TABLE OF CONTENTS The so-called flag carrier concept is now outdated, mainly because it is incompatible with the need to make the European airline industry competitive on a global scale
(Comit des Sages, 1994)
It is possible that alliances are, in certain cases, simply precursors to outright mergers. The signs are there. With the same logo, joint advertising and close co-ordination of service schedules, KLM and Northwest have already gone quite some way in the direction of merger. In other cases the fact that alliances have adopted common aircraft liveries, or common uniforms for cabin staff, is possibly a portent of some more fully consummated relationships to come. Also there are some instances in which equity purchases have earned investing airlines options to acquire further shares in the future. The scope for cross-border shareholders seems certain to increase as state ownership declines and as privatized airlines seek greater access to foreign capital in a deregulated or liberalized environment. But there are still some formidable impediments to cross-border mergers.
It is true that some national governments are beginning to relax restrictions on foreign ownership, but if foreign ownership goes beyond a certain point, this raises serious questions regarding traffic rights on international routes. Ownership clauses in bilateral air service treaties restrict the grant of the relevant freedoms of the air to airlines owned and controlled by nationals of the state concerned. As things stand, if an airline of one state takes over the airline of another state, then...
