Wednesday, August 25, 2010

IATA Calls on Australia to Liberalize Air Transport

Giovanni Bisignani, Director General and CEO of the International Air Transport Association, has called on the Australian Government to remove its remaining restrictions on airline ownership.  From the press release:

Bisignani encouraged Australia to remove outdated ownership restrictions for international aviation. “Historically, airlines have profit margins of less than 1%, that is not sustainable. To fix this, we need to run this business like a normal business. Australia is a leader in aviation liberalization. The open aviation area with New Zealand has achieved what the US and Europe could not in their open skies discussions. And the removal ownership restrictions for domestic Australian operations benefited consumers with greater choice and lower prices. These results make the 49% foreign ownership cap for international operators very difficult to understand,” said Bisignani.

See Press Release, IATA, Agenda to Strengthen Australian Aviation (Aug. 25, 2010) (available here).

As important as crossborder consolidation is to the airline industry, Australia's reticence over removing its foreign ownership caps is not as difficult to understand as Bisignani opines.  According to the World Trade Organization, over 90% of all air services agreements (ASAs) contain nationality clauses, i.e., requirements that a State's airline be "substantially owned and effectively controlled" by its citizens before being eligible to provide international service.  So, for example, if Australia's flagship air carrier, Qantas, was acquired by British Airways, Qantas could lose market access privileges to any State which has a nationality clause in its ASA with Australia.  Until these clauses are removed or neutralized, they will continue to exert a powerfully dissuasive influence on State-level airline ownership rules.

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