Industry Agenda

The World Economic Forum argues that the 'nationality rule'—comprising national statutes and bilateral air services agreements (ASAs)—acts as a 'double-bolted locking mechanism' that restricts foreign investment in airlines. This rule increases the cost of capital and prevents the formation of truly multinational airline corporations. To address concerns regarding safety oversight and 'flags of convenience,' the report proposes replacing ownership-based restrictions with a 'regulatory nationality' test, where an airline is defined by the state that oversees its safety, taxes, and labor standards. The report highlights the European Union's regional liberalization as a successful model and suggests a dual-track implementation strategy to reform both domestic laws and international treaties.

• The 'nationality rule' consists of two layers of restriction: 'internal bolts' (national statutes capping foreign investment) and 'external bolts' (clauses in bilateral air services agreements, or ASAs, that can deny foreign-owned airlines the opportunity to operate international routes).
• The nationality rule increases the cost of capital for airlines and prevents them from achieving efficiencies of size and scope through transnational mergers or foreign subsidiaries, which in turn leads to higher prices for travellers.
• Current justifications for maintaining the nationality rule include preventing 'flags of convenience' (where airlines seek lower labor and environmental standards) and addressing the 'rule of origin' problem (where third-state investors use a liberalized market to gain unauthorized access to another state's airspace).
• The European Union has successfully implemented regional liberalization by abolishing the nationality rule internally, allowing any EU-licensed airline to be owned by any EU national, which has significantly benefited services and prices.
• The report proposes replacing ownership and control tests with 'regulatory nationality,' which defines an airline by the state that oversees its safety standards, collects its taxes, and provides its governing labor and environmental laws.
• The proposed reform follows a dual-track approach: Track 1 focuses on eliminating domestic restrictions on foreign ownership, while Track 2 focuses on amending the designation clauses of bilateral agreements to use the regulatory nationality test.

APA

World Economic Forum (2016). Industry Agenda. http://www3.weforum.org/docs/IP/2016/MO/WEF_AT_NewRegulatoryModel.pdf

Chicago

World Economic Forum. Industry Agenda. 2016. http://www3.weforum.org/docs/IP/2016/MO/WEF_AT_NewRegulatoryModel.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Industry Agenda |date=January 2016 |url=http://www3.weforum.org/docs/IP/2016/MO/WEF_AT_NewRegulatoryModel.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2016industry, author = {{World Economic Forum}}, title = {{Industry Agenda}}, institution = {World Economic Forum}, year = {2016}, month = jan, url = {http://www3.weforum.org/docs/IP/2016/MO/WEF_AT_NewRegulatoryModel.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }