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tv   [untitled]  CSPAN  June 22, 2009 7:00pm-7:30pm EDT

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transportation coverage. anita mosner, partner at holland and knight and co-chair of the firm's global aviation team and a guess of our speaker. skipping over the podium, angela keen, bloomberg news and chair of the committee. skipping our speaker for just a minute, sean bullard, president of -- member of the national president club's bored of governors. he also organized this event. thank you very much, sean. paul charles, director of communications for virgin atlantic and a guess of our speaker. joe joe anselmo of aviation week. caspar -- for the european union delegation and finally myron belking former ap bureau chief in london and secretary of the national press club. ask anyone in this room who sir
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richard branson is and he will be defined different ways: a flamboyant en43 pren newer with an appetite for starting new buses, a magnet for controversy, such as his recent stint as a glass xo cleaning worker in a tv ad for his virgin trains. or a billion dollar philanthropist attempting to save mother earth. no matter, he is a gift for making people pause and take notice. his high profile adventures cloud developing personal space flight and in 1986, crossing the atlantic in his plane offshore racing boat in racing time. a year later, he set another record crossing the atlantic in his virgin atlantic flier, not only the first hot air balance lon to cross the atlantic but also the largest ever at 2.3 million cubic feet. clearly, this is a man who likes a challenge.
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whether it's in business or in sport. and while many would be satisfied after being knighted by the queen of england for services to entrepreneurship, he's not. sir richard branson, founder of a pint-sized record business in 1970 now rules an empire that rivals the gross domestic product of many small countries. whether it's virgin cola, investing in alternative green technologies, space tourism or running one of the eup est airlines in the sky he's done it and although the european press has skewered him for having lost -- in the last year, or $171,000 british pounds in an hour, he continues to be optimistic. who in this room would promise all of his or her airline profit if you actually owned an airline to the break through discovery of an alternative fuel for the airline industry? only one person. when recently asked why he
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responded "i actually believe it's a good financial investment and i hope that anybody who gets spare cash will put their money into the sector because our beautiful world needs to be protected." ladies and gentlemen, and members of the national president club, i introduce to you entrepreneur, balloonist, dare delve, philanthropist, personal space flight advocate sir richard branson. [applause] thank you very much. >> good morning and thank you very much for inviting me to speak at the world famous, highly influential national press club. i'm honored to be here today as a 25-year, i wish it was 25-year-old, 25-year veteran of the transatlantic aviation market. 25 years this year since virgin
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atlantic's inaugural flight took off from london for newark in june of 1984. we started with just one 747, leased from boeing and now have 38 wide-body deed aircraft flying to 30 designations around the world from london's heathrow and gatwick airports. i'll never forget those first for you hours of operating. there was a bird strike on the test flight, bank was trying to close us down, most of the food wasn't loaded on board the inaugural, fortunately there was plenty of booze, anyway, just another typical day in our industry, of course. [laughter] so it's taken us 25 years to grow as a private company without any government subsidy or bailouts to get to the position where we are today. where we are still red-hot. the airline, that is. you've grown by listening to customers, innovating where big
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carriers can't or won't, and by providing a strong product against our competition. we don't have the giant marketing budgets of our rivals, yet travelers choose us because we offer real quality at good value. we provide red-hot competition. yet we're celebrating -- excuse me -- we're celebrating our birthday amid the most testing economic times ever. the airline industry itself has never faced such a crisis. commercial aircraft were barely in their infancy at the time of the last significant collapse, the wall street crash in 1929. now airlines around the world are reacting swiftly, hunkering down, cutting capacity and sadly jobs in order to protect their cash and their operations. in all my experience i've never seen anything like it and i'm
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sure you all agree this is a sobering time and one which unfortunately will last month, many months yet. when we started virgin atlantic i knew we were in for a hard time. i knew we'd face numerous challenges and dirty tricks from the incumbent care carriers. i knew the odds were stacked against us but i didn't think 25 years later, after flying around over 70 million prime ministers, ministers, students, families, business people, elder states men and women and entertainment and countless opinion formers, that some airlines would still be adopting bullying tactics and trying to bend the rules to kill off the competition. well, i'm here today to warn you: the consumers and users of transatlantic services, that if the proposed merger and ignore all semantics because a merger is what it will effectively be of the two largest airlines in
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the world, british airways and american airlines, is allowed to go ahead, then the result for passengers, for employees, for communities and for fair and healthy competition will be absolutely disastrous. it will be the end of red-hot competition. given the state of turmoil and swift change that the airline industry finds itself in, it is questionable how any competition authority can reach a relevant, robust and meaningful conclusion regarding the plan of british airways and american airlines. it's impossible to predict with any degree of certainly what the future competitive landscape will look like when there is so much change taking place. in fact, the one certainty we can predict is that f b.a. and a.a. are aplowed to proceed, there will be higher prices and competitors will be squeezed out. it doesn't make sense to actually encourage even less competition by allowing the two
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largest dominant carriers to increase their stranglehold by setting prices together and agreeing schedules. before virgin atlantic started air travel was an elite form of transport. now it's more affordable and everyday part of our lives. aviation links up businesses and families, without it, economic grolt and cultural exchange and development assistance would be significantly hampered. i have no doubt aviation will lead the way in helping economies to recover from the current crisis. but it can only do so if industry remains viable and competitive. i understand that it is tempting for regulators to say, well, we've given dispensation to one airline, we should do likewise for others as they have done previously. but they must resist that temptation. each anti-trial fabrication must be considered on its own
