The Travel Company's Perspective

01 July 2006

AVIATION BILATERAL REGULATION 

For the First Choice Group, a key part of business is accessing low cost, high quality, value for money airline seats. Utopia would be a common airline seat product, this would maximise use of our own aircraft assets across the group, this is some way off in the future but we will continue to seek it. 

Since deregulation within the EU in January 1993, our in-house airline has been able to operate unhindered within the EU Common Aviation Area where all of the previous bilateral restrictions have been removed. Creating a level playing field with no legal distinctions between scheduled and non-scheduled carriers has allowed each airline business to develop and refine its own model. Deregulation of the USA airline industry within its borders has resulted in a number of distinct business models: fullservice carriers, charter carriers offering full or restricted on-board services, or low-fares carriers with ‘no-frills’ service. This business approach has worked well in both the USA and Europe where deregulation has created new markets and innovative products that meet consumer needs. That said, more could be done by established carriers to remove remaining barriers to entry into overseas markets. 

In its role as a tour operator, First Choice is largely free to acquire foreign counterparts, in whichever country it chooses, and has done so where desirable. The same cannot be said for aviation. We, and other tour operators, remain restricted under long standing bilateral agreements or outdated charter rules. This prevents us using any of our aircraft on many of the routes for which the group provides holidays. First Choice, therefore, supports the general principle of the EU to conclude a number of ‘open skies’ agreements, such as the one recently initialled with Morocco. We remain cautious, however and insist that such deals must be true open skies arrangements that are fair and balanced. Further evidence is needed to convince us that this is the case with the tentatively agreed position between the EU and the US. 

By removing barriers to entry, whether by liberalisation of local charter rules or creation of common aviation areas, extensive evidence shows that any such liberalisation inevitably leads to an increase in competition, creating more demand and consequent increased tourism to that destination – all of which ultimately benefits the local economy. 

BORDER CONTROL ISSUES

Since the events of 9/11 in 2001 plus other terrorist atrocities since – Bali, Madrid and London – governments wishing to improve their border controls have placed enormous pressure on the aviation industry. They are doing this by requiring air carriers to provide more and more passenger data. Much of this data, however, is not available because of the contractual relationships between tour operator and air carrier or retail travel agent and tour operator, or even because IT systems are too primitive. Obviously, this information is important to governments in the present context but, with more and more countries requiring that carriers provide advanced passenger information (API) and grant access to, or provide details of, passenger name records (PNR) held in reservations systems, the cost burden to the industry is increasing, with no real or derived benefits accruing to carriers. There is some mitigation of carriers’ liability costs, but the savings achieved are far outweighed by the cost of collection and transmission of API data. 

Given the complexity of the industry, the airlines and the regulators need to spend a great deal of time developing common understanding and clear insight into the complexities of airline and airport operations, and of the differing operating procedures and data available between scheduled and non-scheduled carriers. It is not uncommon for airlines to be working with ground handling agents, who still operate legacy IT systems, some of which are running on 1970s data platforms that have been amended by ‘bolt-on’ technology over the past 30 years. So, combining a plethora of IT systems to provide data is costly and, because the business model for charter carriers is significantly different from that of regular scheduled carriers, our ability to comply and provide even basic API data is in most cases somewhat limited. A number of governments assume that because an airport is modern it will have the necessary infrastructure and technical infrastructure to collect and transmit API data. The truth is that airlines can easily find that over 90 per cent of their networks are unable to capture such data, yet in some cases the regulators want airlines to provide it, often at less than six months’ notice, with the carriers paying for the introduction of the technology. Although the need to strengthen countries borders is understood, in practice, all the financial investment and responsibility have been put squarely at the door of the airline community, which is unjustifiable. We continue to press individual states to adopt international ICAO standards for the collection of both API and PNR data. We feel, however that PNR data should only be required to the extent that it is available and captured as part of the day-to-day business of the carrier – requiring airlines to capture more data than this is unrealistic. 

THE ENVIRONMENT 

Managing the group’s impact on the environment – the group has substantial business units in 17 countries across the world including its airline of 32 aircraft – is another big challenge, as it is for all in air transportation. Our main focus is on a selfregulatory programme of contributing to sustainable development by having regard to customers, employees, the communities and local environments of our holiday destinations as well as making a concerted effort to operate responsibly. 

