Cross-Border Joint Venture Airlines in Asia: Corporate Governance Perspective
- PDF / 711,574 Bytes
- 21 Pages / 439.37 x 666.142 pts Page_size
- 57 Downloads / 269 Views
Cross‑Border Joint Venture Airlines in Asia: Corporate Governance Perspective Jae Woon Lee2 · Seung Young Yoon1
© T.M.C. Asser Press 2020
Abstract Asia is witnessing the emergence and significant growth of incorporated joint venture airlines. The joint venture model has been a functional approach since most states restrict foreign ownership in an airline to less than 50% and require it to be effectively controlled by locals. A typical business model is for a parent airline group to have a minority share while local owners hold a majority share. This model was pioneered by AirAsia, and Jetstar, Lion Air, Singapore Airlines, Spring Airlines, and VietJet have managed to establish a presence in foreign countries through such joint venture arrangements with local investors. In the joint venture model, local investors can be categorized as either strategic investors or financial investors. Strategic investors are typically local airlines that choose to be a joint venture partner so as to create synergy with their own business and to undertake a new business model. In contrast, financial investors are companies that do not necessarily have a strong interest in the airline industry. For the past 15 years, foreign airlines have learned that management conflicts can arise when they partner with strong local airlines. Although foreign airlines want to maximize their corporate control power in their joint venture airlines, they should be mindful of regulatory hurdles in the airline industry. This unique circumstance creates interesting corporate governance issues. This article examines the opportunities gained, lessons learned, and challenges faced by joint venture airlines in Asia from a corporate governance perspective. Keywords Joint venture · Cross-border joint venture · Airlines · Corporate governance · Effective control
Jae Woon Lee is the principal author and Seung Young Yoon is the corresponding author. * Seung Young Yoon [email protected] Jae Woon Lee [email protected] 1
School of Law, Hankuk University of Foreign Studies, Seoul, Korea
2
Faculty of Law, The Chinese University of Hong Kong, Sha Tin, NT, Hong Kong SAR
123Vol.:(0123456789)
J. W. Lee, S. Y. Yoon
1 Introduction The Asian airline industry has shown remarkable growth. Asia is expected to achieve unprecedented long-term growth in the aviation market; it is estimated that air travel in Asia will be greater than the next two largest markets (North America and Europe) combined by 2030.1 Such unprecedented growth is closely linked to the emergence of low-cost carriers (LCCs) in the region. LCCs eliminate traditional services, enabling them to offer lower fares and be operated with a lower cost structure. Asia has spawned groundbreaking international LCCs, with some of their greatest successes coming in Southeast Asia. The LCC penetration rate in the Southeast Asian market is above 50%, having steadily increased from around 3% in 2001.2 Interestingly, many of Asia’s LCCs are incorporated cross-border joint ventures. To be clear, it is neces
Data Loading...
