American Airlines 2008 Annual Report Download - page 8

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The Department of Justice (DOJ) has jurisdiction over airline antitrust matters. The U.S. Postal Service has
jurisdiction over certain aspects of the transportation of mail and related services. Labor relations in the air
transportation industry are regulated under the Railway Labor Act, which vests in the National Mediation Board
certain functions with respect to disputes between airlines and labor unions relating to union representation and
collective bargaining agreements.
On December 21, 2007, a New York federal judge dismissed the Air Transport Association‘s (ATA) challenge to a
recently enacted New York law requiring airlines to provide certain services to onboard passengers whose flights
are delayed on the ground prior to takeoff for more than three hours. The ATA appealed the dismissal of the
challenge. The Second Circuit Court of Appeals reversed and ordered the District Court to enter judgment for the
ATA on the grounds that the legislation was preempted by federal law. The law, which was briefly in effect, was
declared invalid.
International International air transportation is subject to extensive government regulation. The Company's
operating authority in international markets is subject to aviation agreements between the U.S. and the respective
countries or governmental authorities (such as the European Union), and in some cases, fares and schedules
require the approval of the DOT and/or the relevant foreign governments. Moreover, alliances with international
carriers may be subject to the jurisdiction and regulations of various foreign agencies. Bilateral agreements
between the U.S. and various foreign governments of countries served by the Company are periodically subject to
renegotiation. Changes in U.S. or foreign government aviation policies could result in the alteration or termination
of such agreements, diminish the value of route authorities, or otherwise adversely affect the Company's
international operations. In addition, at some foreign airports, an air carrier needs slots (landing and take-off
authorizations) before the air carrier can introduce new service or increase existing service. The availability of
such slots is not assured and the inability of the Company to obtain and retain needed slots could therefore inhibit
its efforts to compete in certain international markets.
In April 2007, the United States and the European Union (EU) approved an “open skies” air services agreement
that provides airlines from the United States and EU member states open access to each other’s markets, with
freedom of pricing and unlimited rights to fly beyond the United States and any airport in the EU including London’s
Heathrow Airport. The provisions of the agreement took effect on March 30, 2008. Under the agreement, every
U.S. and EU airline is authorized to operate between airports in the United States and Heathrow. Notwithstanding
the open skies agreement, Heathrow is a slot-controlled airport. Only three airlines besides American were
previously allowed to provide service to Heathrow. The agreement has resulted in the Company facing increased
competition in serving Heathrow, where the Company has lost market share. In addition, the Company is facing
additional competition in other European markets. See Item 1A, Risk Factors, and Note 11 to the consolidated
financial statements for additional information.
Security In November 2001, the Aviation and Transportation Security Act (ATSA) was enacted in the United
States. The ATSA created a new government agency, the Transportation Security Administration (TSA), which is
part of the Department of Homeland Security and is responsible for aviation security. The ATSA mandates that the
TSA provide for the screening of all passengers and property, including U.S. mail, cargo, carry-on and checked
baggage, and other articles that will be carried aboard a passenger aircraft. The ATSA also provides for security in
flight decks of aircraft and requires federal air marshals to be present on certain flights.
Effective February 1, 2002, the ATSA imposed a $2.50 per enplanement security service fee, which is being
collected by the air carriers and submitted to the government to pay for these enhanced security measures.
Additionally, air carriers are annually required to submit to the government an amount equal to what the air carriers
paid for screening passengers and property in 2000. In recent years, the government has sought to increase both
of these fees under spending proposals for the Department of Homeland Security. American and other carriers
have announced their opposition to these proposals as there is no assurance that any increase in fees could be
passed on to customers.
Airline Fares Airlines are permitted to establish their own domestic fares without governmental regulation. The
DOT maintains authority over certain international fares, rates and charges, but applies this authority on a limited
basis. In addition, international fares and rates are sometimes subject to the jurisdiction of the governments of the
foreign countries which the Company serves. While air carriers are required to file and adhere to international fare
and rate tariffs, substantial commissions, fare overrides and discounts to travel agents, brokers and wholesalers
characterize many international markets.