The Impact Of Recent Changes In The Law On The Tourism And Hospitality Industry - Essay Example

Discuss how recent changes in the law may impact on the tourism and hospitality industry – the case of the airline industry Introduction In most countries worldwide, the increase of complexity of business activities has resulted to the update of the legal framework on which these activities are based. One of the priorities of legislators involved in this task is to ensure that the rights of the public are adequately protected. However, measures need to be taken also for the support of the entrepreneurship as a factor contributing to the development of the local economy. In practice, it has been proved that the development of legislative texts for the regulation of various industrial sectors can be a challenging task. A series of constraints can appear causing severe delays to the completion of the relevant projects. Current paper focuses on the effects of law on the airline industry – emphasis is given on the aviation law of UK – as influenced from the European Union law. It is concluded that the update of legal rules related – either directly or indirectly – to the airline industry has affected the performance of the specific industrial sector. The character of the relationship between this industry and the law cannot be clearly specified – being characterized by benefits and drawbacks. However, despite the delays that the changes in the law have caused to the development of airline industry – in the context described below – still, it is necessary that the relevant measures are supported both by the entrepreneurs and the public. After a transition period, the benefits of these initiatives will be made clear – even if currently the introduction of the relevant legal rules is not fully justified. 2. Legal framework of airline industry The needs of various industries in regard to their regulation can be differentiated. The characteristics of each industry and the level of its interaction with the public are usually of high importance in order to decide on the form of the regulatory framework developed for the particular sector. Under these terms, the needs of each industry in terms of law are defined by the following criteria: a) the position of the industry within the local economy, b) the structure of the operational activities of the industry’s firms, c) the practices followed in regard to the regulation of similar industries in the context of the international community, d) the rules developed by international bodies and which are binding for a specific industrial sector – for instance the rules of the European Union which need to be promoted within all member states. In the case of the airline industry, the elements of the legal framework used for the regulation of the industry’s activities can be identified by referring to the operational characteristics and needs of the firms operating in the specific industry. Reference should be also made to the travel and hospitality industry – part of which is the airline industry. In accordance with Barth et al. (2008, p.42) ‘the travel industry is large and diverse’; this fact results to the continuous introduction of new legal rules aiming to cover all aspects of this industry’s activities. Another aspect of the legal framework of firms operating in the travel and tourism industry is mentioned in the study of Hayes et al. (2010, p.8) who state that the control by the state of the prices of these firms’ services need to be continuous ensuring that the interests of the public are adequately protected. The above issues need to be taken into consideration when evaluating the rules regulating the airline industry. Traditionally, the legal framework of the airline industry has been influenced by the changes made on the laws regulating the following sectors: the transport sector and the travel and hospitality industries. This trend is highlighted in the study of McLaughlin (1967) who analyzed the criteria under which the Railway Labor Act of 1926 would be expanded in the airline industry – an expansion that finally took place in 1936 (McLaughlin, 1967, p.37). The above initiative was developed in USA. In Britain also, the legislation on the airline industries is based on the rules related to the transport industry and the travel and hospitality industry. The general rules applied on corporations are also used for resolving issues related to the specific sector. Moreover, the events related to the airline industry – referring especially to the events of the September the 11th – and those that have strongly influenced the global economy have affected the legal framework of the airline industry – as explained analytically in the next section. Currently, the legal framework of airline industry in Britain encompasses the following rules: a) The Air Navigation (General) Regulations 2006, b) The Air Navigation (Restriction of Flying) (Nuclear Installations) (Amendment) Regulations 2008, c) the Air Navigation Order 2009 (no 3015), d) the Air Navigation (Amendment) Order 2010, e) the Air Navigation (Environmental Standards) Order 2002, f) the Air Navigation and Transport Bill of 2004, g) the Air Navigation (Dangerous Goods) Regulations 1994, h) Environmental Protection Act 1990 – which sets the limits of noise allowed to aircrafts in the context of specific regions (along with the Civil Aviation Act 1982 and the Airports Act 1986). Legislation related to corporate activities in general may also be applied on firms – referring to the private sector – operating in the airline industry. An indicative example is the Competition Act 1998. On the other hand, the international law on aviation is also used – where appropriate – for regulating issues that are related to the activities of airline firms in the global market. Of particular importance is the Warsaw System, a legal framework regulating the international aviation. The above system is constituted from the following Conventions: ‘the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air, 1929, the Hague Protocol of 1955, the Guadalajara Convention of 1961, the Guatemala City Protocol of 1971 and the Montreal Protocols of 1975’ (Graham et al., 2010, p.61). In the overseas Territories of Britain, the various aspects of air navigation – referring to the civil aviation related to Britain – are regulated through the Civil Aviation Overseas Territories Act 1949; additionally the relevant ‘International Conventions and Standards’ (Air Safety Support International, 2010) are applied – as appropriate. 