During a debate about airline ownership rules, at the Sky Harbor International Aviation Symposium in Phoenix in May, the DoD's assistant deputy undersecretary told attendees that changes in US airline ownership rules could have "many ramifications" for the DoD's airlift capability during times of crisis.
Mary Lou McHugh said that under the DoD's civil reserve air fleet (CRAF) programme, US airlines volunteer their aircraft and crew for use by the military during emergencies. Airlines voluntarily sign for CRAF on a year-by-year basis and receive financial compensation when the programme is activated.
The DoD does not believe that foreign-owned airlines would be as willing or as reliable CRAF volunteers as US-owned carriers. "We feel comfortable with the current situation. During times of crisis we need to know without question that there is support. As we explore airline ownership issues, we must keep US national security foremost in our minds," says McHugh. The DoD relies on the 725 aircraft signed for CRAF for 93% of its troop movements and 41% of its cargo movements during a major conflict. The last time CRAF was activated was during the Gulf War.
The DoD's firm stance seemed to come as a surprise to the international audience, which included several proponents of a relaxation in ownership rules. The key driver towards any global change in the industry - and most attractive market - would be the USA.
Virgin Atlantic's owner Richard Branson is campaigning for a change in US laws so that he can set up a low-cost airline within the USA. Some American start-up carriers believe that greater access to overseas' investment would improve their chances of survival.
But the DoD's stance means that any relaxation in ownership rules will be slow in arriving, although the notion that such changes might inject new competition into the US domestic industry is gaining weight with some US politicians and within the Department of Transportation (DoT). The DoT plans to hold a conference in Chicago at the end of the year to look further into the issue.
There are misgivings in Europe, however. Dr Rene Fennes, directorate general VII (transport policy) at the European Commission, believes the next step - before general changes in ownership rules are applied - should be the creation of a "strong multilateral framework across the Atlantic" that would replace the current bilateral system. "Until then, let's face it, you will have to walk over our limp bodies before you take government ownership and control away from us," Fennes said.
Tony Baker, director, international aviation negotiations at the UK Department of Transport, points to KLM's take over of Air UK as an example of globalisation already taking place. Although safety issues would have to be addressed, and the UK would not want to see flags of convenience occur in the airline industry as they have in shipping, Baker concludes: "Change in ownership rules is maybe an idea whose time has come."
Source: Airline Business