Posts Tagged ‘US Politics’
In this article TWC Aviation’s Carter Stewart examines some of the recent news on EU ETS (European Union Emissions Trading Scheme) and offers his perspective on some of the prominent stories of the past few weeks, and examines what may be next for the EU ETS controversy.
I feel compelled in each conversation that I have with clients, the public, or news outlets to say at the very start that I personally believe that the inclusion of Commercial Aviation into the EU ETS framework was not in the best interest of airlines, passengers, or the industry. What is important to remember, however, is that this is now law both in the European Union and in each of its member states- including the United Kingdom.
While much noise has been made in the world media over the past few weeks about the formal introduction of aviation within the EU ETS, there appears also to be a great deal of media spin on the stories that are coming out.
Take for instance the reports that many U.S. airlines began collecting a $3.00 surcharge per passenger travelling to/from the European Union to offset the carriers EU ETS obligations. I do not believe that this is necessarily true. Some airlines have called this additional charge simply miscellaneous. I believe that some carriers may well be using the revenue for the EU ETS obligations, while some others may well be using it as a form of fuel surcharge. Spikes in Jet-A fuel prices in Q4, as well as unusually heavy west-bound Atlantic winds, have been slowly eating away at revenues. There is also some considerable uncertainty over fuel prices and Iranian politics that are likely also influencing the various revenue teams around the world.
While it is reasonable to assume that carriers would want to offset their obligations, it is also important to point out that all carriers who had flight operations over a certain threshold have also received certain allotments of Aviation ETS credits from the E.U. nation who host the majority of their movements. In effect, for this first year, both E.U. and foreign air carriers have been given an allotment of free credits that run into millions of Euros. This is a fact that many trade groups, news outlets, and even foreign governments appear to leave out of their press statements.
While the time for EU ETS political advocacy on behalf of the industry has long since passed us by, the rest of the world has seemingly only awoken up to the reality of these new laws. While many trade groups and individual carriers had filed for hearings in the European Court of Justice, the court has made their position clear that their view is that EU ETS is not only legal, but does not violate international law. It is at this point where I believe commercial aviation trade groups will turn their attention away from European Capital, and instead spend their valuable time and money lobbying their own legislators for a diplomatic solution.
Many other jurisdictions such the United States, China, and India take an opposite view and have begun exercising their diplomatic and legal powers in search of a remedy to this situation.
I do believe that the future of EU ETS is likely to place pressure on E.U. relations with some countries. The United States Congress has introduced draft legislation in both the House of Representative and The Senate to propose making it illegal for a U.S. air carrier to acquire and spend E.U. ETS Credits. India has hinted that they are to re-examine several bi-lateral agreements with E.U. nations, carefully only alluding to E.U. ETS as a primary driver.
I personally believe that no country can afford an aviation trade war at this moment in time. While it would appear that the European Union had not learned from British History that occasionally “taxation without representation” can create political difficulties, it does not yet appear to have successfully created a credible legal argument against the new laws that each individual member-state has passed in their own jurisdiction that make up E.U. ETS. There is even some debate regarding which existing body is fit and proper to hear any new legal or treaty challenge.
Having said that, U.S. Lawmakers may do well to also remember the post 9/11 TSA security fees and demands for APIS (Advanced Passenger Information) often flew in the face of other nations’ sovereignty as well. While I am not comparing these items directly, what I would compare is the unilateral action taken by one party against another while exercising their treaty rights (i.e. operating international commercial airline flights).
Whatever the lofty arguments for or against E.U. ETS may be, the real challenge is what individual member states will do with individual carriers who do not comply with the new emissions framework. That is where I predict we will see the next credible legal set of arguments.
The Resolution in brief
Citing the erosion of airline competition on international routes, House Transportation and Infrastructure Chairman James L. Oberstar of the 8th District of Minnesota has introduced a bill to study the effects airline alliances and anti-trust immunity have on consumer choice.
The bill, H.R. 831, was introduced late Tuesday session of the US Transportation Aviation Subcommittee, and was formally released today.
While the Resolution does appear to outwardly address issues around consumer protection, our analysis of the text shows a more disturbing trend toward questioning the role of the Secretary of Transportation and the Department of Justice in the review, approval, and interpretation of U.S. existing anti-trust law in a single industrial area.
Why the Resolution is not required
While we agree that the legislative and judicial branches should have a common set of laws to work from, the fact of the matter is that they already do. These laws have kept in balance the needs of consumers and the airlines and other industries, with a few notable exceptions. One of the most notable exceptions was the failure in 2002 of the American Airline (AA) and British Airways (BA) antitrust immunity. At the time, this decision was based on restrictions at London’s Heathrow Airport which have since been lifted and trans-Atlantic competition at Heathrow has flourished even in a weakening market.
The other potentially damaging issue with this new Resolution is its impact on the US-EU Open Skies agreement that paved the way to opening up London Heathrow, as well as other key trans-Atlantic markets. We would call on both the Chairman and the Committee to explain the potential impact of this resolution on the Open Skies agreement.
This resolution could hurt airline consumers and constituents alike
While we applaud the House Resolutions wish to protect consumers, we see it as simply a misguided attempt to redefine the power and scope of the U.S. Department of Transportation, and also needlessly attempt to block needed industry consolidation.
After fully examining Chairman Oberstar’s voting record and public comments, it has become clear to us that he feels that his constituents and the U.S. worker on whole needs protection from globalisation. This is not unlike the same issues that Prime Minister Gordon Brown faces here in the U.K. with regard to the recent wildcat strikes protesting the use of “overseas’ labour- even when that labour is simply part of the EU’s “Freedom of Movement” guarantee that we are all able to avail ourselves of.
What should we be focused on?
At TWC we feel that the US and EU government’s top priority should be an open trans-Atlantic aviation area that would allow the reciprocal removal of limits on the ownership of airlines by EU and U.S. investors and also give European carriers rights to fly passengers and cargo between U.S. destinations, known as the right of cabotage. We also feel that the US and EU must work out formal agreements on these key issues before extending the agreements to other third-party nations.
We should also keep in mind that consolidation is essentially better than a single airlines failure, and all of the local and national economic consequences of such a failure. Surely, it is in all of our interest to allow airlines to consolidate in a manner that allows them to remain strong, viable, and competitive employers.