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specific merit. and considered on its merits, it's clear the application for the merger between british airways and american airlines must be rejected. a line in the sand needs to be drawn. i'm not saying that all consolidation within the airline industry is a bad thing. while consumers may stand to benefit if complementary networks buy carriers that are not dominant in a particular marketplace and are being pooled, they suffer if networks overlap because of the tendency towards monopolies. i believe the fact of ba and american airlines demonstrate that this would be the prime example of bad consolidation. the only winners would be the shareholders of those two airlines. certainly won't be the employees of british airways and american airlines or their customers. we have been accused by the heads of these airlines of wheeling out the same arguments, they accused us in 1996 and 2001
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as well when the two last oh when the two last applied to create a merger. well, the facts are the same, if not worse, then why should we change our stance. our arguments are as strong today as they were then. dominance has fwron even further between then and now and let me spell out why you should still be worried. last time we said heath row is so congested that it is virtually closed. the same applies today. heathrow is unique to this antitrust application because it's full, hubs for sky team and star are not full. if we want to start a new airline in paris or frankfurt today we could do so. british airways and american airlines is the only alliance where the most important gateway hub is virtually closed to competitive entry. heath row u.s. has a far greater share of the eu/u.s. market.
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it's vital regulators understand this is not just another al appliance. it is an attempt to stitch up the most important long haul routes from europe's most important eachs. ba and aa together with their protected partners in one world will hold half of the total takeoff and landing slots at heath row. in comparison, virgin atlantic is capped at just over 3%. yes, a striking difference which shows no one can replicate their scale. loose time we said b.a. and a.a. would hold the dominant share of peak hour slots at heath row. nothing has changed. these slots are essential to the competitiveness of transatlantic services. b.a. was gifted many of those when it was privatized. no other carrier can get anywhere close to competing. last time we said that b.a. and a.a. would have an insurmountable lock on key airport pairs, nothing has
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changed. in fact, their market share has increased further since 2001. at the moment, they compete against each other on six key routes from heathrow, giving them im community would change all this. according to the official air lied guide up to the end of march, 2009, b.a./a.a. controlled 100% of all heath row dallas ft. worth capacity, 80% of heathrow boston, 70% of hooet row/miami, 64 of hooeingt row chicago, 64% of heathrow new york and 47% of heathrow los angeles capacity. given severe constraints at heathrow, there would be no chance for any carrier to try to mount a meaningful competitive response to these captive heathrow/u.s. pair city markets. is it right one group should have a 70 or 70 or 80 or even 100% share of a route so they
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can milk consumers? the times haven't changed. at heathrow's owner recently said in a rest submission to the department of transportation, heathrow is as full and access to it is as limited as it historically has ever been. of course, the e.u. sla u.s. phase 1 open sky agreement does not guarantee heathrow slots, gates or other essential facilities. in fact public filings indicate continental paid $209 million for just four heathrow slot pairs, i.e., over 50 million per slot pair to support a single heathrow round trip flight. free access to heathrow? hardly. while european carriers provide a handful of slots to facilitate the few new flights last summer that supply of factual slots is not limb minimumless as they contend. in fact, that very small pool of
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slots is now exhausted. also, with j.f.k. recently joining the heathrow club as a closed airport, red flags should be flying high on both side of the atlantic. b.a. and a.a. argues that even if heathrow is full, competitors can operate from gatwick. well a stampede wishing to move to heathrow would not have occurred if financial returns were in any way comparable. heathrow has a clear premium as an airport. after all, why would its owner want to keep it yet agree to sell off gatwick? b.a. argues it needs to link up with americans because sky team and star are dominant at their hubs. but the fact is that even b.a. on its own is already bigger between heathrow and the u.s., the businessiest air corridor, than star is from frankfurt or sky team is from paris. and that's even before it gets
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together with american. heathrow accounts for nearly a quarter of all passengers traveling between europe and the u.s. though b.a. and a.a. argued the environment is changing our own look at recent data suggests whatever changes are taking place, they are simply reinforcing the dominance of routes between the u.s. and the e.u. in fact, in 2008 it looks like eight of the top ten u.s. routes to europe were heathrow routes. that makes heathrow very special indeed to u.s. consumers. they're going to be feeling shortchanged when suddenly there's a lot less competition and higher prices on the routes to get there. -- final mission to the department of transportation. we will prove it benefits b.a./a.a. allege will result from their merger are illusory. even robert crandall, former
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chairman and ceo of american airlines, who led the first attempt to merge b.a. and a.a. has now seen the light. he said in the london daily telegraph, a news article recently, and listen to these words because we fought this man for years when he was trying to get this merger through last time. he said, "any objective observer would have to look very hard to find a way in which alliances have benefited consumers." what a change of stance from the days when he was actually chairman of american airlines in 1996 when he said "the b.a./a.a. lines will benefit travelers on both sides of the atlantic." bob crandall knows in reality that b.a./a.a. is a step too far. his former airline has long agreed alliances are not a blessing particularly when the air france delta lynn linkup cut off connecting traffic at paris.
