Image Image Image Image Image Image Image Image Image Image

CAPA TV | September 30, 2020

Scroll to top

Top

The Great Debate: Ownership And Control Rules Will Be Discarded (With Thorough Disruption Of The Aviation System)

CAPA
  • On May 25, 2017

THE GREAT DEBATE This discussion will take the form of a debate. Speakers will alternate between the opposing propositions while delegates will be encouraged to actively participate.

Ownership and control rules will be discarded (with thorough disruption of the aviation system)

Despite decades of inertia, new forces are at work, operationally and commercially that are coming together to disrupt the airline industry. From a range of sources, momentum has been building that signals the potential for a remarkable evolution in international ownership restrictions.

But changing the regulatory order of things is extremely complex, even assuming willing parties. Underpinning the transactional bilateral approach, the persistent role of “ownership and control” clauses in the myriad of bilateral agreements has dogged any prospect of substantial disruption.

Joint venture and bilateral partnerships have become enormously important to the success – and even survival – of major airlines. Limited by ownership and control rules, airlines have constantly sought options to expand their global presence. The multilateral alliances have gone some way in that respect, but the intensification of international long haul competition has greatly enhanced the value of close bilateral ties.

A new disruptive influence has appeared in the marketplace, with an abundance of aviation bilateral “currency” at levels never previously imagined. China has emerged, and its outbound tourists are delivering massive economic benefits to every country in which they land. The magnitude (and sudden appearance) of China’s currency asset is unprecedented. Until recently, China has not been a principal voice in the formulation of international policy. Instead it has been content to rely upon the historical constraints of the bilateral system, protecting its airlines as they achieve a level of international competitiveness. As it stretches its wings in the aviation market, China’s influence is growing rapidly.

Secondly, there have already been a number of incursions into the sanctity of ownership and control provisions. These include (1) the proliferation of cross-border JVs, which have been particularly functional in Southeast Asia as LCCs like AirAsia have sought to establish themselves across the region as Pan Asian airlines; and (2) the revival of significant minority shareholdings in foreign airlines. Etihad accelerated this trend, which is now being elaborated multiple ways.

To disrupt the complex regulatory structure that has survived 7 decades is no easy task, but most of the industry believes it needs to be, at least insofar as the deadlock of “ownership and control”. That said, there are clearly cracks appearing in the fabric.

Moderator: John R. Byerly, Consultant, John Byerly

For the proposition that ownership and control restrictions will be disrupted:
Proposer: European Aviation Club, Chairman, Rigas Doganis
Seconded: BKH Aviation, Chairman, Barry Humphreys

Against the proposition:
Against: Aviation Strategy & Concepts, Managing Director, Ulrich Schulte-Strathaus
Seconded: DVB Bank, Senior Vice President Aviation Research, Albert Muntane Casanova

Audience participation will be encouraged and the audience will vote on the various issues raised.

error

Do you enjoy CAPA TV? Please spread the word!