaines compagnies comme Air France, ils sont l’exemple d’une concurrence saine découlant des marchés ouverts.
De plus, il existe un sérieux candidat potentiel sur le marché Londres-USA. BMI (BD) a redoré son blason auprès des passagers professionnels durant les derniers mois. En tant que seconde compagnie aérienne d’Heathrow, établir des liaisons directes vers les USA serait-il si lointain pour elle? La récente augmentation par Lufthansa de sa participation dans BMI est une autre preuve de la force et de la concurrence émergentes de Star Alliance qui travaille déjà sur le marché d’Heathrow en bénéficiant de l’immunité antitrust.
Ces dernières années ont également vu d’importantes expérimentations avec les liaisons transatlantiques entre d’autres aéroports londoniens tels Stansted et Luton, avec des résultats mitigés. Un changement tout à fait radical s’est produit à Gatwick lorsque des compagnies ont transféré, sous la forme d’un quasi-exode, leurs opérations de Gatwick à Heathrow peu après la mise en place de l’accord final sur Open Skies. Virgin Atlantic a également une opportunité unique de redéfinir l’expérience aéroportuaire Londres-USA puisqu’elle dirige un consortium qui propose de racheter l’aéroport de Gatwick à la British Aviation Authority (BAA). Si son offre est acceptée, la société aura l’occasion de faire préférer un autre aéroport qu’Heathrow à ses clients, grâce à une expérience aéroportuaire supérieure.
Globalement, nous pensons qu’il n’existe aucun argument convaincant pour s’opposer à la demande d’AA/BA pour la même immunité qui a déjà été accordée à de nombreuses autres alliances dans l’UE et aux USA. Nous pensons que son approbation permettra aux alliances des compagnies aériennes de lutter à armes égales, augmentera les pressions et au bout du compte, bénéficiera aux consommateurs.
Clause de non-responsabilité : les opinions exprimées reposent sur l’analyse continue de l’équipe de TWC et sont soumises à nos Conditions d’utilisation. L’auteur ne possède pas de contrats actifs, d’actions ou de titres dans l’une des sociétés mentionnées dans ce rapport au moment de la rédaction de cet article. Cette analyse/ce rapport sont uniquement rédigés à titre informatif.
Oberstar’s Protectionist Politics
"Does anyone here object to his union?" Queue Congressman Orbester (Pic copyright of TWC 2009)
After lobbying from Alaska Air and other labour groups, it would appear that Congressman Oberstar (Democratic Congressman and Chairman of the House Transportation Committee) has requested that U. S. Transportation Secretary LaHood look into the “nationality” of Virgin America for potential violations of U.S. foreign ownership rules.
We find this ironic, given today’s news from the G20 summit in our own hometown. While protesters went about their business in the Square Mile, down in the Docklands something truly important was happening. In the final communiqué the G20 found common ground, in principle, against trade barriers. We predict that we will see implicit ripple effects onto Open Skies Mark II as a result. We also think that a US Congressman would be more concerned with American jobs being lost vs. the blatant protectionist politics and his obsession with HR 831.
Ironically, the Virgin issue has very little to do with HR831, as it is a stand-along player that Oberstar is righteously trying to protect against what his calls ‘whiny’ legacy airlines.
Perhaps we should all think this through to its logical conclusion? In our opinion both Oberstar is missing the point. We are talking about American jobs here, and it is my sincere hope that the legislators of both Houses from California and New York will be so kind as to remind the Congressman of that pertinent fact.
In addition, is it possible that while the investors may have indeed decided to extract some of their remaining investment from this venture, that perhaps they still retain critical voting rights as part of the contract’s structure? I am no lawyer, but what I do know is this: The Virgin Group and its CEO are both known quantities to me personally, and I would not underestimate how particularly adept they are at doing their jobs.
While we understand the position of Alaska Air, we are a bit more puzzled by the reaction of some of the labour unions who are exercising their muscle on this issue as well. While I appreciate that times are tough, but I have to wonder if ALPA be singing a different tune if Virgin America’s pilots were dues paying members?
Oberstar has missed the fundamentals. We live in a global economy now, and airlines are on the front line. They are our physical lifeline to the new global economy, a tangible manifestation of the reality of international commerce, trade, and leisure.
At TWC we will continue to use our resources to highlight what we interpret as the dangerous brand of political protectionism practiced by the Chairman of the US House Transportation Committee.
Disclaimer: The author holds no current positions or active contracts with any of the carriers mentioned in this blog.
BLOGROLL ON THIS TOPIC
http://eyeonlaaviation.blogspot.com/2009/04/oberstar-claims-vx-may-be-violating.html
www.planebusiness.com (Don’t subscribe and you are in the aviation business? You need to!)