There are global players in many industries and to get to be global often they acquire large national companies in countries to expand to those markets.
Why is it with Airlines that there are no global companies owning airlines across multiple nations?
Virgin is the closest I can think of and even they do not actually own the airlines, just the name in some places (Australia).
My only thought is that airlines are not exactly huge profit centres?
In: 201
The airline industry is indeed unique in this respect. While there are many reasons why you don’t see global companies owning airlines across multiple nations, some of the key ones are:
National Regulation and Ownership Rules: Many countries have strict rules and regulations around foreign ownership of airlines. These often include a stipulation that a majority of the airline must be owned and controlled by nationals of that country. The US, for instance, caps foreign ownership at 25%.
National Security Concerns: Airlines are often seen as a strategic industry linked to national security. As a result, many governments are hesitant to allow foreign control of these assets.
Bilateral Air Service Agreements: International air travel is governed by bilateral air service agreements between countries, which often include a clause requiring that airlines be owned and controlled by nationals of the respective countries. This is to ensure fair competition and equal opportunity for airlines from both countries.
Profitability Concerns: The airline industry is capital-intensive and subject to high operational costs (such as fuel and maintenance), regulatory burdens, and market fluctuations. The high-risk, low-margin nature of the industry may deter global companies from investing across multiple nations.
National Pride and Branding: Airlines are often seen as national symbols and carriers of national identity. Hence, local ownership and control can be a matter of national pride.
That said, there are ways around these barriers. Many airlines enter into strategic alliances, such as Star Alliance, Oneworld, and SkyTeam. These alliances offer benefits similar to what you’d see from global companies, such as coordinated scheduling, shared frequent flyer programs, and mutual recognition of elite status among member airlines.
Another model is the equity alliance, where an airline invests in foreign airlines but doesn’t necessarily seek majority ownership or control. Examples include the Etihad Equity Alliance and the Delta/Air France-KLM/Virgin Atlantic partnership.
Lastly, some airlines operate under a single brand but are separately owned and controlled entities, like Virgin and Air France-KLM. This allows them to reap some of the benefits of a global brand while complying with national regulations.
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