Metal Neutrality and the Nation-Bound Airline Industry

Abstract

The system of trade in international aviation services is a product of post-World War II economic nationalism. It has resulted in an international airline industry in which international airlines are effectively 'nation-bound', because their operations all must begin and end in their home countries. The growth of branded global alliances and the evolution of US and European aviation policies are accelerating rapidly. As part of its deregulation policy, the US has used the possibility for antitrust immunity (ATI) for cooperative marketing arrangements with national carriers that accept Open Skies liberalization. Recent developments in US policy now require airlines seeking such immunity to commit to operate joint ventures that are 'metal neutral'. A metal neutral joint venture is structured so that partners in the venture are indifferent as to which operates the 'metal' (aircraft) when they jointly market services. The metal neutral requirement is a work in progress but holds the potential to diminish economic nationalism and alter the nation-bound nature of aviation operations.