Industry Agenda A New Regulatory Model for Foreign Investment in Airlines January 2016 World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 Email:
[email protected] www.weforum.org World Economic Forum® © 2016 – All rights reserved. No part of this publication may be reproduced or Transmitted in any form or by any means, including Photocopying and recording, or by any information Storage and retrieval system. REF 020216 Contents 4 Executive Summary 5 1. An Overlooked Restraint on Travel and Tourism 6 2. The Nationality Rule: A Double- Bolted Locking Mechanism 7 a. Restrictions at the national level: The internal bolt 8 b. Treaty restrictions: The external bolt 9 3. Reasons for the Nationality Rule 9 a. Historical justification for the nationality rule 9 b. Aviation’s equivalent to a trade rule of origin 9 c. Preventing flags of convenience 11 4. The Nationality Rule as It Exists Today 11 a. Industry work-arounds of the nationality rule 12 b. Progress on unlocking the internal bolt 12 c. Progress on unlocking the external bolt 14 d. Regional liberalization 14 e. Recent enforcement actions 15 5. Proposals for Reform: A Dual- Track Solution 15 Track 1: Replacing the internal bolt with regulatory nationality 16 Track 2: Replacing the external bolt with the same test 17 6. Benefits and Risks of Liberalization 18 Endnotes 19 Acknowledgements A New Regulatory Model for Foreign Investment in Airlines 3 Executive Summary The World Economic Forum’s Global Agenda Council on The proposed solution is to replace hard numeric caps the Future of Travel & Tourism proposes a new regulatory and other restrictions on foreign investment in and foreign model for foreign investment in airlines.