Ownership and control in airlines

Air transport promotes freedom of movement and brings people closer together. Yet the providers of this freedom, the airlines, operate in a cage of regulatory complexities second to no other international industry. One of these complexities is the “ownership and control clause” found in international air services agreements and most national (or regional – EU) legislations alike. Ownership and Control (O&C) restrictions, by the way applicable only to airlines and no other part of the aviation value chain (airports, manufacturers etc), have caused airlines some headaches:

First, the restrictions prevent cross-border mergers which are an important component to expansion, consolidation of operations and growth in any other industry. Airlines have had to make do with (awkward) structures of joint ventures and airline groups (even within the EU where O&C has been fully liberalised). These were the only ways to achieve economies of scale and expand networks to better accommodate consumer demands but do not replace or fully realise the potential and benefits of full mergers.