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Evaluating Airline Deregulation in Australia

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  • John Quiggin

Abstract

It has frequently been claimed that the cost of air travel in Australia has fallen by around 20 per cent in real terms since the end of the Two Airline agreement. However, this claim rests on a misinterpretation of price data. In this article, an analysis based on the theory of price indexes is presented. It is concluded that the representative passenger has probably experienced a small reduction in the cost of air travel since deregulation. Some additional benefits have flowed from the expansion of frequent flyer schemes, and from increased frequency of service. The distributional effects of deregulation are unclear, but are probably favourable on balance. The Australian airline industry is a natural duopoly and the market is not contestable. Therre is no evidence of dynamic efficiency gains arising from deregulation. The observed effects of deregulation are consistent with the predictions of neoclassical microeconomic theory.

Suggested Citation

  • John Quiggin, 1997. "Evaluating Airline Deregulation in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 30(1), pages 45-56, March.
    • Handle: RePEc:bla:ausecr:v:30:y:1997:i:1:p:45-56
    DOI: 10.1111/1467-8462.00004
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    Cited by:

    1. Zhang, Yahua & Sampaio, Breno & Fu, Xiaowen & Huang, Zhibin, 2018. "Pricing dynamics between airline groups with dual-brand services," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 46-59.
    2. John Quiggin, 2004. "Looking Back on Microeconomic Reform: A Sceptical Viewpoint," The Economic and Labour Relations Review, , vol. 15(1), pages 1-25, June.
    3. Zhou, Heng & Norman, Richard & Kelobonye, Keone & Xia, Jianhong (Cecilia) & Hughes, Brett & Nikolova, Gabi & Falkmer, Torbjorn, 2020. "Market segmentation approach to investigate existing and potential aviation markets," Transport Policy, Elsevier, vol. 99(C), pages 120-135.
    4. Zhang, Yahua & Zhang, Anming, 2021. "COVID-19 and bailout policy: The case of Virgin Australia," Transport Policy, Elsevier, vol. 114(C), pages 174-181.
    5. Stevens, Nicholas & Baker, Douglas & Freestone, Robert, 2010. "Airports in their urban settings: towards a conceptual model of interfaces in the Australian context," Journal of Transport Geography, Elsevier, vol. 18(2), pages 276-284.
    6. Tarryn Kille & Paul Bates & Patrick S. Murray, 2013. "Measuring success: the search for assessment criteria in determining the impact of deregulation in regional aviation," International Journal of Aviation Management, Inderscience Enterprises Ltd, vol. 2(1/2), pages 4-34.

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