What are ownership and control clauses? Why do they matter?
Under a bilateral Air Services Agreement, a Government has the right (but not the obligation) to demand that the airline the other Government is designating for air transport services between the two countries be substantially owned and effectively controlled by that Government or citizens of that country. In practice, this effectively prevents airlines to access foreign capital. While every country should be free to decide if its own airlines may or may not be open to foreign direct investment, this decision should not affect other countries’ ability to open their airlines to investment. As a result, airlines cannot merge across borders, acquire airlines in other countries, or tap into international equity markets or private equity investors to the extent other industries can do. No other global industry faces such limitations. This is particularly problematic in times of deep crisis, as it reduces the number of tools available to fight the economic downturn.
