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AA quoted in Airport Policy News

Airport Policy and Security News #120

“IATA doubled down on its quirky definition of ‘smarter’ regulation by asking not only for a free ride from the suppliers, but an inside track against competitors. It is not called a legacy industry for nothing. That every year IATA again has to plead that the IATA Worldwide Slot Guidelines be adopted should tell you all you need to know about the falsity of its title. Perhaps the fact that it is a naked attempt to distort the market, whilst allowing incumbents to benefit from windfall gains, is so blindingly obvious that even protectionist-minded governments can see through it. There have even been calls to break up slot monopolies at airports (a la BAA and AT&T) in such irresponsible, anti-business rags as the Financial Times. Could the tide be turning?”

—Andrew Charlton, “The IATA AGM—Zigging Not Zagging; Canning Not Cunning,”
Aviation Intelligence Reporter, July 2017

Link: reason.org

AA section published in : The Future of Business

Critical Insight on a Rapidly Changing World from 60 Futurists

Section 7 – Industry Futures – How might old industries change and what new ones could emerge?
The Future of Aviation – Andrew Charlton.

If you would like to purchase the book click here.
or if you would like a copy of “The Future of Aviation Section”, then please email air@aviationadvocacy.aero

AA quoted in Politico

Etihad ensnarled by Europe’s airline ownership rules

Etihad Airways suffered two financial catastrophes in Europe in less than six months, and some of the blame is being put on EU regulations on airline ownership.
In recent years, Etihad sought to expand into Europe by buying minority stakes in EU airlines. The Abu Dhabi-based carrier couldn’t do more because for an airline to be regarded as an EU carrier, it must demonstrate it is majority-owned and effectively controlled by EU nationals.

The situation turned out to be a disaster for both Etihad and the European airlines it invested in.
“Irrespective of whether Etihad’s strategy was right or wrong, the United Arab Emirates company was a willing investor in European airlines to expand its network and brand,” Andrew Charlton, managing director of Aviation Advocacy, a Geneva-based consultancy. “But it was unable to fulfill the strategy because it is not allowed to majority own or control the airlines it bought into.”

In 2012, the company took a 29.2 percent stake in Air Berlin, Germany’s second-largest airline, and since then invested more than €2 billion. This week, the German airline declared bankruptcy, and its planes are flying only thanks to a €150 million emergency loan from the German government.

Etihad also led a €1.8 billion investment in Alitalia in 2014, taking a 49 percent stake — the maximum permitted by EU law. In April, the perpetually troubled Italian flag carrier slid into bankruptcy, being placed under special government administration and kept alive by a €600 million bridge loan.
Air Berlin and Alitalia, in need of rescuing and looking for bidders, face a situation in which they may not find an interested investor from within the bloc, but EU rules make it unattractive for foreign airlines to get involved.

The European Commission in June published guidelines for the interpretation of the existing rules as part of its Open and Connected aviation package but gave no indication it plans to change the system.
“We have to make sure that [foreign] investors are not discouraged or de-incentivized by a too strict interpretation of the ownership and control rules,” said Ulrich Schulte-Strathaus, managing director of Brussels-based consultancy Aviation Strategy & Concepts.

Etihad’s financial woes may have been lessened had it been permitted to gain a controlling stake in the companies. It was unable to paint the Air Berlin or Alitalia aircraft in Etihad colors and went to court over code-sharing (an agreement where airlines share the same flight) with Air Berlin, said Charlton.

Etihad did not immediately respond to a request for comment.

For other airlines, the desire to revamp EU ownership rules is growing increasingly acute ahead of Brexit.

Ireland-based Ryanair has many U.K. shareholders. Once they are no longer EU citizens, the airline may have to force them to sell their shares to keep its status as majority-EU owned. U.K.-based carrier easyJet recently set up an Austrian subsidiary to help it continue flying within Europe after Brexit.

International Airlines Group, the parent company of British Airways, Aer Lingus and Spain’s Iberia and Vueling, is pressing hard for a rethink of ownership rules because it likely won’t meet the definition of EU owned and controlled after Brexit.

Willie Walsh, the head of IAG, last month pleaded before the European Parliament for the bloc to relax its “arcane” airline ownership law to bring it inline with other global sectors like banking or automotive.

The rules are a hangover from the days when airlines were seen as symbols of the countries that owned them, he told the Irish Times. “I have been arguing this for 20 years,” he said.

By Cathy Buyck

http://www.politico.eu/pro/etihad-ensnarled-by-europes-airline-ownership-rules/

AA quoted in the Financial Times

British Airways counts the cost of outage disruption.

“It really is a big deal,” says Andrew Charlton, an aviation analyst. “The cost of its hub going down is enormous and the ripple effect down the entire operations will take about 14 days to work out of the system. Aircraft are in the wrong place, the crew are in the wrong place, connections are lost, there is a need to find ways to re-accommodate passengers. It will go on and on.”

Link to Financial Times

AA quoted in the New York Times

After Technical Chaos, British Airways Looks to Restore Schedule

“It’s more than just simply saying we know you’ve got a booking and therefore we’re going to issue you with a boarding pass,” said Andrew Charlton, the managing director of the Aviation Advocacy consulting firm and a former chief legal officer at Qantas, the Australian airline.

