BusinessWeek’s Debate Room asks whether foreign ownership is a good or bad thing for US airlines. Arguing in favor of foreign ownership, Matt Vella says innovation, not nationality, is best:

There’s little evidence the impact on labor would prove more substantial than that of the current outsourcing craze, which already has carriers retooling planes in remote parts of the globe. And foreign-owned, U.S.-incorporated airlines would, of course, be subject to U.S. safety, security, and employment rules.

One could also look to Air France-KLM as an example of foreign ownership that has strengthened the two airlines while keeping the KLM brand and Dutch connection alive and well.

Arguing against foreign ownership, Justin Bachman says that foreign carriers would have little incentive to maintain US aviation jobs – everything from pilots to ground crews, maintenance services, airport staff, and even Boeing employees. He also questions whether, under foreign ownership, US airlines would drop rural flights and focus only on transporting US urban-dwellers to international cities.

I think both of these arguments are fairly weak.

Competition is Necessary

A foreign owner, even Air France-KLM, which is based in the same country as the headquarters of Airbus and a significant amount of its manufacturing, would recognize the necessity of competition between aircraft makers and would understand that one aircraft maker alone could never keep up with the demand for new planes. Airbus and Boeing are the companies they are today because they have each other to compete with.

Goodwill Gestures?

Regarding the second argument, foreign owners would come under heavy fire if they dropped rural US routes, and the US carriers themselves are already doing so in response to the economic downturn. If anything, I could imagine a foreign owner offering to reinstate some rural routes after announcing its intention to buy a US carrier. It would be an excellent goodwill gesture to help ensure a deal is approved by federal regulators, and some rural routes that are being cut today will be added back sooner or later. It’s a cyclical thing, after all.