ABSTRACT
While the airline business is international, access to foreign markets is generally regulated by a restrictive framework that is more than 60 years old. In comparison to other sectors, even other services industries, foreign direct investment, be it either as the establishment of a new subsidiary or the acquisition of foreign companies, is in most cases subject to strict ownership caps and other regulations. Even where it is not explicitly prohibited, the takeover of a foreign airline is usually associated with a loss of international traffic rights within the current framework. The potential loss of traffic rights in case of mergers or acquisitions has led to the emergence of international airline alliances. International mergers and takeovers seldom occurred in the past. However, merger activity is growing with a number of examples in recent years, predominantly in Europe. This growth in mergers and takeovers is potentially triggered by a changing regulatory environment. As more and more horizontal aviation agreements between the EU and third countries come into effect, a common community of national airlines based in the EU is being accepted. In contrast, transactions in the past had relatively complicated holding structures with a division of economic voting rights and effective ownership and control had to be created, for instance in the case of the merger of Air France and KLM.
