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CHICAGO - Existing aviation regulations have done little to assure the viability of cash-starved domestic airlines, and, in fact, are contributing to the ailing industry's current crisis, according to a study released by Dr. Brian Havel of the DePaul University School of Law.
 
Havel's study - "A New Approach to Foreign Ownership of National Airlines" - indicates that outdated regulations regarding foreign ownership and control of US airlines "are acting as a barrier to efficiency and competition."

Many US airlines, "once concerned about the implications of global competition, have abandoned their protectionist stance in recent years and recognized that laws restricting ownership and control to US citizens are preventing access to sorely needed foreign capital," said Havel.
 
According to Havel, who has been focusing on the law and policy of the global airline industry for several years, "The world's most global service industry lacks even a single global competitor," he said.
 
"The nationality rule prevents airlines and investors alike from making the kind of reasonable, practical business decisions that are taken for granted in every other industry operating in today's global business environment."

Havel is the author of the book "In Search of Open Skies: Law and Policy for a New Era in International Aviation," which was published in 1997 and is regarded as a leading treatise on worldwide airline liberalization. A new edition will appear in the spring of 2004.

As a result of Havel's long-held position that the citizenship purity test is outdated and harmful to the US airline industry, ASTAR Air Cargo commissioned him to conduct his most recent research.
 
The US Department of Transportation (DOT) is currently conducting a proceeding involving ASTAR, a US-based cargo carrier whose citizenship status is being challenged by competitors of a major foreign-owned company that is one of ASTAR's clients.

According to Havel, the ASTAR case illustrates how companies can use unclear and outdated US airline citizenship laws to gain a competitive advantage. Under current law, airline mergers or acquisitions are possible only if both airlines have owners with US citizenship.

Following the US lead, almost all other countries have laws against foreign investment in national airlines.

Although the federal government is proposing an increase in allowable foreign investment to 49% from 25%, Havel maintains that extensive reforms will be needed for the airline industry to evolve as a viable part of the global economy.

As a first step, "the US government should use its air cargo sector as a laboratory for later adopting more comprehensive reforms in the larger and more complex passenger sector," he concludes.
 
He noted that several nations already have granted air cargo operations more liberal traffic rights than those allowed in the air passenger sector.

To review Havel's study, visit http://www.law.depaul.edu/bhavel and click on white paper.

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