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US, India, EU discuss relaxing rules on airline ownership

US, India, the European Union and a dozen other countries are exploring ways to liberalize the aviation industry after a weekend summit meeting in Istanbul organized by the International Air Transport

US, India, the European Union and a dozen other countries are exploring ways to liberalize the aviation industry after a weekend summit meeting in Istanbul organized by the International Air Transport Association.

Senior aviation officials from Australia, Brazil, Canada, Chile, Mauritius, Morocco, Panama, Singapore, Switzerland, Turkey and Vietnam were among those assessing regulations on airline competition and ownership with a view toward easing restrictions, said Jeff Shane, an aviation lawyer and former undersecretary for the U.S. Transportation Department, who chaired the meeting. He spoke in a teleconference.

International air traffic is governed by about 3,500 bilateral air treaties that dictate where carriers can fly and how many times a day, how many airlines may fly from a given country, and who must own the airline, Shane said. While many treaties have been updated since the framework was set up after World War II, restrictions on aviation are still tighter than those governing other global industries, Shane said.

“International air transport is something people think of as one of the most international businesses on the planet,” said Shane. “It is in fact one of the least international in terms of its corporate organization. All rules promulgated by national governments insist that airlines in their territory be owned and controlled by citizens of those territories.”

By allowing capital to flow more freely within the industry, the airline business would be stronger and better able to cope with difficult periods such as the current one, Shane said. By allowing more competition, consumers would also be better served, he said. Today, for the most part, international carriers may not carry passengers across international lines unless the plane leaves from and ends up in the country in which that carrier is based.

Second Meeting

No decisions were made at the weekend summit. The participants have asked IATA to help set up a second meeting in early 2009 “to turn discussion into action,” said Giovanni Bisignani, chief executive officer of IATA. IATA also plans to develop a multilateral statement on policy to express the group’s views.

Shane and Bisignani both described the need for change as urgent, particularly given the dim prospects for air travel demand and likely losses for the world’s airlines. Global airline- passenger traffic fell 2.9 in September, the first drop in five years, as the credit-market crisis and slowing economic growth deterred tourists and business executives from flying.