Africa’s single aviation market: The progress so far

To promote the development of air transport at the continental level, several policies were introduced, leading to the Yamoussoukro Decision (YD) in late 1999, which had the liberalisation of the intra-African aviation spaces as its main objective. Even though notable progress has been achieved towards more market-oriented aviation policies, at the pan-African level some markets are still restrictive and inconsistent with the YD, particularly with respect to the granting of 5th freedom rights. This paper aims to examine recent developments in the aviation sector in Africa, with a focus on the implementation of the YD. The obstacles to liberalisation are discussed and several measures for facilitating Africa’s move towards multilateral open skies are investigated. These include, among others, a greater collaboration and co-operation among African airlines, as well as between African airlines and foreign ones; redefinition of the role and responsibilities of different institutions which are instrumental in implementing the YD and some further issues such as ownership guidelines.     

The impact of Air Service Agreement liberalisation: The case of Nigeria

The positive impact of air transport liberalisation as suggested by economic theories and empirical studies has inspired many developing countries like Nigeria to liberalise some of its Air Service Agreements (ASAs). This paper seeks to examine the extent to which international air service liberalisation has impacted upon Nigeria ten years after it was introduced. The research developed a cross-sectional model with passenger traffic as the dependent variable, while macroeconomic factors (trade and GDP), historical links, distance and ASAs (a proxy for liberalisation) served as independent or predictor variables. The analysis revealed a set of ASA stages in the country's policy-making process (restricted Bilateral Air Service Agreement, Open Skies Agreement and Yamoussoukro Declaration). Further analysis showed that the predictor variables were all significant in explaining passenger demand. The model demonstrated that the liberalisation of market access to the Open Skies Agreement level could stimulate traffic growth by at least 65 percent. The findings can assist in guiding policy and industry stakeholders in future decisions relating to liberalisation and ASAs.     

MANAGING THE PROCESS OF REMOVING CAPITAL CONTROLS: WHAT DOES THE LITERATURE SUGGEST?

Economic theory suggests that opening the capital account should allow a country to diversify away economic shocks, increase capital inflows, expand economic growth and efficiency as well as encourage governments to pursue good policies. The empirical evidence with regard to these theoretical predictions, however, are in some instances debatable. Many studies, for example, have reported mixed results as it relates to the impact of capital account integration on growth, exchange rates, trade and policy discipline. This paper provides a review of this literature as well as some recommendations for policymakers in relation to managing the process of removing capital controls.     

Fiscal crisis and fiscal reform in developing countries

In recent years, policy-makers in developing countries haveresponded to crisis of macroeconomic instability with two setsof measures: conventional stabilisation policies and policiesof economic liberalisation. The fiscal implications of thisdouble agenda are set out, following three lines of enquiry.First, how can policies be kept consistent, when some liberalisationmeasures have large adverse fiscal consequences? Second, cana fiscal deficit be reduced without damaging the provision ofpublic services vital for growth and poverty alleviation? Finally,since lack of tax revenue is usually the binding constrainton government intervention, how can this most easily be relaxed?     

Telecommunications in the land of the Thunder Dragon: recent developments in Bhutan

This paper charts the development of telecommunications in Bhutan. Since the introduction of telecommunications services in 1963 Bhutan has faced many challenges as it has sought to roll out a network that covers the whole population and country. A small population, a mountainous geography, a transitional economy and a unique approach to development—Gross National Happiness—present many challenges that need to be overcome if the telecommunications industry is to develop further. Added to this is the decision of Bhutan to join the outside world through membership of the ITU, APT and WTO that has added liberalisation and privatisation to the challenges faced by Bhutan. This paper identifies two broad policy options that Bhutan could adopt—network expansion nationally or investment concentration towards urban areas. The authors conclude that due to the limited resources available to Bhutan these policies are contradictory and will take the telecommunications industry in quite different directions if adopted.     