Link to The New York Times

AA quoted in The Economist

The super-connector airlines face a world of troubles

Second, geography has turned sharply against them. When Sir Tim Clark, president of Emirates, helped Dubai’s government to set up the airline in 1985, he was quick to spot that a third of the world’s population lives within four hours’ flight of Dubai, and two-thirds within eight. “They were in the right place at the right time,” says Andrew Charlton of Aviation Advocacy, a consultancy. “But now they’ve been caught in the wrong place at the wrong time.” A series of terror attacks in the region and a coup in Turkey last July has prompted many passengers to shun airports in the Middle East and to go elsewhere to change planes. The latest figure (from March) for capacity utilisation for Middle Eastern airlines was just 73%, the lowest since 2006 and worse than at the height of the financial crisis in 2008-09.

Link to The Economist

AA quoted in Politico

Brexit clouds over EU-US open skies agreement

By Cathy Buyck- 4/25/17, 6:50 PM CET

U.S., EU and U.K. air transport negotiators will have to scramble to update the decade-old transatlantic open skies agreement to prevent aviation chaos in the wake of Britain’s departure from the EU.

At the moment, air travel between the EU and the U.S. is regulated by the open skies agreement signed in April 2007. It allows all European airlines to fly without restrictions from any point in the EU to any point in the U.S., and beyond and offers the same terms to American airlines flying to Europe.

The problem is that the agreement is between the U.S. and all 28 EU members states (plus Iceland and Norway).

Once the U.K. quits, the agreement has to be amended to cover all remaining 27 European states and the U.S., with the U.K. possibly negotiating its own agreement with both other parties. Revamping the deal won’t be easy. The original open skies talks took seven years and 19 rounds of painstaking consensus-building to complete.

In the unlikely event of a breakdown in talks, 16 of the European countries would fall back to bilateral agreements in place in 2007, before open skies were agreed. The issue for London is that 10 years ago, it didn’t have a bilateral open skies deal with the U.S., which could create massive problems if the clock is turned back to 2007.

Bermuda II, as the U.K.-U.S. air services agreement, was called, restricted access to London Heathrow to two only U.K. and two U.S. airlines. Heathrow is Europe’s busiest airport handling 76 million passengers last year. Reverting to Bermuda II “would have profound implications for airlines and their customers, no matter how unlikely,” according to the International Air Transport Association.

That has all sides are hoping Brexit doesn’t create an air transport crisis.

“I’m quite hopeful [the U.S.] will be able to maintain the open skies agreement with the European Union,” John Byerly, the lead U.S. negotiator of the original open skies agreement, told POLITICO. “And my hope is the United States and the United Kingdom, in due time, will be able to work out an agreement on open skies after Brexit. I think the stakeholders involved, especially the airlines on both sides of the Atlantic, are committed to the open skies framework we negotiated.”

Uncertainty in EU-U.S. air travel would have enormous business and financial consequences.

Major airlines on both sides of the Atlantic have set up joint ventures and these partnerships have anti-trust immunity, allowing participants to agree on routes, capacity, and fares without triggering regulatory problems. Together, four such alliances control almost 77 percent of the capacity on transatlantic routes, according to aviation data provider and consultant CAPA Centre for Aviation. They are highly profitable, so airlines have a clear interest in keeping them alive.

“The immunized joint ventures would not be approved if there is no open skies environment between the U.S. and the EU and the U.S. and Great Britain,” said Byerly, a former U.S. State Department official who now works as a consultant for the airline industry.

Daniel Calleja, who led the negotiations for the EU as director for air transport at DG Move, also is confident the EU-U.S. open skies will survive.

“Traffic has grown enormously. The agreement is bringing concrete benefits to both sides,” he told POLITICO, speaking along with Byerly as part of a podcast for the anniversary of the agreement. “When you have something that works, it will be difficult to backtrack. We have a framework that is beneficial for consumers, it is beneficial for the stakeholders, for the airports on both sides of the Atlantic.”

Because of the scale of the original agreement (it covered about half of world passenger traffic and 70 percent of cargo traffic), its effect has been immense. The number of direct EU-U.S. city links grew by a third, and the number of passengers increased from 50.6 million in 2007 to 54.5 million in 2015, according to Eurostat.

Transport Commissioner Violeta Bulc called it “a game-changer for Europe’s external aviation policy.”

The goal was to bring together the two largest aviation markets in the world into “one big open aviation area” in which investment could flow freely and in which European and U.S. airlines provide air services with few restrictions, said Calleja, currently director-general of DG Environment.

Not all of the EU’s objectives were achieved. Allowing EU airlines to operate domestic routes in the U.S. was a no-go for the U.S. side. The U.S. also rejected an EU proposal to align ownership and control requirements, something that would have eventually allowed U.S. and EU airlines to merge.

“The agreement does not get us to the obvious end state of a free market, but it is a step in the right direction,” said Andrew Charlton, managing director of Aviation Advocacy, a Geneva-based consultancy. “As we consider Brexit, the rise of protectionism and a suspicion of transparency, we should be grateful we have that agreement at all.”

Restarting talks on open skies would take place in a much different environment than during the original negotiations. There’s a lot more skepticism about free trade and deregulation, fuelled by the protectionist Trump administration in Washington and rising populism in Europe.

“There is some backpedaling on the benefits that open skies and free trade can bring,” said Byerly. “In many respects, as we celebrate the 10-year anniversary of this agreement, we can celebrate the two sides having the foresight, I don’t know if we knew it at the time, of seizing an opportunity that might not be feasible today or in the future.”

Link to Politico

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