Tuesday, March 2, 2010

More on the Nationality Clause

Reuters news service ran an interesting story last Friday entitled Airline Alliances Becoming the New "Mergers", Reuters, Feb. 26, 2010 (available here).  The piece focused on the all-too-familiar fact that national restrictions on airline ownership and control have impeded the ability of (most) airlines to consummate crossborder mergers.  What the story missed is that these nationality restrictions form only one part of what is effectively a double-bolted legal lock to the formation of transnational airlines.  As the growing aeropolitcal tensions between Austria and Russia show, see "The Nationality Clause Lives," the demand for citizenship purity in airline ownership at the international level is an equally strong bar to consolidation in the airline industry.  Under the current regime of bilateral air services agreements, 90% of which contain nationality rules, see WTO Council for Trade in Services, Quantitative Air Services Agreements Review (QUASAR): Part B: Preliminary Results, at 33, para. 61, S/C/W/270/Add.1 (Nov. 30, 2006), any State desiring to unilaterally open its carriers up to foreign investment would be putting their airlines' rights to fly internationally in jeopardy.  The United States, for example, could allow Lufthansa to purchase United Airlines, but would the Chicago-based carrier then find itself locked out of lucrative markets such as China and Japan? 


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