Liberalisation,competition and ownership in the presence of vertical relations

This contribution analyses a market with an upstream bottleneck monopoly and a downstream activity that may either be vertically integrated or separated. Separation always reduces the consumer surplus, and the total surplus unless there are large cost reductions. Downstream competition from a public or private network monopoly would crowd out other firms, also when public ownership is associated with more modest objectives than welfare-maximisation. A market is therefore less likely to remain a mixed oligopoly than without vertical relations. However, private firms would survive in a moderately welfare-improving mixed oligopoly with cross-subsidisation and access charges equal to marginal costs.

Has Labour Paid for the Liberalisation of European civil aviation?

Work and employment has been transformed by the competitive forces unleashed by liberalisation and the creation of a Single European Aviation Market (SEAM). The SEAM has led to benefits for passengers and for many local economies. However, the claim that liberalisation has also been good for labour is one that is contradicted by the deterioration of aircrews' terms and conditions of employment and the erosion of workers’ ability to defend contractual terms and professional standards.     

Lessons learnt from the market for air freight ground handling at Amsterdam Airport Schiphol

On 16 April 2013, the European Parliament adopted a new, amended airport ground handling Regulation, which will replace the old Directive 96/67 EC on ground handling services. The new Regulation will further open up European airports for competition on the ground handling market. Even long before the introduction of Directive 96/67/EC, Amsterdam Airport has had a liberalised handling regime. Against the background of the further liberalisation of the European ground handling market, this paper investigates the characteristics of the open ground handling market for air cargo at Amsterdam Airport and the lessons that can be learnt from the Amsterdam experience. We find that an open handling market brings greater freedom of choice for airlines and lower handling fees. However, we do not see any (serious) market failure for the airport that would justify intervention by the market regulator, by limiting the number of handlers for example.     

Four shades of Open Skies: European Union and four main external partners

The Open Skies agreements are in the centre of the European Union’s external aviation policy. They form the basis of liberalisation of aviation between the EU and the rest of the world, opening up markets and promoting fair competition. The progress made since the original road map in 2005 depended both on the priorities of the European side and the individual strategy of each external partner. This paper discusses the status of the EU’s aviation relations with four important partners: USA, Russia, Morocco and Turkey.Aviation liberalisation is at a different stage of maturity in the four examples. The evolution of traffic over time can give an insight into the impact that gradual liberalisation had in each case: total traffic grows faster when restrictions are lifted, but new demand is not spread equally across airports on either side. The impact on concentration, measured with the Herfindahl–Hirschman Index (HHI) at airport level, varies significantly between the various markets. Political, geographic, demographic and economic factors influence the airline network dynamics and lead to distinct patterns of expansion. Special emphasis is given to the analysis of the role of airline alliances, ownership limitations and specific obstacles such as the visa limitations and the Siberian overflight royalties.     

The competitive landscape of air transport in Europe

Competition between airlines and airports increased significantly since the deregulation of the intra-European air transport market in 1997. The passenger has a wider choice in terms of routings and departure airports than twenty-five years ago and pays a lower price. In this paper we investigate in which parts of Europe airline and airport competition are most intense and how the competitive landscape has changed since the liberalisation of the intra-European market.Competition levels are modelled for all air transport markets available to consumers in each western-European municipality using a Multinomial Logit (MNL) model. This allows us to determine how competitive the air transport product available to consumers in each of those municipalities truly is and how competition levels have changed. As opposed to most other competition studies we take all viable direct and indirect flight alternatives into account, as well as competing alternatives from nearby (adjacent) airports. This makes it the most extensive analysis of competition in the European aviation industry performed to date.As expected the results show that airline competition, allowing for grouping of the airlines belonging to the same alliance together, has in general increased since the liberalisation of the intra-European market. This can mainly be ascribed to the rise of the low cost business model. The spatial analysis however shows an uneven outcome. Changes in airline competition are most pronounced in areas that were previously not well served, such as the more remote regions in the United Kingdom, Spain and Italy. In Germany airline competition is lagging behind due to the strong dominance of the STAR alliance. In large parts of Scandinavia, but also in parts of France and Spain, airline competition is considerably less. These areas are often served only by a handful of airports and/or airlines, limiting airline choice and therefore competition.