Nearly a decade after it last convened a world summit on liberalisation, ICAO will again gather the nations in March to address the issue. This time, perhaps, it could just provide the necessary momentum to get the debate moving on an end to national ownership limits.
Pressure has been building of late to bring the whole issue of airline ownership and nationality clauses out into the open. In March, the industry will get its chance as ICAO opens its 5th World Air Transport Conference on the theme of liberalisation. When ICAO gathered the regulators to Montreal for the same event nearly a decade ago, little was ultimately achieved. The world, it seems, was not yet ready to break the mould. This time there is a good deal more urgency behind the whole debate.
It could still be that the event is overshadowed by conflict in the Gulf and the industry's ongoing crisis. If it is, then air transport will have lost a huge opportunity to put a little momentum behind all the talk about becoming a truly global industry. The long-term health dangers of keeping airlines locked up behind national boundaries are potentially much greater than the short-term pain of any conflict.
The point is not for the world to emerge from Montreal with much by way of hard decision-making. Even ICAO itself privately concedes that this is a distant prospect. The key goal is to get the debate out in the open and moving. As ICAO points out, it is a success of sorts that whereas back in 1994 the world was still talking about whether to liberalise, it is now talking about how.
There are at least three barriers that have worked together to keep airlines from going global. First, a bilateral system which still largely includes restrictions on nationality. Second, national ownership limits. Finally, competition policy which has often done little more than maintain the status quo. An assault on any one of these pillars weakens the justification for the rest. And assaults there have been, most recently in the form of the European Court of Justice (ECJ) decision effectively outlawing nationality clauses that distinguished between member states of the European Union (EU).
ICAO, for its part, appears to believe that progress can still be made within the framework of the existing bilateral system. It has worked to produce a template for a new, liberalised bilateral accord which, among other things, would loosen up the traditional nationality clauses. If states followed through by lifting airline ownership rules, then indeed air transport could be well on the way towards allowing some genuine global consolidation.
The European Commission (EC) seems ready to go even further and faster. Ludolf van Hasselt of the EC's air transport unit, believes that the ECJ's assault on nationality clauses marks "the beginning of the end" for the bilateral system. Brussels makes no secret that it would like to start assembling the pieces for a new international framework for airline regulation, possibly starting with the proposed transatlantic common aviation area. Under such a regime, issues of ownership and nationality would be largely redundant. Europe's airlines are a little more cautious over the pace of change, but in principle favour a complete relaxation of ownership rules.
The US position is less clear. The possibility of off-shore investment in US carriers has been regularly floated over the years, but has just as regularly foundered amid talk of national security and safety. Indeed as recently as 2000, Sir Richard Branson pushed to gain US regulatory clearance to back a planned Virgin start-up then called New Air and now called JetBlue. He backed off when it was made clear that the national security argument would prevail.
The idea has come up again as US carriers now struggle to stay airborne and some are willing to consider it seriously. But while the need for capital has grown, so too have the nation's security concerns. Just how realistic this fear is open to question. Few literally believe that an overseas investor would have the power (much less the will) to prevent the US government from using the aircraft of a US-based airline for military airlift capacity. The reality is that a coalition of fears, taking in labour union fears of staffing subterfuge, helps to block the issue.
The US Department of Transportation (DoT) is studying the issue, perhaps more deeply than it has in the past, even if the study by consensus is not likely to change congressional minds any time soon. However, as the DoT's Jeff Shane has wondered aloud to key lawmakers, it is "strange in this day and age that anybody limits access to capital".
Ultimately, the tidal wave of globalisation must one day sweep away national ownership limits. Such restrictions are not only already looking dated, but also increasingly leaky. It hardly matters where the industry starts in tackling the old bilateral order, but it must start somewhere and soon. Until now, what has lacked is not exactly the means to change but the motivation. There are signs that the necessary momentum may now be in place for something to give. Perhaps that something might just begin to take shape in Montreal.
Source: Airline Business
