Many countries have put restrictions on foreign ownership of their home-grown airlines but the economic pressures on a volatile airline industry could be changing attitudes. Brazil becomes the latest country to ease restrictions on foreign investment in its national carriers. Is it time for governments to do away with airline foreign ownership limits?

Reuters reports that foreigners will be able to take a stake of up to 49 percent in Brazilian airlines compared with the current 20 percent limit, under a government proposal to modernize air transport before Brazil hosts the soccer World Cup and Olympic games. Brazil becomes the latest nation to rethink its policies toward foreign ownership of its airlines. Late in 2009, Australia removed the 25 percent individual and 35 percent overseas restriction on foreign companies seeking a stake in the nation's flagship carrier Qantas. The government maintains that the nation's airlines must still be at least 51 percent Australian-owned for national security reasons.

National interest has often been cited as the key reason for restrictions on foreign ownership of a nation's air carriers. Such constraints have been sticking points for countries trying to negotiate aviation agreements with the United States. The U.S. is reluctant to ease restrictions on foreign ownership of its home-based airlines, often invoking national security. Part of the latest round of negotiations between the United States and Europe for Phase II of their Open Skies agreement hinges on the relaxation of ownership rules. European negotiators insist that if the U.S. does not move to ease the ownership restrictions, now at 25 percent for foreign investors, the entire Open Skies deal could unravel. With it could go the freedom enjoyed by EU airlines to fly to any U.S. city from any member country and allowances for U.S. airlines to fly to any EU city and beyond.

It seems that airlines are starting to make the business case for allowing foreign airlines to buy stakes in their companies. Airlines are in survival mode. Though the passenger numbers are slowly recovering, the move toward consolidation – mergers, alliances and joint ventures – shows that the old paradigms no longer apply. Airline unions in the U.S. are leery of any relaxation of ownership rules, fearing that foreign investors could eventually control the operating decisions at the airlines and that jobs and service could suffer as a result. Others argue that airlines may require such investments to stay aloft, thus saving those very same jobs. No matter who is right, the lessons learned from Brazil and Australia may very well clear the way for other nations to decide if foreign ownership restrictions are simply "old school" or sound policy.