AMERICAN BAR ASSOCIATION VOLUME 22, NUMBER 4, 2010 Alliances, Immunity, and the Future of Aviation By Warren L. Dean, Jr. and Jeffrey N. Shane eventeen years after the U.S. alliance/ATI development appears to be predicated on Department of Transportation a misunderstanding of both the role of alliances as an S(DOT) granted antitrust essential element in the liberalization of international immunity (ATI) to an innovative air services and the importance of ATI as a factor in KLM-Northwest joint venture, ATI that success. The article suggests that the criticism of has become one of the most contro- DOT’s handling of alliances and ATI fails to under- versial issues in current aviation stand the evolution of the international air transporta- law and policy. This article reviews tion networks and puts at risk a major aviation policy the history of ATI and its statu- success story. DOT’s approach to international airline tory foundation and attempts to place airline alliances alliances and ATI, the article concludes, has been pre- in a more contemporary perspective. Criticism of the scient and insightful, has benefited both the industry and its customers, and should not be disturbed.1 Lessor, Financier, and In 1992, the United States and the Netherlands entered Manufacturer Perspectives into the world’s first Open on the New Third-Party Skies agreement,2 predicated on a new DOT policy initia- Liability Conventions tive.3 The agreement elimi- nated most of the regulatory By Jeffrey Wool constraints on entry, capacity, and pricing that had charac- n the previous edition of this publication, my learned colleagues Sean terized bilateral air transport Gates and George Leloudas reviewed, from the perspective of the agreements since the first air transport and insurance industries, the proposed new third-party U.S.-U.K. Bermuda accord in I 4 liability conventions adopted at the International Conference on Air Law 1946. The Carter administra- in Montreal in April and May 2009.1 This article provides a lessor, finan- tion had launched the quest cier, and manufacturer perspective on the new conventions, primarily the for more liberal bilateral Convention on Compensation for Damage to Third Parties, Resulting from aviation arrangements in Acts of Unlawful Interference Involving Aircraft (the UIC). This anodyne 1977. Fifteen years later, by abbreviation veils the actual subject matter of this convention: terrorism, eliminating all regulatory con- and the unique legal challenges that pertain to terrorism. The article also straints on carriers’ access to assesses the Convention on Compensation for Damage Caused by Aircraft all gateway cities, the Open to Third Parties (covering general risks, thus referred to as “the GRC”)— Skies model took liberaliza- that is, damages from ordinary course operational incidents. tion to an entirely new level. continued on page 23 continued on page 17 Forum on Air andTheThe Air AirSpace and & SpaceSpace LawyerLawyer Law Volume 22, Number 4, 2010 The Air & Space Lawyer (ISSN: 0747-7499) is published quarterly by the ABA Forum on Air and Space Law, 321 N. Clark Street, Chicago, IL 60654-7598, to inform members of developments in air and space law and to keep the membership apprised of the activities of the Forum. The opinions expressed in the articles pre- sented in The Air & Space Lawyer are those of the authors and shall not be construed to represent the policies of the ABA or the Forum on Air and Space Law. Chair’s Message Address corrections should be sent to the ABA, Membership Services, 321 N. Clark Street, Chicago, IL 60654-7598, [email protected], 800/285-2221. Copyright © 2010 American Bar Association. Greetings! Produced by ABA Publishing. Requests for permission to reproduce or repub- lish material from The Air & Space Lawyer should he Air & Space Lawyer is bringing you yet another outstanding issue, be addressed to ABA Copyrights and Contracts at www.abanet.org/policy/reprints.html. which Ken Quinn will describe in more detail in his Editor’s Column. Editor-in-Chief Ken and his team have consistently delivered a product that is compa- Kenneth P. Quinn T Pillsbury Winthrop Shaw Pittman LLP rable to the very best publications in its quality and the timeliness of its topics. Washington, DC [email protected] We’re sure you will agree that our journal is one of the finest benefits of your Managing Editor Forum membership. David Heffernan WilmerHale, Washington, DC Speaking of benefits, those of you who joined us in Chicago were treated [email protected] Assistant Editors to a spectacular conference, with a top-notch group of speakers giving us John Easton, Houston Lisa A. Harig, Washington, DC their perspectives on everything from airline alliances to orbital space debris Joseph D. Heyd, Cincinnati Dr. John Saba, Montreal, Canada to current labor issues to appellate advocacy. Keynoters John Luth from Jacqueline E. Serrao, University of Miss. Kathleen A. Yodice, Washington, DC Seabury Group and Glenn Tilton from United Airlines provided great insights ABA Staff Editor into the state of the industry from financial and