Competition, Alliances - Create A New Horizon For Airline Industry

Leading Aviation Experts Focus on Coming Change at CCH Forum

(RIVERWOODS, ILL., September 10, 1999) – Big changes are on the horizon for the airline industry and a new, global landscape can be expected to emerge as the economic forces of free trade, deregulation, the Internet and globalization collide, according to aviation experts who attended The Coming Revolution in Airline Competition aviation forum organized by CCH INCORPORATED’s Aviation Law Reports. CCH, a leading provider of business and regulatory law information hosted the forum at which airline executives, leading aviation law practitioners and industry experts gathered to examine the building market tensions in domestic and international aviation that will thrust the airline industry into a new era.

Coming Change: Alliances Lead the Way, But Not Likely to Survive New Order

Casting off the constraints of the bilateral treaty regime that governs civil aviation, carriers have turned to global alliances to meet the demands of a progressively more competitive, global industry and more sophisticated customer base, noted conference keynote speaker Paul V. Mifsud, Vice President, Government and Legal Affairs, U.S., KLM Royal Dutch Airlines.

Under the traditional bilateral regime, which was established by the Chicago Convention in 1944, countries negotiate one-on-one for air rights. In recent years, however, alliances – through which foreign-owned carriers partner with domestic airlines to serve cities that ordinarily would not receive international service – have been creatively used by air carriers to broaden markets and expand the airline industry. However, neither alliances nor the bilateral scheme that gave birth to the alliance concept, are likely to see the light of the industry’s new day, Mifsud noted, pointing to safety and antitrust concerns, as well as the overriding restraints of the bilateral framework.

Conference speaker Michael G. Whitaker, United Airlines Vice President of International and Regulatory Affairs agreed, stating that while the alliance concept has successfully allowed carriers to move toward open skies, the bilateral regime’s constraints have effectively constructed a "brick wall" that prevents further progress down this path.

Future Dimension is Multilateral

The time for change has come and "the logical place to go from here is a multilateral system" that eliminates the regulatory hurdles of the current bilateral system, Whitaker said. A true multilateral air transport regime would permit carrier mergers, consolidations and cross-border ownership and control of airlines, effectively ending the need for most alliances.

The Honorable Gerald L. Baliles, former Attorney General and Governor of Virginia and member of the CCH Aviation Law Advisory Council cautioned, however, that infrastructure issues will have to be addressed first, before a new multilateral regime is adopted.

"Not much will happen until there is a commitment in the U.S. and Europe to air traffic control reform," said Baliles, who also is former chair of the National Commission to Ensure a Strong and Competitive Airline Industry (National Airline Commission).

The new multilateral framework, he stated, "depends on the capacity of the air traffic control systems to handle it." If reform of the air traffic control system doesn’t happen, including consolidation of the system in Europe and a steady user-generated revenue stream for the U.S. system, nothing else will, he concluded.

Closer Look at Multilateral Framework to Follow at Chicago Convention

Conference moderator Brian F. Havel, author of In Search of Open Skies: Law and Policy for a New Era in International Aviation and Associate Professor at DePaul University College of Law, noted that many of the countries that created the antiquated bilateral system that now regulates international air transport are planning to meet with U.S. federal regulators in Chicago in December to discuss the dimensions of a new multilateral regime.

Havel, CCH Aviation Law Advisory Council Chair, said that the December meeting was more likely to lead to a consensus on where to go in the future rather than a binding treaty. But setting up a consensus, Havel suggested, might prove in the end to be as good as getting a final treaty. Airlines will take their cue from their governments’ willingness to support liberalization, and we may even see U.S. airlines acquiring control of foreign airlines and forcing Washington to abandon strict U.S. laws on foreign ownership of airlines, he said.

CCH Aviation Law Advisory Council and Aviation Law Reports

Joining conference speakers Paul Mifsud and Michael Whitaker in the timely discussion of The Coming Revolution in Airline Competition were members of the CCH Aviation Law Advisory Council.

Council members

Brian F. Havel, Council Chair, is Associate Professor at DePaul University College of Law. An expert in the field of international economic law, he is the author of In Search of Open Skies: Law and Policy for a New Era in International Aviation, a comprehensive study of airline deregulation in the U.S. and European Union. Before coming to Chicago, Professor Havel practiced in the areas of international antitrust and corporate litigation with the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison.

Hon. Gerald L. Baliles has a distinguished record of leadership in economic development, as partner at Hunton & Williams in Virginia, and as the former Attorney General and Governor of Virginia. In 1993, President Clinton appointed him to chair the National Commission to Ensure a Strong and Competitive Airline Industry. More recently, Gov. Baliles assisted the U.S. in negotiating an "open skies" air transport agreement with Japan.

James L. Devall is managing partner of the Washington, D.C. firm of Zuckert, Scoutt & Rasenberger, where he represents non-U.S. air carriers and aviation-

related businesses in areas of international aviation and regulatory matters. Previously, he held a position with the U.S. Office of Management and Budget in the Executive Office of the President. He is a member of the European Air Law Association, an Adjunct Professor of Law at American University, Washington, D.C. and has served as president of the International Aviation Club of Washington.

Phillip J. Kolczynski manages his own law firm in California. His practice is national in scope, concentrating in aviation, product liability and business litigation. Previously, he was a trial attorney in the Aviation Unit, U.S. Department of Justice, and the Federal Aviation Administration. While at the Justice Department, Mr. Kolczynski was an instructor at the Attorney General’s Civil Trial Advocacy Institute.

Kenneth P. Nolan is managing partner of the New York office of Speiser, Krause, Nolan & Granito, specializing in aviation personal injury and wrongful death litigation. He has successfully handled over 70 million-dollar verdicts and settlements, nine involving airliner crashes, including the KAL shootdown and the Pan Am Lockerbie disaster. He serves as editor in chief of Litigation, published by the American Bar Association. He is a member of the Aeronautical Committee of the Association of the Bar of the City of New York and a member of the Board of Directors of the New York State Trial Lawyers Association.

Kenneth P. Quinn is a member of the Washington, D.C. firm of Winthrop, Stimson,

Putnam and Roberts, where he specializes in aviation and international law. He served as Counselor to the Secretary of Transportation and later as Chief Counsel for the Federal Aviation Administration. Mr. Quinn is a member of the Governing Committee of the American Bar Association Forum on Air and Space Law, and served as its Chairman for two terms.

About CCH Aviation Law Reports

For over fifty years, CCH has been a leading provider of aviation law information, tracking, explaining and analyzing aviation law developments for aviation lawyers, the nation’s leading air carriers and aircraft manufacturers. Since 1947, the CCH Aviation Law Reports publication has served as a comprehensive and authoritative source for aviation cases, laws, regulations, agency decisions and new developments, providing complete coverage of the federal regulation of civil aviation. For more information about CCH’s Aviation Law Reports call 1-800-449-6435.


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