Hey, I am doing a paper on the Open Skies proposal. If you know anything about it, or have an opinion about, let me know. Also, does anyone know ALPA's stance on this? I am sure I know what is most likely will be. Thanks!
I can't seem to edit only after ten minutes elapsed since the orginal posting. So here is an adendum and clarification:
Open Skies is the treaty/agreement with other countries for any air transportation. This agreement goes back to the origin of being able to fly from one country to the next, affectively bypassing customs. In recent times, the EU and other interests have been proposing to limit the restrictions of these agreements. A specific item has been to relax the US restriction of only allowing a 25% of foreign interest in the ownership of an airline. The core to the Open Skies treaty is that airlines will be able to operate into other countries to the location of thier own chosing, and schedule these flight when they want. Many people fear that we as a rather isolated country couldn't compete with the consortium of countries that make up the EU and companies like Airbus when it came down to operating our airlines profitably. The fact is that foreign countries heavily subsidize their airlines and therefore artificially alter the market price of a seat or cargo.
So, these agreements are coming under pressure again for change and I am wondering if anyone has any current thoughts or news on the development of these negotiations. Thanks ahead of time.
BTW, this could affect us all. Can you imagine if we had European run airlines with all European employees opperating in the States? It is not likely to happen in our life time but the globalization of economies is a reality. This globalization is being lead by the fact we can get from one country to another quickly, or better put, the fact we have planes, or even better put; aviation is the fundamental element in driving globalization. Well, maybe second to the internet now. Thanks!
If I'm not mistaken, Open Skies and cabotage are separate issues. We already have Open Skies agreements with most of the EU countries, the UK is the big stickler and that is due to Whitehall's protecting the positions of the British carriers at Heathrow. The US won't agree to Open Skies unless our carriers are given meaningful LHR access.
We can do open skies without changing the foreign ownership restrictions or allowing cabotage. I think Open Skies is fine, but cabotage is another matter.
Well the current issue has morphed from the over-flight policy into one of cabotage. There are huge presssures all over the globe to both open airspace and also end cabotage rules and laws. Currently on the books is huge pressure from the EU to relax ownership restrictions for foreign owners from 25% to 49%. Some say this would infuse the airline industry with some cash but it looks like it woudl be a move towards consolidation on a global scale.
Some other elements that are really fresh in this arena are the final agreement on a single airspace over the EU. Can you believe that hasn't happened yet? But most of this Open Skies policy discussion isn't confined to the EU. There is huge focus on China and the rest of the developed Asian nations. Just yesterday Thailand and China reached an agreement on cabotage with regards to cargo. They have esentially "taken down the wall" if you know what I mean.
The globalization of the world is happening and aviation is leading the charge. The policy makers are hard at work and the evolution will be interesting.
[ QUOTE ] EU Rejects U.S. Aviation Deal, Will Press for Broader Agreement
March 9 (Bloomberg) -- The European Union said a U.S. offer to open up the $18 billion trans-Atlantic airline market was inadequate and pledged to seek a broader accord. The EU also said it would consider a two-stage opening if the U.S. gave some initial access to the domestic market.
The move comes a week after U.S. Transportation Secretary Norman Mineta said he wouldn't consider letting European airlines, such as British Airways Plc and Deutsche Lufthansa AG, compete on domestic routes. It also comes before a fourth round of talks between the two sides due to take place later this month.
``What we have is not acceptable to Europe,'' Transport Commissioner Loyola de Palacio said at a Brussels press conference after a meeting of EU transport ministers. ``There is nothing in terms of access to the American market.''
An EU-U.S. aviation accord would encourage airline mergers by at least removing nationality-based traffic-right restrictions in existing U.S. treaties with European countries. The restrictions, which prevent a German airline from flying to the U.S. from Italy, for example, breach rules making the 15-nation EU a single economic area, the bloc's top court has ruled.
The EU wants a trans-Atlantic aviation pact also to offer access for European airlines to U.S. routes, abolish foreign airline ownership limits of 25 percent in the U.S. and 49 percent in Europe and encompass competition issues.
``At the end, what we want is a fully integrated market,'' De Palacio said. The U.S. has offered to raise its foreign airline ownership limit to the EU's 49 percent level while saying European competition on domestic routes isn't negotiable because Congress has outlawed the practice.
[ QUOTE ] New EU law seeks to curb aid to US airlines
11 March 2004
The European Parliament passed a law Thursday to seek redress for subsidies enjoyed by foreign airlines such as billions of dollars granted to US carriers after the September 11 attacks.
The European Union assembly said European airlines, which are subject to strict EU rules on state aid, could not compete fairly with their US rivals.
The adoption of the law means that the European Commission, the EU's executive arm, must now work out detailed ways to seek redress if, for example, a European airline complains about help offered to US carriers.
Among the possible measures would be to fine the foreign airline the same amount it is found to have received from its government.
The EU lawmaker who steered the legislation through parliament, British Liberal Nick Clegg, said the law targeted aid such as the post-9/11 support given to US carriers.
"Since 11 September 2001, US airlines in particular have benefited from huge government subsidies which have allowed them to lower prices artificially on trans-Atlantic routes in order to win over customers," he said.
"This has hit competing European airlines hard, especially since they have to comply with stringent EU state aid rules."
Airlines around the world were plunged into crisis in the aftermath of the September 11 airborne suicide attacks on New York and Washington, when insurers withdrew or drastically scaled back coverage for acts of terrorism.
Coupled with a slump in air travel, the attacks forced governments, including in the EU, to step in to prevent a total shutdown of air travel.
The EU has been scaling back its state insurance coverage for European airlines, but the European Parliament accused the US government of continuing to extend billions of dollars in subsidies for its carriers.
"The days are long gone when EU airlines were protected from international competition by dollops of public subsidy and US airlines had to survive unaided," Clegg said.
The European Commission has been clamping down on subsidies offered to EU airlines.
In a landmark decision last month, the commission ordered Europe's biggest no-frills carrier Ryanair to repay millions of euros (dollars) in subsidies extended by a state-owned airport south of Brussels.
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I'm thinking JetBlue's gonna make a killing if it heads over to the EU.
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There was a big article about JetBlue in my hotel delivered USA Today this morning, JetBlue and the other discounts airlines now carry 22% of pax at JFK, LGA, EWR, back in 99 they carried only 7%. And they are just waiting for US AIR to go belly up so they can snap up there gates and take off/landing slots.
JetBlue gets it high profit margin from multiple approaches. The single aircraft type was Southwest's baby but will soon be a thing of the past. JetBlue will be buying the new Embraer 190 and Southwest is looking at that plane too ( I think they will be getting the 100 seat version).
JetBlue is not a union company as well. The cost structure of the entire airline is streamlined down to point to point service and that is what allows them to make the higher profit margin.
Interestingly, after writing this paper and creating the presentation, my feeling is that the legacys will need to do two things. First, slim down. The need to cut the fat and create a more streamlined product. The LCC's are here to stay with some analysists predicting 40-50% market share in the long term. The need to distinquish themselves. Second, they need to focus on their strengths. They are good at long haul flights. The legacies should be lobbying hard for further Open Skies treaties (they are lobbying pretty hard now). With a greater and greater global economy long haul routes will soon be connecting much of the world that is out of the loop.
But back to RivieraJet's proposed business plan, I think it is great and it will most likely do really well. They are simply looking at doing the really popular point to point routes (just like the LCC's do) and making it transcontinental. If they can find the right aircraft, the right route and fare, they should be in.