operational perspectives. John J. Palmer Once again, we proved that that Forum is indeed the one-stop shop for Art Director Cameron Anhalt cutting-edge issues in aviation and space law. The social event at the new Forum Manager Dawn Holiday Modern Wing of the Art Institute of Chicago presented an unparalleled net- 312/988-5660 working opportunity before a breathtaking skyline, amidst gorgeous paint- Forum Chair Renee Martin-Nagle Airbus North America Holdings Inc., Herndon, VA ings, sculpture, and other objets d’art. The success of the conference was due Chair-Elect Steven H. Taylor FedEx Express, Memphis, TN in large part to the tireless efforts of the effervescent program chair Julie Ellis Immediate Past Chair Nancy D. LoBue and our wonderful ABA staff liaison Dawn Holiday. Many thanks to them, the Federal Aviation Administration, Washington, DC Budget Officer David A. Schwarte program committee, the moderators, panelists, and all attendees for your time Sabre Inc., Southlake, TX and energies. GOVERNING COMMITTEE MEMBERS: Andrea J. Brantner We hope that you will join us for one or both of the next two conferences. GE Capital Aviation Services, Stamford, CT The annual Update Conference will be held at the Ritz-Carlton in Washington Randal Robert Craft, Jr. Holland & Knight LLP, New York, NY on January 27, 2010, and will have panels on new developments in legislation, Mark C. Fava Nelson Mullins Riley & Scarborogh LLP, Charleston, SC aviation regulation, airline alliances, satellite navigation, and aircraft accident Richard A. Hauser litigation. We are grateful to Nancy Sparks and Andy Steinberg for serving as The Boeing Company, Arlington, VA James Hnat co-chairs of this conference. For the annual fall conference we’ll go to the JetBlue Airways Corporation, Forest Hills, NY West Coast and gather at the Fairmont Hotel in Seattle on September 30 and Monica Hargrove Kemp Airports Council International-North America, October 1, 2010. Bob Span has agreed to chair this conference, and we’ve Washington, DC Francine J. Kerner already begun the planning process. Watch your e-mails and check our website Department of Homeland Security, Arlington, VA at www.abanet.org/forums/airspace for more information as we get closer. Paul R. Lovejoy United Air Lines, Chicago We’ve been asked by a number of people to provide ways to get more Franceska O. Schroeder Fish & Richardson P.C., Washington, DC involved in the Forum, and we’re open to ideas. At the Chicago conference, Patricia G. Smith Roy Goldberg volunteered to dispatch news about current legal issues Consultant, Washington, DC and opinions. Contribute to these updates by e-mailing Roy at rgoldberg@ Robert S. Span Steinbrecher & Span LLP, Los Angeles sheppardmullin.com. In addition, we have formed four committees that Peter Steenland Jr. Sidley Austin LLP, Washington, DC members are invited to join, depending on your interests. Julie Ellis chairs Nancy N. Young the Outreach Committee, which serves as the Forum’s connection with law Air Transport Association of America, Inc., Washington, DC students, law schools, and young lawyers, including overseeing the scholar- LIAISONS: Law Student Liaison Nicholas D. Welly ship program and establishing a mentoring program. Nancy LoBue chairs University of Mississippi School of Law the Education Committee, which is charged with keeping our membership Sponsorship Liaison Jennifer Trock Pillsbury Winthrop Shaw Pittman LLP updated on pressing issues through webinars, brown bag lunches, e-mail Young Lawyer Liaison India J. Pinkney Federal Aviation Administration blasts, etc. Franceska Schroeder chairs the Marketing Committee, which will Canadian Liaison William F. Clark seek liaisons with other like-minded organizations, both domestically and Clark & Company, Toronto continued on page 27 Volume 22, No. 4, 2010 2 The Air & Space Lawyer Editor’s Column s we approach the end of the decade and close In the face of withering criticism from the out the “00s” it appears Congress is no closer Department of Justice and others regarding DOT Ato passing comprehensive FAA Reauthorization grants of antitrust immunity to airline alliances, their since the agency’s authorization expired two years article is a tour de force defense of DOT analyses and ago. We were told Congress wanted to wait until the decision making in this area. Some argue that alliance presidential election to put forward its comprehensive benefits unquestionably work in favor of the alliance plan. It’s now been over a year since the election. carriers, but question the effect on smaller competitors Good grief. or consumers facing the combined market power of Congress is often the first to criticize the FAA. the alliance carriers. Jeff and Warren forcefully point Members rush to issue press releases taking officials to the market-opening and consumer-efficiency ben- to task for “misguided and flawed” environmental efits of immunity grants, and argue that DOT should reviews, “inability to handle” NextGen, or having “too continue to possess the authority to grant immunity cozy” of a relationship with industry.