Economic effects of air transport market liberalization in Africa

Abstract

Although the aviation industry is increasingly becoming important for Africa's economic development and integration, the ability of airlines to access foreign markets remains hindered by restrictive regulatory policies. Attempts have been made to fully liberalize the intra-African air transport market. Except for general assertions about the merits/demerits of liberalization, our empirical understanding of the welfare effects of such polices in Africa remains rudimentary. This study empirically measures the economic effects of air transport liberalization, mainly on two supply side variables: fare and service quality, measured as departure frequency. The results show up to 40 % increase in departure frequency in routes that experienced some type of liberalization compared to those governed by restrictive bilateral air service agreements. While the effect of liberalization is substantial in improving service quality, there is no evidence of its fare reducing effect. AbstractAlthough the aviation industry is increasingly becoming important for Africa's economic development and integration, the ability of airlines to access foreign markets remains hindered by restrictive regulatory policies. Attempts have been made to fully liberalize the intra-African air transport market. Except for general assertions about the merits/demerits of liberalization, our empirical understanding of the welfare effects of such polices in Africa remains rudimentary. This study empirically measures the economic effects of air transport liberalization, mainly on two supply side variables: fare and service quality, measured as departure frequency. The empirical models evaluate how air fares and departure frequency respond to measures of openness in air services agreements, while controlling for other determinants. The results show up to 40% increase in departure frequency in routes that experienced some type of liberalization compared to those governed by restrictive bilateral air service agreements. Furthermore, there is a relatively larger increase in departure frequency in routes which experienced partial liberalization compared to fully liberalized ones. This can be explained by the diminishing marginal effect of progressive liberalization on departure frequency. While the effect of liberalization is substantial in improving service quality, there is no evidence of its fare reducing effect.

Air Traffic Forecast in Post-Liberalization Context: A Dynamic Linear Models Approach

“…Other studies focus on the analysis of diverse situations (e.g. demand behavior), in the post liberalization context, particularized in certain countries or regions; in addition to the countless jobs in relation to the United States, we have, for example, from Europe (Eriksson & Pettersson, 2012;Fan, 2006;Goetz & Graham, 2004;Thompson, 2002;Graham, 1998Graham, , 1997Ivy, 1995;Dennis, 1994), from Canada (Oum, 1991), from Australia (Hooper, 1998;Forsyth, 1991), from Asia (Bowen, 2000;Bowen & Leinbach, 1995), from Brazil (Oliveira, Lohmann, & Costa, 2016;Koo & Lohmann, 2013), from Central and Eastern Europe (Jankiewicz & Huderek-Glapska, 2015), from Africa (Njoya, Christidis, & Nikitas, 2018;Abate, 2016;Dobruszkes, Mondou, & Ghedira, 2016;Njoya, 2015;Surovitskikh & Lubbe, 2015;Ismaila, Warnock-Smith, & Hubbard, 2014;Daramola & Jaja, 2011), and finally from Colombia, where there is only one related research, that of Díaz Olariaga et al 2017. From the perspective of public policy, Koo and Lohmann (2013) examine the relationship between the volatility of aeronautical public policy and the spatial evolution of the air transport supply.…”

Economic impacts of the ASEAN single aviation market: focus on Cambodia, Laos, Myanmar, The Philippines and Vietnam

“…They can compete within their existing network by operating more frequencies (Njoya, Christidis, andNikitas 2018, 2018) or expand and optimise their network (FU, OUM, and ZHANG 2010;Jankiewicz and Huderek-Glapska 2016) and offer more destinations. They strive to reduce ticket prices and increase the quality of their services (Abate 2016;Goetz and Vowles 2009;Njoya, Christidis, and Nikitas 2018). Deregulation is hence a recognized driver of traffic and network growth (Jankiewicz and Huderek-Glapska 2016) and is recognised as bringing positive impacts on countries' economies (FU, OUM, and ZHANG 2010).…”

Air Transportation Income and Price Elasticities in Remote Areas: The Case of the Brazilian Amazon Region

“…For this reason, in addition to estimate and discuss the factors affecting the sensitiveness of the demand regarding the passenger air transportation and the variations in price and income, this paper explores the discussion of market conditions, which, in a liberal scenario, will have a greater influence in the decision of airlines in operating in isolated areas. Abate [8], for example, pointed out that the liberalization of the airline sector in Africa resulted in a 40% increase in the frequency of flights, but had no impact on prices. This reinforces the importance of studying how demand behaves in relation to price changes under different market conditions.…”