Deregulation of the ASEAN air Transport Market: Measure of Impacts of Airport Activities on Local Economies

ASEAN Member States are currently in a step through liberalization of air traffic market in their region. The target is the 5th freedom right for South-East Asia in 2020. Two opposite effects might be observed following the deregulation: one negative on flag carrier due to increase in competition, one positive on national and regional economies. One main issue concerns the impact of expected development of airport activity on national and regional economies. We propose an estimation of these impact, using a two stage econometric model applied to four ASEAN countries. We show that GDP is the most sensible to air traffic growth in region where only international airports are located, that is for region that exhibit the highest level of development. We show that up to the 5th freedom right, given the expectation in tourism development, national GDP is expected to increase by 9% (Myanmar) to 51% (The Philippines) depending on the country. The magnitude of the impact depends on the tourism development expectation as well as on the tourism contribution to GDP. The analysis show then that economic benefit of air transport liberalization are non-negligible for the ASEAN countries. Given the magnitude of the estimated effect, the benefits would certainly overlap the negative effect of competition on the flag carriers.