Why You Can’t Fly Air France Between London and New York

Having enjoyed my experience flying on a variety of foreign airlines, I for one would welcome increased foreign investment and competition in the still-struggling, always annoying U.S. airline industry. Yesterday, the U.S. Transportation Department took a large step back from its earlier efforts to globalize the U.S. airline industry by withdrawing a proposed rule that would have allowed some limited foreign control of U.S. airlines. While foreign equity ownership of U.S. airlines would remain capped at 25 percent, “foreigners should have more say in airline decisions such as marketing and flight schedules,” according to this report.

Even more regrettably, this withdrawn rule likely destroys chances for an “Open Skies Agreement” between the U.S. and various European countries that would permit Europe-based airlines to fly from more than one country to the U.S. Such an agreement could only benefit U.S. consumers, but the usual coalition of domestic airlines and labor unions has probably killed this deal. (For a useful analysis of the now-killed rule and agreement, see this comment by Depaul lawprof Brian Havel).

On a broader level, the citizenship test lives on (although maybe it is changing, as Peter notes below), at least in the U.S. airline industry. Maybe this is just economic protectionism, but the emphasis on citizenship in the U.S. airline ownership regs is also indicative of citizenship’s lingering significance, even in the most globalized industry one can imagine.