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Chapter 1 Introduction:Preparing for a New Era in International Aviation1

Ⅰ REPLACING A FLAWED REGULATORY SYSTEM1

Ⅱ THE 'CHICAGO SYSTEM' AND A PROPOSAL FOR ITS REFORM5

A An Overview of The Global Air Transport Industry:Passenger/Cargo Services6

B A Synoptic View of the 'Chicago System'8

C Open Skies:Seeking Flexibility within the Chicago System12

Ⅲ A SUMMARY OF CORE PRINCIPLES FOR A SECOND STAGE PLURILATERAL TREATY17

Chapter 2 Prelude to Change:A Synthesis of Transatlantic Aviation Relations 1993-200823

Ⅰ INTRODUCTION:AN EPISTEMIC COMMUNITY RISES23

Ⅱ RETHINKING BILATERALISM:THE OPEN SKIES DECADE 1993-200325

A Beyond Bilateralism:The Baliles Airline Commission25

B A Bridge to Multilateralism:The Strategic Implications of U.S.Open Skies29

C The EC Responds to Open Skies:An Incomplete First 'Mandate'34

D Webs of Influence:International Organizations and Academic Commentators40

1 Webs of Influence Ⅰ:International Nongovernmental Organizations40

2 Webs of Influence Ⅱ:International Governmental Organizations43

3 Webs of Influence Ⅲ:Academic Commentators46

E Glimmerings of Multilateralism:Some Tentative U.S.Initiatives52

Ⅲ FIXING A NEW HORIZON FOR OPEN SKIES:U.S./EC AVIATION RELATIONS AFTER 200355

A The Force of EC Nondiscrimination Law:The European Court Destabilizes the Nationality Rule57

B Managing the Fallout:The Commission Secures A Second (Double) Mandate61

Ⅳ THE TRAJECTORY OF U.S./EC AIR SERVICES NEGOTIATIONS 2003-200767

A Toward a U.S./EC Agreement Ⅰ:Political Stalemate67

B Toward a U.S./EC Agreement Ⅱ:Breaking the Impasse71

Ⅴ AN EXECUTIVE BRIEFING ON THE 2007 U.S./EC AIR TRANSPORT AGREEMENT78

A The 17 Keynote Ideas of the 2007 Agreement79

B The Second Stage Agenda and Timetable82

1 The Second Stage Timetable83

2 A Threat of EU Member State Unilateralism84

3 The Second Stage Agenda:Toward an OAA?85

Ⅵ CONCLUSION:VISIONARIES,PRAGMATISTS,AND THE SHAPING OF A POST-CHICAGO GLOBAL AVIATION ORDER93

Chapter 3 Airspace Sovereignty:The Ontology of the Chicago System of International Air Transport Regulation97

