Jeffrey Goh, GC at airline network Star Alliance, has made the status of his small legal group soar at the company
There’s a very good chance that if you are a lawyer in a global company or firm doing international business, you will have stepped on board a Star Alliance plane. The network was the first alliance for airlines; founded in 1997 it now has 27 members from around the world, including carriers such as Singapore Airlines, United, US Airways, Lufthansa and Air New Zealand.
Although Star Alliance itself is a fairly small company, with only 70 full-time-equivalent employees, its member airlines collectively make more than $180bn (£112bn), employ 436,000 people and carry nearly 680 million passengers every year.
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The alliance is managed from Frankfurt and is a German limited liability company. Heading its small legal team, with additional responsibility for corporate services and HR among other things, is general counsel Jeffrey Goh.
Goh joined Star Alliance six years ago. He has always been involved in aviation law in some way or other, having spent some time in academia before going into private practice at specialist aviation firm Beaumont & Son, which later merged with Clyde & Co. From Beaumonts, Goh moved to Canada to set up a European legal offering for the International Air Transport Association (IATA), advising on some of the many EU regulations affecting the industry.
In early 2007 Goh, poised to return to private practice, was instead lured by Star Alliance to take up the then-vacant general counsel role. He joined the alliance a year before the company underwent a group restructuring, meaning that the team of two lawyers became three. As well as pure legal advice, Goh became responsible for a far wider remit and sits on the company’s management team.
“When I started at the legal department, it was, as in most companies, struggling to find its strategic relevance in the company,” says Goh.
“Looking back I’m pleased to say I’ve been able to place the legal department as a strategic stakeholder in the company. Not all business units will like that, but the degree of respect is much higher than it’s been in the past.”
Working in such a heavily regulated and competitive sector has helped, Goh believes.
“One of the drivers behind the greater respect for lawyers is compliance,” he adds. “We hammer home clearly the severity of the punishments that can arise from violation of competition laws.”
Split the difference
Legal work is split between that carried out by Star Alliance’s in-house team – issues that affect members and involve a collaborative approach from member airlines’ legal teams, and that which requires input from external counsel.
Star Alliance has a ‘legal advisory group’ of the legal teams of its members, explains Goh. This meets twice a year. The group generally has another three or four conference calls through the year and Goh sometimes turns to individual airlines for advice on issues affecting a particular jurisdiction.
However, he adds, external advice is also key to maintaining impartiality or on internal matters that do not affect the members. Top of the list is competition law, while employment advice, IP and trademark law are also things for which Star Alliance will turn to outside counsel.
“Competition is a sensitive area and we want to ensure advice is as independent as possible,” Goh says. In the main he instructs Latham & Watkins, which advised Star Alliance on its set-up, but he has also used firms including Clyde & Co in the UK, Wilmer Hale in the US and HWL Ebsworth in Australia.
“My choice is guided by how much an external counsel understands the business of the company,” Goh elaborates.
Of the three areas where he tends to instruct outside lawyers, competition is by far the most critical.
“Prior to 2006, airlines did whatever they wanted,” he says. “The worldwide cargo cartel investigation in 2006 set a different tone for the industry. Regulators are now paying more attention to us.”
Although Star Alliance is not involved in areas such as fare prices, which are set by its members, there are aspects of the business that come under the competition umbrella, such as airport lounges for members or the impact of sales or acquisitions by members.
A recent case in point is the merger between Star Alliance’s Brazilian member TAM and Chilean carrier Lan Airlines. Because Lan’s principal competitors, Avianca Tapa and Copa, are both Star Alliance members, the regulator has ruled that the merged entity cannot join Star Alliance and has two years to leave.
Although Goh and his team do not have direct involvement in the process, this is an example of where stringent competition rules have an impact on the business. Brazil is a key market for the alliance and TAM’s withdrawal leaves what Goh calls a “white spot” on the map.
However, the addition of new members to the group is not a heavily legal issue. Carriers must meet the alliance’s standards and agree to abide by them, but the main issues are connected to the new member’s existing network.
“When we integrate a new member we’re always mindful of potential regulatory considerations or approvals that may be necessary,” explains Goh.
As to the future, Star Alliance is reviewing its governance with the aim of focusing more on strategic priorities. Goh, who says only around 10 to 15 per cent of his time is spent on legal work these days, expects that his role will encompass more strategic work as the business evolves. With new members and further expansion likely, he will be kept busy.
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Jeffrey Goh, Star Alliance
Title: General counsel and vice-president, corporate services
Reporting to: Chief executive Mark Schwab
Number of employees:
Legal capability: Four (three lawyers, one trainee)
Main external law firms: Latham & Watkins, Clyde & Co (UK), WilmerHale (US)
Annual legal spend: €200,000 (£162, 000)
Colin Flynn, senior manager, legal, Singapore Airlines
Although my responsibilities are wide in scope – being a good juggler is part of the job – my primary focus is ensuring that Singapore Airlines stays in bounds when it comes to competition law compliance around the world.
This is no small task, given the proliferation of new competition law regimes in recent years, particularly in Asia, and the scaling back or removal of exemptions from competition laws that many airlines enjoyed once upon a time.
Indeed, the glare of scrutiny the airlines and many other industries face from competition regulators, combined with dire consequences including criminal penalties for individuals in an increasingly long list of jurisdictions, make strict compliance critical.
The challenge of keeping a global workforce on the right side of the antitrust line is further heightened by the network aspects of aviation and the intricate webof commercial collaboration among airlines that underpins the global system.
Such collaboration extends from vanilla code-share agreements and reciprocal frequent-flyer programmes to participation in alliances such as Star and ‘metal neutral’ joint ventures facilitated by grants of antitrust immunity (ATI).
Despite great strides towards liberalisation in the sector in recent years, national ownership, control restrictions and other regulatory impediments remain in most markets. These restrictions essentially preclude fully fledged mergers so the trend towards airlines aiming to secure grants of ATI – and the ability to collaborate with legal certainty and expand network coverage that comes with this – is likely to accelerate. There is no one-stop-shop for ATI applications and many competition law regimes lack an ATI mechanism, further adding to the challenge.
To effectively manage the company’s competition law risk exposure, instilling a compliance culture from top to bottom is essential. To that end we maintain a comprehensive competition law compliance training programme that aims to deliver the key messages while not overwhelming staff with abstract legal concepts and arcane jargon.
No matter how exotic the destination, there’s likely to be a competition law regime in place on the ground wherever Singapore Airlines flies. As a result, just as antitrust enforcement has gone global, so has our compliance effort.