Finding a way out: escaping the regulatory confinement of foreign ownership rules
A report in the latest edition of Airline Leader examines some of the alternative models for overcoming foreign ownership restrictions in the airline sector.
While alliances have been most commonly used by airlines as a substitute for cross-border mergers, newer concepts pioneered by airlines such as Emirates, AirAsia and Virgin Australia, have started to take shape.
Emirates, assisted by ultra long-haul aircraft and an advantageous geographical position, exemplifies what the report calls “the fourth alliance”. Its non-stop widebody connections over its Dubai home base to most of the world’s key cities makes the Gulf carrier “the only single airline that can compete with the combinations created within Star, SkyTeam and oneworld”.
In emerging markets such as Asia and Latin America, airlines – usually LCCs – have used the cross-border JV model to overcome foreign ownership restrictions, holding 49% ownership of companies bearing their brand in neighbouring countries.
Meanwhile, Virgin Australia, according to the report, has established another model, building a virtual global network through a series of bilateral alliances. Its partnership with Delta is the only non-global alliance related agreement to have been granted metal neutral ATI status. Aside from the US, the former LCC has access to the New Zealand domestic market through Air New Zealand, while its partnership with Etihad allows it to tap into the latter’s network in the Middle East, North Africa, Europe and the Americas. Furthermore, in early Jun-2011, the carrier announced plans to establish a long-term alliance with Singapore Airlines, giving it access to SIA’s Asian destinations.
The full report and the magazine can be downloaded from airlineleader.com
Airline Leader is a monthly journal covering strategic global aviation management issues. It provides cutting-edge feature stories and analysis, the latest financial and traffic reports, regional wraps, exclusive contributions from industry thought leaders and interviews with leading CEOs.