Ⅰ INTRODUCTION:THE CONCEPTUAL FRAMEWORK OF THE CHICAGO SYSTEM97

Ⅱ AIRSPACE SOVEREIGNTY99

Ⅲ AT THE HEART OF THE CHICAGO SYSTEM:THE FREEDOMS OF THE AIR AND BILATERALISM103

A The Nine Freedoms103

B Trading the Freedoms: The Rise of Bilateralism109

1 Ex Post Facto Flexibility:The Moderate Liberalism of Bermuda Ⅰ111

2 Treaty-Based Rigidity:Bermuda Ⅱ116

Ⅳ THE VENERABLE DOCTRINE OF CABOTAGE119

A A Principle of Exclusion119

B Cabotage in a Multilateral Airspace Environment122

1 Pooling Airspaces in the EC:Can Cabotage Be Traded Away?123

2 Cabotage and U.S.International Aviation Policy126

a The Legal Foundations of U.S.Cabotage126

b The Durability of U.S.Cabotage Restrictions128

Ⅴ SOVEREIGNTY AND CITIZENSHIP PURITY: THE NATIONALITY RULE133

A The Substantial Ownership/Effective Control Dyad133

B Proscribing Multinational Airlines:The Nationality Rule in Domestic Law135

1 Case Studies in the Nationality Rule and the Unmaking of a U.S. Government Rulemaking138

a Airline Citizenship:Law and Policy in the United States138

b DHL/ASTAR and Virgin America:Citizenship as a Competitive Weapon143

ⅰ DHL/ASTAR144

ⅱ Virgin America150

c The DOT's Noble Failure:The 2005/06 Rulemaking155

C A Future Without the Nationality Rule?162

1 Alliances:From Code-Sharing to Contract162

2 Reforming the Nationality Rule in Domestic Law164

3 Liberalizing the U.S. Domestic Rules on Ownership and Control167

D Conclusion:The Superior Norm of Nationality171

Ⅵ FETISHIZING SOVEREIGNTY: THE PUBLIC STAKE IN AIR TRANSPORT172

A Public Airlines and Public Subsidy172

B The Retreat of the State:The Age of Deregulation178

1 New Models of Airline Regulation in the United States and EC178

2 Airline Privatization in the EU184

Ⅶ THE REGULATORY REFLEX:COMPUTER RESERVATIONS SYSTEMS AND AIRPORT ACCESS188

A CRS:From Regulation to Deregulation in 20 Years189

B The Competitive Quandaries of Airport Access194

Ⅷ THE LATE-MODEL CHICAGO SYSTEM:STRATEGIC ALLIANCES AND CODE-SHARING198

A Entrepreneurial Circumventions of the Nationality Rule198

B Global Marketing Alliances198

1 Strategies for Alliance-Building198

2 KLM/Northwest and Its Progeny:The Immunity Artifice203

C Code-Sharing as 'Pseudo-Cabotage'208

1 A Code-Share Taxonomy208

2 Does Code-Sharing Violate Cabotage?213

3 Code-Sharing:A Costly Compromise for U.S. International Aviation Policy-and for the Airline Industry214

4 Code-Shares and the Consumer220

Ⅸ MULTILATERALISM AND REGIONALISM IN THE CHICAGO SYSTEM223

Ⅹ THE CHICAGO SYSTEM ON THE CUSP OF REFORM231

Chapter 4 Model Jurisdiction Ⅰ:The United States&Airline Deregulation Within and Beyond a Unitary Airspace235

Ⅰ INTRODUCTION235

Ⅱ THE LEGAL AND HISTORICAL BACKGROUND239

A Prologue:An Apt Quotation239

B The Regulatory Era:The Kitty Hawk Irony240

1 CAB Route Authority:The 'Grandfather' Syndrome242

2 CAB Rate Authority:The 'Pullman' Effect244

3 CAB Antitrust Authority:Regulatory Omnipotence246

C Deregulation:The Intellectual Premises248

D Deregulation:A Political Act of Will251

1 CAB Route Deregulation:The Fruits of Dormancy255

2 CAB Fare Deregulation:Zones of Flexibility258

3 CAB Antitrust Deregulation:The Longest Sunset259

4 A Regulatory Vestige:The Essential Air Service Program263

E Scrambling the System:Alfred Kahn's Regulated Deregulation264

Ⅲ EXPORTING DEREGULATION: PROBING THE LIMITS OF BILATERALISM268

A The Emergence of an Open Skies International Aviation Policy268

B The IATCA:An Ambivalent Challenge to Bilateralism272

1 The IATCA's 'Soft Law' Approach to the Chicago System274

2 Protecting U.S. Carriers:The IATCA's 'Hard Law' Approach275

C The IATCA and the Chicago System:Enduring Regulation279

1 International Designation:Public Franchises and Private Profits279

2 International Fares:Zonalism and Unilateralism283

3 International Antitrust Regulation:Wielding the Wand of Immunity285

a Avoiding the Sunset285

b Two Case Studies in Alliance Approval and Antitrust Immunity:The Force of Bilateral 'Specificity'287

c Immunity Proceedings:The Conflict of Competition and Aviation Policy293

d The SkyTeam Proceedings:Slouching Toward Regulatory Incoherence297

e Mixing Competition Policy and Politics:The Instability of Immunity Jurisprudence301

D Moving Beyond Open Skies:The Need to Reconceptualize U.S. International Aviation Strategy302