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yet american airlines is now trying to argue alliances are great for consumers. well, that's the sort of flip-flop which would give the most popular politician a bad name. what may look like a llife-saver for an airline will be a millionstone around the neck of consumers. if b.a./a.a. were to receive clearance, fares will rise because there would be less competition. why else would they want to join forces at an airport effectively closed to new comers? in addition for the travel trade and large corporate accounts, b.a./a.a. would be very damaging indeed. travel agents with such large parts of sales being derived from b.a./a.a. would also be completely beholden to them, with well over 75% of their income coming from just one source. they would end up being forced for their very survival to recommend b.a./a.a. to passengers. a bigger airline with less
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competition would force up prices because it would not face so much pricing pressure. travelers would pay higher fares in return for a poorer product. the application does not incentivize the creation of new service options, in fact it strongly penalizes the introduction of price competition. these are all good reasons to prevent the b.a./a.a. from going ahead. supporters of this alliance have to resort to other arguments to permit what they would normally prevent. the current economic male last is no justification for regulators to let the application for antitrust immunity through. b.a. and american had hoped to see the application approved by the end of last year. yet this would have represented a der lick shown of duties by the regulators to vigorously access the long-term impact of the tieup on competition, not to provide special protection from the immediate challenges of the
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economic cycle. what would be the b.a./a.a. monitor monday nol poly be like when the economy recovers? antitrust laws should not be ignored during an economic downturn for good reason. when the economy recovers, competition and consumers will be faced with a permanently-changed market. that would be unsustainable and consumers, the intended beneficiaries of consumer laws, would be the biggest losers. of course there is an element of self-interest in virgin atlantic's opposition to b.a./a.a., the proposed alliance would impact on our ability to compete fairly on some of our most important routes but there is a wider consequence. at heathrow, competitors cannot challenge ba's domination and where there is no meaningful competition they will be able to increase fares on the most important air corridors in the world. in fact, if granted, immunity will ensure the two largest transatlantic players will remain in lockstep and ril
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result in an abuse of market past. consequently the regulators need to show more than ever that they are guarding consumers' interests. protecting monopolizing police is not acceptable to consumers. it shouldn't be acceptable to regulators. nothing has changed since 2001 where the regulators last looked at these plans and demanded b.a. give up hundreds of slots at heathrow. how can they require anything less if nothing has changed? the european commission is rightly opening a full investigation into b.a./a.a.'s plans because observers are asking how is it that two giant, dominant airlines can be allowed to emergency when they already have such a tight grip on the industry and consumers? b.a. and a.a. merging is the equivalent of allowing coke and pepsi to merge. would the regulators to allow that to happen in the soft drink industry ti? i don't believe so. consumers certainly wouldn't stand for it and i'm pleased the
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d.o.j. here in washington also takes its role as the consumer guardian seriously. alliance must be viewed by independent competition experts in the context of the impact on the consumer. the crisis we face in aviation does not mean we should rerisch quish or focus on making the industry more sustainable. efficiency gains though considerable are not enough. our industry's success and rapid growth of aviation in the developing world means absolute emissions will continue to grow for many years to come. while this just doesn't make sense considering the dire warnings from climate change scientists unless we can be part of a global framework which limits and then drives down overall greenhouse gas emissions. in -- governments and environmental leaders from all warned the world will gather in copenhagen to negotiate a -- climate change framework. with our colleagues in the
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group, virgin is pushing hard for aviation to be included in global carbon dioxide reduction targets. we know it can be tricky, especially for an industry like ours, where some major competitors are based in developing countries but it needs to be done. we think that a proposal being developed by the a.g.d. group offers a way for governments to balance concerns about environmental effective nice, economic efficiency and the differing responsibilities for climate change between industrialized and industrializing countries. it will deliver much-needed revenues for abatement, lower carbon technologies and avoid deforestation. over the past few months we've shared this proposal with policymakers, industry and environmental groups and look forward to making a positive contribution to negotiations in the runup to copenhagen. a global scheme will replace regional carbon trading or taxation regimes for aviation such as the european union's
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emission trading scheme which aviation will be a part of from january of 2012. we know that e.u. and e.t.s. has received mixed reruse and it may well be subject to legal challenges from third-country carriers but i can't help feeling a carbon cap and trade scheme, ideally a global one, is preferable to blunt taxation. we have got firsthand experience in the u.k. where -- they are paid by each departing passenger and was initially introduced at the environmental tax, allowing aviation to cover its external costs. since then it has mo rphed and passenger contributions have doubled or tripled with none of the proceeds being spent for environmental projects. cap and trade schemes are at least linked to the environmental performance of a carrier and incentivize low-carbon behavior.
