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Regulation, market structure and performance in air passenger transportation

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  • Rauf Gönenç
  • Giuseppe Nicoletti

Abstract

The paper uses a data base on regulation, market structure and performance in the air passenger transportation industry, to analyse the links among liberalisation, private ownership, competition, efficiency and airfares at national and route levels. Covering the 1996-97 travel season, 21 aggregate indicators have been developed for 27 OECD countries, and 23 micro indicators for 102 air routes connecting 14 major international airports. These data are summarised by means of factor analysis. Controlling for market size, network length and other technological and economic differences, and combining national and route-level characteristics, cross-country and cross-route regressions show that i) productive efficiency increases and fares decline when regulations and market structures become more friendly to competition; ii) productive efficiency is sensitive to actual competitive pressures, as proxied by market concentration; iii) fares react to liberalisation independently from market structure, but in liberal environments their decline is amplified by actual competition between carriers; iv) business and economy fares tend to decline when they are liberalised and market concentration is reduced, but tend to increase when markets are dominated by airline alliances on the route; v) discount fares are affected by the overall market environment at route ends, charter regulations and the actual presence of challenger airlines on the route; and vi) airport congestion and dominance tend to increase fares in time-sensitive market segments.

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File URL: http://dx.doi.org/10.1787/eco_studies-v2001-art6-en
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Bibliographic Info

Article provided by OECD Publishing in its journal OECD Economic Studies.

Volume (Year): 2001 (2001)
Issue (Month): 1 ()
Pages: 183-227

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Handle: RePEc:oec:ecokaa:5lmqcr2k29bn

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Cited by:
  1. Adriana Kugler & Giovanni Pica, 2003. "The Effects of Employment Protection and Product Market Regulations on the Italian Labor Market," LABORatorio R. Revelli Working Papers Series 28, LABORatorio R. Revelli, Centre for Employment Studies.
  2. Adriana Kugler & Giovanni Pica, 2003. "Effects of employment protection and product market regulations on the Italian labor market," Economics Working Papers 722, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Piermartini, Roberta & Rousova, Linda, 2009. "Free Sky and Clouds of Restrictions," Discussion Papers in Economics 10944, University of Munich, Department of Economics.
  4. Arvis, Jean-François & Shepherd, Ben, 2011. "The air connectivity index : measuring integration in the global air transport network," Policy Research Working Paper Series 5722, The World Bank.
  5. Zhang, Yahua & Findlay, Christopher, 2014. "Air transport policy and its impacts on passenger traffic and tourist flows," Journal of Air Transport Management, Elsevier, vol. 34(C), pages 42-48.
  6. Cheng, Kuangnen & Lee, Zu-Hsu & Shomali, Hamid, 2012. "Airline firm boundary and ticket distribution in electronic markets," International Journal of Production Economics, Elsevier, vol. 137(1), pages 137-144.
  7. World Bank, 2009. "Tunisia's Global Integration : A Second Generation of Reforms to Boost Growth and Employment," World Bank Publications, The World Bank, number 6298, January.
  8. Lücke, Matthias & Spinanger, Dean, 2004. "Liberalizing international trade in services: Challenges and opportunities for developing countries," Kiel Discussion Papers 412, Kiel Institute for the World Economy (IfW).
  9. Alan V. Deardorff & Robert M. Stern, 2003. "Empirical Analysis of Barriers to International Services Transactions and the Consequences of Liberalization," Working Papers 505, Research Seminar in International Economics, University of Michigan.
  10. Geloso Grosso, Massimo & Shepherd, Ben, 2011. "Air cargo transport in APEC: Regulation and effects on merchandise trade," Journal of Asian Economics, Elsevier, vol. 22(3), pages 203-212, June.

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