1 Open Skies and Retrenchment:U.S. Bilateral Relations 1978-92302

2 U.S./Europe:A Continuing Story of Aeropolitical Discord305

3 Resisting Open Skies:The U.S./Asia/Oceania Market309

4 The U.S. Response:Aerodiplomacy Trumps Retaliation and Denunciation312

5 A Reconceptualization of Open Skies-Some Preliminary Thoughts318

a IATCA and the 2007 U.S./EC Air Transport Agreement322

b The Risks of More Bilateralism325

Ⅳ A CRITIQUE OF U.S. FEDERAL AIRLINE DEREGULATION326

A Lessons from the U.S. Experience326

B Securing Competition in a Deregulated Airline Industry327

1 The Structural Unpredictability of U.S. Deregulation327

2 An Enduring Business Model:Complex,Costly Hub-and-Spoke Networks331

3 CRS:Adjusting to a Post-Regulatory Environment335

4 Loyalty Programs and Slot/Gate Scarcity:Enduring Non-Price Entry Barriers340

5 The Death and Life of A Merger Policy for the U.S. Airline Industry347

a Mergers in the Reagan Era:Laissez-Faire under CAB/DOT Review348

b After 1989:Stronger Surveillance by the Antitrust Division352

6 Finding the Proper Regulatory Tempo:A Case Study of the 1998 Predatory Pricing Guidelines357

a The DOT Enters a Jurisprudential Minefield357

b The Rational Side of Predation362

c The DOT Abandons Regulatory a Priorism365

C Portents of Reregulation:An Industry in Perpetual Transition368

1 The Lessons of the September 11,2001 'Stabilization' Package368

a The First Approach of Reregulation:The September 11,2001 'Stabilization' Package369

b Lessons of the Stabilization Act373

2 2008:The Reregulation Debate Redux374

D U.S. Airline Deregulation:An Unfinished Experiment378

Chapter 5 Model Jurisdiction Ⅱ:The European Community&An Experiment in Multilateral Airline Liberalization381

Ⅰ INTRODUCTION:AN OVERVIEW OF THE EU AIR TRANSPORT INDUSTRY381

Ⅱ THE SUPRANATIONAL LEGAL AND POLICY FOUNDATIONS OF EC AIRLINE DEREGULATION386

A General Principles of the Community Legal Order386

B The Community Institutions and EC Air Transport Liberalization388

1 The Council of the European Union388

2 The European Commission389

3 The European Parliament391

4 The European Court of Justice393

C The Legislative Foundations of the Single Aviation Market:A 'Package' Deal401

D The EC Treaty's Competition Code:Still Leading from the Center410

1 The Primary and Secondary Sources of EC Competition Law411

a Regulating Private Action:Articles 81 and 82,Regulation 1 of 2003411

b Applying Competition Law to the Airlines416

c Merger Control in the EC418

d Regulating Public Action:State Aids422

E Toward Multilateralism:The EC's External Aviation Relations424

1 The Open Skies Rulings and the External Competence of the EC424

2 A Synthesis of the Community's External Competence432

Ⅲ AN APPRAISAL OF MULTILATERAL AIRLINE DEREGULATION IN THE EC:GUIDEPOSTS FOR THE ERA BEYOND OPEN SKIES434

A The Demonstration Effect of the European Experiment434

B Reprising the U.S. Experience:Protecting Competition in a Deregulated Era435

1 Europe's FTC:The Shifting Role of the European Commission435

2 Two Case Studies in Supranational Trusteeship:The Article 82 'Dominance' Factor438

a An Early Example:British Midland v.Aer Lingus439

b Focusing on the Competitive Structure:The Travel Agency Incentives Case443

3 Airline Mergers and Alliances:A New Commission Activism450

a Europe's Airline Culture:Cooperation Trumps Merger450

b Case Studies in the Commission's Scrutiny of Transatlantic Alliances453

ⅰ The Nebulous World of Transnational EU Mergers:Air France-KLM456

ⅱ A Case Study in Community Merger Policy:The easyJet Challenge to Air France-KLM459

c Conclusion:When the Mergers Come466

C Regulatory Challenges of Multilateral Airline Liberalization Ⅰ:Issues Common to the U.S.Experience469