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aviation is a carbon-intensive industry that currently relies totally on fossil fuel derived to get planes off the ground. just 18 months ago people didn't think that there were any alternatives to using carbon-intensive carbon fuel derived kerosenes to get planes off the ground and it was only with our announcement we'd be the first with our partner boeing and emporium to use a blend to fly a commercial jet aircraft which at the time was greeted by skepticism from many quarters but we did and in february of 2008, and since then, sustainable biofuels are at the forefront of the whole industry's efforts to put aviation on a lower carbon flight path. technical certification of blends as a replacement is i believe only a couple of years away and major efforts are under way through groups such as sustainable aviation fuel users group to make sure that these
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new supply chains are developed in a sustainable way right from the very beginning. we're also a major investor in a company called givo which turns biomass such as sugarcane which can be the answer for aircraft and formula one cars alike. we have been watching the obama administration focus on greening economic recovery. but we need government all over the world to support the development of the next generation of biofuels as part of the economic regeneration efforts. i'm a big believer in innovation throughout my life and some work going on now as a feed stock and converting biomass waste into fuels that meet strict requirements is really impressive. government support for these efforts is essential and will make to make sure airlines can play their crucial role in maintaining business and cultural wlijs between countries, stimulating economic development and flying our way
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out of this recession. sustainable aviation is the only way forward over the next 25 years. that means on environmental issues as well as competitive issues the industry can only try with airlines competing fiercely in a free market, not airlines given a leg up when they already dominate on an unbelievable scale. virgin has made its way through two crises, in 1991 and 2001 and fully intends to get through this latest crisis, but allowing through british airways and american airlines on the nod would not just be tilting the playing field, it would be armor plating one team to charge its way through the opposition and score touchdown after touchdown. what is before the -- us today is the futures of a aviation industry. the latest british a what's and american a lines application is not about the industry wants. it's about what the consumer
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needs. it should not be decided on emotion or past support, it should be decided on true facts. this recession will be over and we need an industry we can be proud of, an try that promotes competition, creates jobs and brings real benefits to consumers. please join me in saying no way, b.a./a.a. thank you for listening and thank you. [applause] >> all right. you mentioned that after the recession lifts that a b.a. and american merger would be anti-competitive and would be something that the world would regret and consumers would regret but british airways and american say they can't survive this particular economy without a merger. what is your response? >> well, they are the two largest carriers flying between
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oh across the transatlantic and they certainly should be able to survive. i mean, british airways was given all slots at heathrow by the government on a plate, it cost them nothing. they were given -- and it cost them nothing, they were given it for one pound. they've been given enormous advantages. they're quite capable of standing and surviving, you know, they are a giant airline with massive, massive advantages that have been bequeathed to them by governments in the past. i think there is absolutely no danger of british airways of american airlines going out of business. for them to cite that they won't be able to survive if they are not allowed to merge, you know,
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that is fairly unbelievable. if they do merge, as i've just said, the control that they will have, i mean, let me just try to put it in simple -- try to make it very clear for people to understand. let's imagine you are a travel agent: you are in washington. suddenly 75% of your business this year is from british airways and american airlines and they will pop in and say, well, look, you've done very well, last year we gave you a 10% discount. that 10% discount that british airways and american are giving is almost definitely their profit, if they lost that 10% discount, they would go out of business. so british airways and american airlines say to this travel agent well last year you had 75% of the business, now we're merged and we expect you next year to get to 80% of the

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