DOT to ease restrictions
on foreign investment
US Dept. of Transportation will
ease its interpretation of what
constitutes foreign ownership
and control of a US carrier
under a Nov. 1 notice of proposed rulemaking that aims to
encourage “easier access to
foreign capital for US airlines”
(see Editorial, p. 5). The
NPRM does not modify the
requirements that 75% of voting control of a carrier reside
with US citizens and that the
president and two-thirds of the
managing officers and directors be US citizens as well,
which may be altered only
through an Act of Congress.
However, DOT said that in situations where the US and a foreign country enjoy an open
skies relationship and reciprocity for US investment, it would
be willing to loosen its definition of foreign control.
As an example, DOT
described a situation in which
a foreign investor who is a citizen of an open skies partner
owns up to 25% of a US airline. Two of the carrier’s seven
directors represent the
investor’s interest on the board
and three of the 12 senior
management officials are nominated by the foreign investor.
This arrangement is in compliance with the statute.
However, under its new
interpretation, DOT also would
permit one of the three senior
managers to be in charge of
“day-to-day operations” of the
airline while another could
head a committee whose
responsibility is setting market
entry strategy. Both would have
influence in aircraft purchase
decisions. In the past, said the
department, “such responsibilities would have raised actual
control issues,” while under
the proposed policy they would
not “absent any other indicia
of control.” The NPRM was
released during a new round of
Open Aviation Area talks
between the US and EU.
Song to disappear
but live TV remains
Delta Air Lines intends to fold
its Song low-fare airline opera-
tion back into the mainline
during the next year or so
while introducing Song’s cus-
including live seatback televi-
sion, to at least 52 additional
mainline aircraft that will be
deployed on business routes
including all transcontinental
flights from fall 2006. Delta
also will add first-class sec-
tions to Song’s current fleet of
48 757-200s to attract business travelers who can use status and miles to upgrade to
the front of the cabin.
Additionally, in what it
described as “the largest international expansion in its history,” Delta will launch nonstop
service from Atlanta and New
York JFK to 11 cities in
Europe and the Middle East
beginning March 27.
Meanwhile, the airline is
seeking bankruptcy court
approval to impose a new contract on its 7,000 pilots that
would reduce pay rates by
19.5%, providing estimated
savings of $325 million annually. Delta has cut pay and
benefits for its 44,000 other
employees by $605 million.
The pilots have offered concessions valued at $90.7 million
per year over four years.
JAL, Royal Jordanian to
The world’s largest nonaligned
airline is independent no more.
Japan Airlines in late October
said it will apply to join
oneworld. The link is not unex-
pected given the close associa-
tion between JAL and oneworld
anchors American Airlines and
British Airways as well as with
Qantas and Cathay Pacific, also
members of the partnership.
Also in October, Royal
Jordanian was invited to join,
becoming the first Middle
Eastern airline to enter a major
In terms of revenues, JAL
Group is the No. 3 airline company in the world, trailing
Lufthansa Group and Air France-KLM Group. It will expand
oneworld’s existing network by
10%, adding 68 unique destinations.
FL Group, parent of Icelandair,
reached agreement as expected in late October with
Sterling parent Fons
Eignarhaldsfelag to acquire the
Danish low-fare airline for
DKK1.5 billion ($241 million)
including DKK1.1 billion in
cash and DKK400 million
worth of shares in FL Group.
Payment may rise or fall
depending on Sterling’s EBIT-DA performance. FL will take
over operation of the carrier
on Jan. 1, subject to approval
of competition authorities.
Sterling, which recently
absorbed Maersk, will focus on
charter and tourism markets,
emphasizing southern Europe.
In tandem with the purchase, FL Group proposed a
share offering to raise ISK44
billion ($733 million), boosting equity to ISK65 billion.
The group has been restructured into separate subsidiaries reflecting their core
activities: Airline and airline-related, tourist service and
» Lufthansa Group posted third-quarter net earnings of €416
million ($490 million) after a
breakeven first half. Results
were boosted by pre-tax gains
of €180 million from the sale
of LH’s remaining shareholding
in Amadeus and €107 million
from the sale of its interest in
Loyalty Partner. It earned
€125 million in the third
Boeing launched the 747-8 (formerly the 747 Advanced) on Nov. 15 with orders
for up to 34 freighters from Cargolux and Nippon Cargo Airlines. A passenger
variant also is being offered. Aircraft will be powered by a version of the GEnx
engine for the 787. Service entry is late 2009 (see article, p. 44).
» WORTH THE WEIGHT
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