In part two of his interview with GTDT Aviation Law News, Jeffrey Shane, general counsel at IATA, spoke about the effect of Donald Trump on the aviation industry, how litigation can help shape the market, and what legal trends he expects to develop ahead of 2018. See part one here.
One panel at this year’s Legal Symposium considers how President Trump will approach the aviation industry. How do you balance hopes that he will be a friend to the US aviation industry against fears that he may pose a risk to foreign carriers, especially those out of the Middle Eastern gulf?
As you can imagine, that is an awkward area for us as we represent both US and non-US carriers. We have seen the challenges that some of the US carriers have raised in connection with the Gulf carriers. Obviously IATA can’t easily opine on those issues, and the carriers on both sides know that. They don’t expect IATA to take a role in those sorts of disputes.
When I started planning this Legal Symposium a year ago, I thought it would be just the wrong time to have a meeting in Washington, DC, as there would be a brand-new administration. The new president would only have been sworn in on 20 January, I thought, and there probably wouldn’t even be a secretary of transportation by that time. Nothing will have happened, I thought. Nobody will know anything about what is going on and there will be nothing to talk about.
So much for my reputation as a prognosticator. Obviously, I could not have been more wrong. There will be plenty to discuss.
IATA and its member airlines were largely blindsided by President Trump’s recent executive order blocking immigration from certain Middle Eastern countries. How challenging is it running an in-house legal team within an environment of increasing political/legal uncertainty?
Perhaps there are shades of difference with President Trump issuing executive orders like the travel ban, but the truth is that when you are serving a global industry, keeping track of all the rapid-fire developments that affect it everywhere is always a challenge.
Keeping up with economic sanctions is a typical example. They are constantly changing. We had the Iran nuclear deal, so suddenly we heard that some of the Iranian sanctions were going to be relaxed, and we began moving ahead on that front to analyse the opportunities that would be newly available to our member airlines and IATA itself. When President Obama suddenly relaxed Cuban sanctions, another cluster of opportunities opened up for airlines and for IATA.
In other words, the Trump administration hasn’t produced a sea change from my perspective. Yes, there are changes in particular policies. The executive order imposing the travel ban was certainly a challenge for all the airlines that had to comply with it, but airlines place the highest priority on complying with the law of the countries to which and in which they fly, and they tried very hard to do that as long as the executive order was in effect.
We stay in touch with our friends in the US Customs and Border Protection agency, the Transportation Security Administration, and the other agencies that are responsible for these requirements and we convey those requirements to our member airlines as quickly as we can to make sure that everybody is on the same page. Each airline has its own direct connections with those regulators, as you would expect, so we’re just backing them up and in some cases trying to reduce the occasional opportunity for confusion.
Of course, the nature of the industry is that it has to be attuned to rapid changes in the [regulatory] environment, but that comes with the territory.
We have the IATA Legal Committee, which is a representative group of airline in-house lawyers, who come together every month for a conference call or sometimes a meeting in person, such as the one that is always conducted in the margins of the Legal Symposium. That is one way in which we communicate with the industry at large.
We also have the IATA Legal Forum, which is comprised of all IATA member airline in-house lawyers. We communicate directly with this larger group whenever there is a need for clarity about regulatory requirements. For example, shortly after the US district court in Seattle issued a temporary restraining order against the travel ban, a colleague and I were on the telephone with the CBP in Washington, DC, and within minutes I had sent a memorandum to our member airlines’ legal departments announcing that the CBP was restoring the status quo. There was a big question mark among many airlines about the impact of that temporary restraining order, but when the CBP told us authoritatively that people would be allowed to travel just as though the executive order had not been issued, I was able to assure the lawyers from all of our member airlines of that fact. It just reduced the level of confusion.
Legally speaking, have any of your plans been shelved or fast-tracked in anticipation of the new Trump regime?
No, I can’t think of anything. We don’t know precisely what the approach to regulation will be. Our hope is that it will be a business-friendly environment. That is what every industry is hoping, of course. Perhaps there will be a more attention paid to cost-benefit analysis than we saw in the previous administration. But we don’t know yet. We don’t know who the people are who will be responsible. Once they’re there, we will be at their doorstep, getting to know them and letting them know what we think.
What are the big cases that IATA is keeping an eye on or is involved in?
We occasionally get involved in commercial litigation because we are the provider of lots of products and services and we do that in competition with other vendors.
I’m happy to report at the moment, however, that our docket is clean. We had a lot of big cases last year and we either won or settled favourably every one of them. I’m happy about that and at the moment we’re feeling pretty good. Let's keep our fingers crossed.
To what extent does IATA, in its role as a complainant, look to identify competitive and other types of shortcomings in the market? Does it try to engineer improvements, not just through lobbying, but also through litigation?
This is an area that I am unabashedly proud of. The legal services department at IATA was traditionally viewed as a support service, not unlike human resources, accounting or communications. Of course we review contracts, have sanctions compliance work, and perform the usual suite of in-house support functions. That is our day job if you will.