1 Computer Reservations Systems in Europe469

2 The Infrastructure Challenge473

3 Passenger Rights:Overexuberant Regulation?477

D Regulatory Challenges of Multilateral Airline Liberalization Ⅱ:Issues Beyond the U.S. Experience482

1 Building the Community's External Aviation Policy Ⅰ:The Chicago Bilateral System After the ECJ Open Skies Rulings482

2 Building the Community's External Aviation Policy Ⅱ:More Verticality and a European Common Aviation Area488

3 A Concluding Note on the Community's External Aviation Policy492

E A Conceptual Conflict:The Community Licensing System and the Right of Establishment492

F Dipping into the Well of Public Subsidy:The Battle Against 'State Aids'495

1 Two Flag Carriers Under Scrutiny:Olympic and Alitalia497

2 A New State Aids Challenge:Airport Subsidies502

3 Should State Aids Be a Transitional Phenomenon?506

G Conclusion:Some Counterpoints to the EC Deregulation Experiment507

1 Two General Counterpoints509

a The Commission's 'Industrial Policy'509

b A Partial Deregulation of the 'Aviation' Industry510

2 Three Specific Counterpoints511

a The Anomaly of Public Service Obligation (PSO) Routes511

b A Doomed Suggestion:Fare Reregulation513

c A Cautionary Tale of External Relations515

Chapter 6 Conclusion:A Proposal for a Second Stage U.S./EC Air Transport Agreement517

Ⅰ INTRODUCTION:THE CHANGE IMPERATIVE517

Ⅱ THE IMPERATIVES OF LIBERALIZATION AND GLOBALIZATION518

A The Global Regulatory Backdrop to Airline Deregulation518

B A Constitutional Symmetry:U.S./EC Airline Deregulation521

Ⅲ THE FOUNDATIONS OF A NEW PLURILATERAL AIRSPACE522

A Introduction:The Narrowness of Open Skies522

B Visualizing a Multilateral Air Transport Regime524

C GATS Gradualism:A Search for the Highest Common Denominator526

1 Introduction526

2 Applying the GATS Framework Principles to Global Air Transport528

a The GATS Trade Principles530

b Most-Favored-Nation530

c National Treatment534

d Market Access535

3 A Critique of the GATS Approach to Multilateralism535

4 Conclusion:Politics and the GATS540

D A Plurilateral Reconceptualization of the U.S./EC Second Stage Negotiations542

E Some Guiding Principles for the Negotiators544

1 Principle 1:The End of Managed Trade546

2 Principle 2:The End of Cabotage and Chicago's Contrivance of 'Freedoms'547

3 Principle 3:A New Doctrine of 'Regulatory' Nationality548

4 Principle 4:An End to Pricing Controls550

5 Principle 5:A 'Deep Integration' Program of Regulatory Convergence551

a Convergence in Air Transport Competition Law and Policy553

ⅰ Introduction:Globalizing Trends in Competition Law Enforcement553

ⅱ A Proposal for Competition Surveillance of the Airlines559

(a)Shaping a Common Body of Competition Law560

(b)A Rule of Abstention for Competition Enforcement Agencies561

ⅲ Conclusion562

b The End of Operating Aid for Failing Carriers562

c Resetting the Tempo of Regulation:Abstention and Convergence564

ⅰ A Code for Airport Constraints566

ⅱ Labor Rights in a Plurilateral Setting567

6 Principle 6:A Mandatory Supranational Dispute Settlement/Appellate Mechanism570

a Introduction570

b A Sector-Specific Supranational Tribunal572

c Advancing to Private Supranational Dispute Settlement576

d Private Supranational Dispute Settlement:A Constitutional Possibility?578

e Conclusion580

7 Principle 7:Adopting the EC 'Community Designation Clause' for Countries outside the Second Stage Plurilateral581

Ⅳ BEYOND OPEN SKIES: THE POLITICAL CHALLENGE OF AUTHENTIC LIBERALIZATION583

Appendix Ⅰ Department of Transportation Statement of United States International Air Transportation Policy May 3,1995589

Appendix Ⅱ Model U.S. Open Skies Agreement601

Appendix Ⅲ 2007 U.S./EC Air Transport Agreement615

Tables of Cases and Administrative Proceedings659

Select Bibliography669

Index695