The Economic Effects of Progressive Air Transport Liberalization in Africa: The Case of City-pair Routes to/from Addis Ababa

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Addis Ababa University


Empirical analysis on economic effects of liberalization in the context of African air transport sector is not much discussed in the literature and the continent’s policy makers and the industry operators need such analysis to implement liberalization initiatives. As such, the purpose of this study is to empirically measure economic effects of progressive air transport liberalization in Africa by taking the case of 20 city-pair routes to/from Addis Ababa for the period 2000-2005. By employing a Two-Stage Least Square estimation procedure for a panel data set, passenger demand, fare and departure frequency models are estimated to see the impact of Bilateral Air Service Agreement (BASA) liberalization. Liberal policies are assumed to affect the two supply side variables, i.e. fare and departure frequency. Accordingly, the frequency model indicates that a significant increase in departure frequency is observed in routes that experienced both ‘full’ and ‘restricted’ type of liberalization compared to those governed by restrictive bilateral arrangements. In addition, higher increase in the number of departure frequency in routes which experienced restricted liberalization relative to those operated under fully liberalized arrangement is observed. Regarding the fare model, a statistically significant negative impact of liberalization policy on standard economy fare is not found. Finally, it is recommended that liberalizing BASAs, especially provisions pertaining to departure frequency, will enhance service quality. Key Words: Air Transport, Liberalization, Yamoussoukro Decision, Bilateral Air Service Agreements, Africa JEL Classification: L93, L51, L9



Air Transport, Liberalization, Yamoussoukro Decision, Bilateral Air Service, JEL Classification, L93, L51, L9