The prospect of an EU emissions trading scheme (ETS) is of relevance to the industry as a whole. Europe’s aviation ministers agreed at their meeting on 2 December 2005 to instruct the European Commission to table proposals to include aviation in the ETS by the end of 2006 to reduce aviation’s impact on global warming. But the industry view, considering what must be in place beforehand, is that aviation will probably not be included in the scheme before 2008 and that will be the earliest we will be required to trade in carbon permits. Although further work is foreseen, initial expectations are that an ETS would add about €9 to a return flight. We welcome the commission saying it wishes the scheme to apply to all flights departing from EU airports, thus preventing the distortion that might otherwise occur were the ETS to apply solely flights within the EU. 

WHAT WE LOOK FOR WHEN APPOINTING AN AVIATION LAW FIRM

One of the main values we look for when appointing an aviation law firm are its skills and reputation, not only of the particular lawyer we are appointing, but what other services the firm can provide to complement our operations. In many instances, we seek recommendations from firms with whom we already have a longstanding and trusting relationship. Before appointing a law firm, we consider its portfolio of skills and client base, and we will normally ask at least one of the firm’s clients about the service it provides. For us it is important that the firm is available to deal immediately with issues that may arise across the whole aviation spectrum, including those affecting other government agencies, particularly the security and border control agencies. We look in particular for law firms that demonstrate an up-to-date knowledge of issues affecting non-scheduled operations globally and we expect firms to advise on regulatory changes within countries as they occur. 

Cost is of course an important element in our decision. Ultimately, however, what we expect is value for money and expert advice. We will always take into consideration all the components before appointing a firm and it goes as read that they will have a shared vision of and respect for our business values. 

ACCIDENT INVESITIGATION UNDER THE CHICAGO CONVENTION – TIME FOR REVISION

Sean Gates and George Leloudas, Gates and Partners

The Chicago Convention on International Civil Aviation of 1944 regulates many aspects of international air carriage. Among these is the outline regulation of the procedure for aircraft accident investigations, which is mandated by article 26 of the convention. This imposes on the state where an air accident occurs the basic obligation to institute an investigation in accordance with ICAO standards and recommended practices (SARPs) provided that they are not in conflict with the domestic law. It also mandates the state of the aircraft’s registry to appoint observers to the inquiry and compels the state holding the inquiry to communicate the report and findings to the state of registry. 

SARPs for aircraft accident investigations were adopted for the first time in 1951 in annex 13 to the Chicago Convention. The current 10th version represents the body of international law governing aircraft accident investigation. Paragraph 3.1 provides “the objective of the investigation of an accident or incident shall be the prevention of accidents and incidents. It is not the purpose of this activity to apportion blame or liability”. Unfortunately this objective has long ceased to be observed at least by some of the parties to the investigation because of the very significant commercial and economic consequences that any accident might and some do have on those participants. The provision is now also an impediment to the speedy resolution of claims arising from accidents and should be amended, or its spirit reinterpreted, so that settlement of claims is also treated as a priority. 

Under annex 13, the states entitled to participate in the investigation by appointing an accredited representative are: 

• the state of registry; • the state of the operator; 

• the state of design of the aircraft; 

• the state of manufacturer; 

• any state which on request provides information, facilities or experts to the state conducting the investigation; and 

• a state which has a special interest in an accident by virtue of fatalities or serious injuries to its citizens. 

The relevant states are entitled but not obliged to appoint advisers proposed by the operator, designer and manufacturer to assist their respective accredited representatives. These advisers are supposed to remain under the supervision of the accredited representative and their main role is to assist him to the extent necessary to make his participation in the investigation effective. 

Accredited representatives and their advisers are supposed to participate in the complete investigative process under the control of the investigator in charge. This includes the entitlement to visit the scene of the accident, examine the wreckage, obtain witness information and suggest areas of questioning, have full access to all relevant evidence as soon as possible, receive copies of all pertinent documents, participate in readouts or recorded media, and take part in off-scene investigative activities. These will include component examinations, technical briefings, tests and simulations as well as investigation process meetings and deliberations relating to analysis, findings, causes and safety recommendations. The parties are also entitled to make submissions in respect of the various elements of the investigation. Accredited representatives and their advisers are required not to divulge information on the progress and findings of the investigation without the express consent of the state conducting the investigation and are only permitted to report to their respective states in order to facilitate appropriate safety actions. 

