Australia isn't the only country in which foreign ownership of airlines is a sensitive issue. The European Commission has launched a formal investigation into Etihad Airways - one of the major shareholders in Virgin Australia Holdings - over its strategy of buying stakes in carriers across Europe. Delta Air Lines, which bought a 49 per cent stake in Virgin Atlantic, is also under investigation. The concerns relate to whether the non-European carriers are effectively controlling their European investments despite the minority stakes. It is a similar argument to the one that Cathay Pacific is using as an attempt to block Qantas Airways from setting up Jetstar Hong Kong, although in that case it relates to whether control will reside in Hong Kong or Australia rather than foreign ownership issues. In order to operate as a European carrier, an airline must be more than 50 per cent owned and "effectively controlled" by a European Union member state or EU citizens. "Accordingly, the Commission has asked the member state concerned to provide further information on how these investments comply with the rules on ownership and control of European airlines," the European Commission said in a statement. Etihad owns stakes in Germany's airberlin, Air Serbia, Ireland's Aer Lingus and Etihad Regional (formerly Switzerland's Darwin Airline) in Europe. It is reportedly examining an increase of its stake in airberlin to 49.9 per cent from 29 per cent and is also conducting due diligence on the possible purchase of a stake in ailing Italian carrier Alitalia. Australian-born Etihad boss James Hogan's strategy has been to build up his airline's Abu Dhabi hub through alliances involving equity stakes, which also include India's Jet Airways and Air Seychelles. The partner airlines can then route flights to and from Abu Dhabi. At a conference in Abu Dhabi on Monday, Mr Hogan said the airline partners could now leverage economies of scale through joint procurement and resource sharing, which he said were not available through pure commercial relationships or membership of airline alliances. "The benefits of strategy flow to our partners as they gain access to the Etihad Airways global flight network, improved revenue opportunities and reciprocal cost and efficiency gains. The net result is stronger, more competitive airlines, delivering benefits to consumers, creating employment and contributing to economic growth," he said. Etihad does not own a majority stake in any of the airlines but it has management contracts with Air Serbia and Air Seychelles. Delta, rather ironically given the European investigation into its Virgin Atlantic stake, was instrumental in convincing the US Department of Transport from blocking a planned Etihad-Air Serbia codeshare on US flights. The US agency ultimately agreed with allegations made by Delta that notwithstanding Air Serbia was majority owned by Serbia, Etihad would likely nevertheless wield extensive control over day to day operations. In Australia, foreign ownership of international carriers is limited to 49 per cent under the Air Navigation Act, but through a clever split of its domestic and international operations, Virgin Australia is majority foreign owned. Qantas is barred from pursuing a similar structure unless a repeal of restrictive Qantas Sale Act provisions are passed by the Senate. Most nations have protectionist laws relating to airlines due to the need to maintain bilateral air traffic rights. In the US, foreign ownership of airlines is limited to 25 per cent.