3. How recent changes in the law may impact on the airline industry In order to identify the effects of changes in the law on the airline industry, it would be necessary to refer to the characteristics and the needs of this industry – as being alternated under the continuous turbulences in the global financial market. Firms operating in the airline industry are of two main types: those that are controlled – more or less – by the state, known also as ‘flag-carriers’ and those owned by individuals – referring to the airline firms of the private sector. The sector of law, which is most involved in the airline industry, is the competition law. This trend has been particularly revealed in the financing of these firms. More specifically, in the 1980s and the 1990s there was a common practice regarding the financing of ‘flag-carriers’: the state provided the funds necessary for their operational activities – the most known example is that of British Airways (Rodger et al., 2008, p.10). On the contrary, firms of the private sector that operated in the airline industry had to finance all their activities from private investors. This trend created severe turbulences in the Competition Law – the problem was especially intense in Europe. Apart from the financing modes available in the airline industry, another important factor influencing the legal framework of the specific industry has been the terrorism. In Britain, the specific factor has strongly influenced the regulation of the airline industry. This issue is highlighted in the study of Koch et al. (2004); in the above study reference is made to ‘the Lockerbie air crash of 1988 and the events of the September the 11th’ (Koch et al., 2004, p.163). It is made clear that the effects of terrorism attacks on the British airline industry have been of different forms: a) security effects and b) financial effects, being expressed as increase in the insurance costs and the decrease in the profits of airline firms worldwide (Koch et al., 2004, p.163). In 2010, the introduction of body scanners in airports worldwide – especially in US and European airports - has been an indication of the potential effects of terrorism on the regulation of airline industry. On the other hand, the expansion of globalization in all industrial sectors has led firms operating in the airline industry to develop strategic alliances in order to improve their position in the global market. These business schemes had to be appropriately supported by relevant regulations – a need that has been identified by international organizations and governments worldwide; in fact, it is noted by Havel (2009) that the above issue has been highlighted by ‘the representatives of Britain to the International Civil Aviation Conference in Chicago in 1944’ (Havel, 2009, p.573). Today, the need for cooperation between airline firms worldwide has become emergent. However, in many cases, the development of legal rules that are mutually accepted by all parties – referring to the case of international treaties and Conventions – can be quite difficult as the achievement of a consensus is not always achievable (Lu, 2003, p.16). Finally, the British regulation is highly affected by the European rules. The same assumption refers to the case of the airline industry. The rules of the European Commission in regard to the Aviation and those referring to corporate activities – for instance the Competition Law – are also likely to affect the regulation of airline industry in Britain - as also of all other Member States (De Leon et al., 1991, p.39, Lu, 2003, p.54). Particular problems can be developed in cases of carrier’s liability where different criteria are used by the national legislator and the EU legislators in regard to the distribution of liabilities among the parties involved; this issue is discussed in the study of Graham et al. (2010, p.61) where reference is made to the hierarchy of laws in aviation and the superiority – under certain terms – of the international aviation law – as presented in the previous section – towards the national law. 4. Conclusion The role of the travel and tourism industry in the development of economies worldwide is important. In fact, the specific industry reflects ‘an institutionalized way of life for people around the world’ (Singh, 2008, p.58). The airline industry – as part of the travel industry – has been a sector suffered severe damages because of the global economic turbulences but also because of the increase of terrorism worldwide. The British government has tried to continuously develop its legislation in order to meet the needs of the particular industry and to ensure the protection of the life and the interests of passengers. On the other hand, the increase of competition in the airline industry has led to the development of severe conflicts among firms of the specific industry. However, these conflicts cannot cause severe damages to the national economy – referring to Britain – since all the firms of this sector operate in the context of private sector; after the privatization of British airways, the legal framework for the Britain’s flag-carrier had to change. Moreover, the simultaneous application of international and European legal rules can reduce the risks for failures in the effective resolution of disputes related to the airline industry. References Barth, S., Hayes, D. (2008) Hospitality law: managing legal issues in the hospitality industry. John Wiley and Sons De Leon, P., Aberson, E. (1991) Air transport law and policy in the 1990s: controlling the boom. Martinus Nijhoff Publishers Graham, A., Papatheodorou, A., Forsyth, P. (2010) Aviation and Tourism: Implications for Leisure Travel. Ashgate Publishing Havel, B. (2009) Beyond Open Skies: A New Regime for International Aviation. Kluwer Law International Hayes, D., Miller, A. (2010) Revenue Management for the Hospitality Industry. John Wiley and Sons Koch, B., Abraham, K. (2004) Terrorism, tort law and insurance: a comparative survey. Springer Lu, A. (2003) International airline alliances: EC competition law/US antitrust law and international air transport. 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