It is an inevitable fact that, given the comparative safety of commercial aviation, the majority of carriers rarely experience more than one or at most two accidents per generation. By contrast and inevitably because of their dominance of the market, one of the relatively few manufacturers of commercial aircraft will be involved in every accident. For all of the parties who are involved, their brand and reputation is at risk. Each of the parties have a significant interest in protecting that brand and focusing on the issues which affect other participants. Inevitably, manufacturers have a significant advantage in terms of experience of investigations and of technical skills in comparison to what are often small and comparatively less well funded operators. 

The vast majority of accidents have multiple causes involving various parties including the airline, the manufacturer, air traffic control authorities, ground handling services, service providers and others. In most international carriage and the majority of domestic carriage by air, injuries to passengers and persons on the ground are strictly allocated to the operator of the aircraft, sometimes subject to a limit of liability. Claims arising out of an accident are often made for a variety of reasons against other parties; primarily at the instance of plaintiff lawyers seeking the most generous jurisdiction within which to recover compensation. It is commercially and economically sensible for all those implicated in an accident to resolve claims for compensation arising from these accidents with expedition. Claims rarely reduce in value over time. It is therefore appropriate for the parties implicated in an accident to come together as soon as possible thereafter to agree a framework to provide the necessary funds for settlement. That is the best practice for handling major accidents and is endorsed by the International Union of Aviation Insurers. 

Inevitably those discussions require apportionment between involved parties usually by way of contributions to a sharing agreement. The difficulty in this process is the disparity of information between the parties. There is inevitably suspicion that those who have played a greater role in the investigation and have more knowledge of the causes, some of which may involve their own company’s liability, will be able to take advantage of an early agreement to deal with claims and minimise the exposure of their company. Dividing what is usually a multimillion dollar exposure in respect of which major facts are not known to some parties but are to others is a major roadblock in the process towards agreement. 

It seems likely that the prohibition of fault finding and on dissemination of information was designed to limit the lobbying of the investigators by commercial parties with a view to achieving the most balanced and reasonable assessment of the causes in order to achieve the goal of safety in aviation. Those intentions are, however, inevitably affected by the involvement of commercial parties with brands to protect and are nowadays achieved with very limited success. The idea that opening up the investigation in a limited way would thwart the principal purpose of securing safety and avoiding future accidents is not seriously maintainable. All of the parties in civil aviation recognise the absolute importance of safety in civil aviation without which the public’s confidence would be lost and the future of air travel would be jeopardised. Participants in aviation usually carry out their own investigations in the aftermath of an accident in order to ascertain the appropriate safety measures to safeguard their operations. Safety measures are almost always implemented before the publication of the final report regardless of legal implications. As Lord Mance indicated in the recent DVT judgment in the House of Lords: “airlines and airline safety are matters which are, and must always have been, very much in the public eye. They are closely regulated at international and national levels. It seems improbable in the extreme that the, or even an, important driver for aircraft safety and consideration for passengers is the legal responsibility… standard regulatory systems, competition between airlines and the incentives to offer better service are much more credible factors”. 

Although the principal purpose of an accident investigation should remain the avoidance of future accidents, it is submitted that early resolution of the victims’ claims should also be given considerable weight. To achieve that purpose, the parties most directly involved in the accident should be permitted to use the information, which they should be afforded in the context of the official investigation, to level the playing field between parties and afford a respectable opportunity to arrive at a funding or sharing agreement to resolve the claims. To achieve these goals, amendments are needed to annex 13 to permit wider dissemination of information from the investigation within the various companies and their advisers. Additionally, the role of the commercial parties as advisers to accredited representatives should be reemphasised and their right to participate in all aspects of the investigation and make representations should be reinforced, subject to appropriate safeguards to prevent abuse. By these means not only can the safety of aviation be guaranteed but also the fair and speedy compensation of victims. 

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