DOT VACATES PLAN TO CURTAIL EUROPEAN CARRIER WET LEASES BEYOND 14 MONTHS
September 5, 2019
As our readers may recall, in February 2019 DOT issued a Show Cause Order, Order 2019-2-17, proposing limitations on certain current and future statements of authorization for long-term wet-leasing. The Order was to apply to wet-leases by foreign air carriers of the EU, Iceland, Norway, and Switzerland to other such carriers. The Department’s Show Cause Order came in response to European Commission Regulation No. 1008/2008, which limits non-EU carriers’ wet-leases to EU carriers to a duration of seven months plus one possible extension of seven more months, notwithstanding U.S.-EU Open Skies provisions that call for liberal wet-leasing. DOT regulations contain no equivalent restrictions, so U.S. carriers have consistently pressed for time limits to be imposed to balance their alleged competitive disadvantage. Interestingly, in what seemed at the time to be an attempt by DOT to push the EU to resolve the issue, the Show Cause Order stated that the Department is prepared to vacate the order or not finalize the proposed tentative decision if the EU Commission “takes the necessary steps to proceed to the provisional application of the standalone Wet-Lease Agreement negotiated in February 2018.”
On March 8, 2019, delegations representing the United States, the European Union, Iceland, and Norway initialed the text of a standalone agreement on wet leasing, which would effectively eliminate the time limitations imposed on U.S. carriers wet-leasing to affected carriers. This in turn prompted DOT to issue a Notice suspending the Show Cause Order (and any limitation of wetleasing by European airlines) until August 30, 2019. On August 27, 2019, the United States, the European Union, Iceland, and Norway signed, and began provisionally applying, the standalone agreement on wet leasing. DOT deemed this to be a “satisfactory resolution” which will eliminate the competitive disadvantage U.S. carriers have allegedly suffered under European Commission Regulation No. 1008/2008. As such, on August 27, 2019, DOT issued an “Order Vacating Order 2019-2-17 and Terminating Proceeding.” (See Order 2019-8-20)
In effect, this decision should provide additional opportunities for expanded, and longer term (i.e., beyond 14 month) wet-leasing opportunities for foreign air carriers of the EU, Iceland, Norway, and Switzerland. We also expect that applications for statements of authorizations involving long-term wet-leasing between such carriers will be met with less scrutiny and fewer objections from U.S. carriers since they can now enjoy the same rights and competitive opportunities in Europe.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com or 202-659-6622); Drew Derco (dderco@eckertseamans.com or 202-659-6665), or Alexander Matthews (amatthews@eckertseamans.com or 202-659-6633).
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