American Airlines goes broke: Can a 'national' airline be allowed to fail?

As American Airlines becomes the last major US airline to seek Chapter 11 Bankruptcy protection, the issue of airline reconstruction and the basic role of airlines in the national economic and social equation remains a very real one for policy makers. In this timely article, Chris Lyle of Air Transport Economics gives a Canadian perspective.

The vast majority of the world's airlines are today privately owned. This includes most former "national" carriers which have been turned over by their governments to private ownership. And yet, in an era of globalization and transnationalism, when it comes to economic regulation, the "flag" carriers are still mollycoddled with a lean towards jingoism.

There are two principal reasons why this happens. The first is provisions in national law and notably in the vast majority of bilateral air services agreements which preclude majority ownership and effective control of a carrier from one country by parties from another country.