But I believe that the law can be a tool that we can use for the benefit of our member airlines. We can add enormous value to the industry, for example, by looking at whether or not there is sufficient competition among the providers to the industry.
More recently, I began to explore whether or not there is more IATA can do through the Legal Committee and the Legal Forum to help in-house lawyers deliver more value to their companies. If you look at the legal profession across the airline industry, you will find that it is very uneven. Some of the larger airlines have very strong legal departments and do a lot of their legal work in-house. But there are also some smaller carriers in which the legal departments aren’t even staffed by lawyers. My impression is there is a tremendous amount we can do within IATA, by exchanging best practices, by providing materials, and by keeping them apprised of challenges that are coming up in various areas of the world. We can help the lawyers who are working for our member airlines do a better job.
That is a relatively new area for us, but it seems to have engendered real enthusiasm among our members, and I’m not surprised.
Within the IATA Legal Committee we have a litigation budget and we try to identify significant cases around the world that are likely to have some precedential significance, the outcome of which could affect the industry across the board.
We have been in US Supreme Court cases and comparably important cases in lots of jurisdictions. We pick and choose carefully. That is a service we have always performed for our members, although those cases don’t come along all that often.
As an American lawyer, I don’t mind saying that I love having my name on a brief to the Supreme Court of the United States, especially when the decision comes out right. We had two important cases in the Supreme Court a couple of years ago in which the decisions went our way. In Northwest v. Ginsberg, Northwest’s unilateral termination of a frequent flyer programme membership on grounds that the member repeatedly violated the rules of the programme was challenged under state contract law. We argued, and the Supreme Court agreed, that the contract could not be adjudicated under state law because aviation had been pre-empted by the federal government.
The other case, Air Wisconsin v. Hoeper, involved a pilot’s defamation claim against his airline employer. Another employee had described the pilot to security officials as unstable. The applicable security rules encouraged employees to follow a policy of “if you see something, say something". The case went to the Supreme Court. We argued, and the Court ruled, that where security is the objective, people should not be forced to weigh the potential liability consequences of bringing suspicious behaviour to the authorities’ attention.
Looking towards next year, what topics do you think will be dominating the agenda of the Legal Symposium in 2018? Are there any trends currently bubbling under the surface that you expect to gather traction as the year progresses?
The advent of “new model” airlines is a really interesting topic. We have seen Norwegian finally get licensed in the US. We also had WOW Air. There are a whole variety of different models that are posing interesting competitive challenges to the existing carriers and I would expect that we will see more of that. What are the long-term prospects for the alliances that we know today? They are morphing. They are beginning to embrace carriers that we wouldn’t have thought of as obvious candidates for alliance membership. It’s a very dynamic aspect of the business.
The accelerating expansion of international air services – notably in still developing markets – has created new challenges relating to the allocation of scarce capacity at newly congested airports to the growing number of airlines that need take-off and landing slots. This is creating tension not only among airline competitors, but among their respective government champions. IATA’s World Slot Guidelines were developed to establish fairness and predictability in such circumstances, and they have been widely adopted. IATA will continue to urge adherence as the best means of addressing temporary episodes of insufficient capacity.
We have already mentioned drones and I’m sure they will continue to be the focus of major attention. Implementation of the new ICAO “CORSIA” agreement on reducing emissions from aircraft will require examination. And current efforts within the industry to simplify the requirements governing the transfer of aircraft from one registry to another – an increasingly important topic given the number of new airlines emerging throughout the world and the growing market for pre-owned aircraft – are likely to be another interesting topic.
Given the continuing downward pressure on the price of oil, a number of oil-based economies and others have been unwilling to convert and remit airline earnings in hard currency as they are required to do under their bilateral air services agreements and investment treaties. IATA has invested a lot of time and energy on these “blocked funds” situations, and the airlines are looking more closely at their legal remedies. By next year I would hope that there will have been developments on that front worth exploring.
When the US embraced an open skies policy for the first time back in the early 1990s it was also willing, in appropriate circumstances, to provide antitrust immunity to erstwhile competitors in order to facilitate greater efficiencies, increased integration, and more benefits for consumers. The new policy engendered a far more globalised market, and facilitated a level of cross-border cooperation that had been unknown prior to that time as a result of national restrictions on foreign ownership and control. The animating objective behind the open skies policy – which now exists in much of the world in one form or another – was just to get government out of the way and thus to see what the airline industry is capable of developing in terms of innovative approaches to service.
We just don’t know what will come through the door. Entrepreneurs are beginning to understand that the quest for affordable air transportation is growing and boundless. Travel is the first aspiration of people who finally have some disposable income. The new middle classes emerging in a great many economies represent a very important new market, but it will require some tailoring of existing offerings to tap into that successfully. That phenomenon may well be a big topic for us in 2018.
It is a consistently fascinating industry and there will be developments that we haven’t even imagined yet.