Open skies, deregulation has been good for global air markets

A more open market for airline competition has benefited customers not only in the U.S. but also countries and regions worldwide that have that liberalized their air service, a new study concluded.

InterVistas-ga2 Consulting, an aviation consulting firm in Washington, said its study on The Economic Impact of Air Service Liberalization shows liberalization has increased employment and added to economic growth by creating new opportunities for consumers and shippers and dramatically increasing the number of travelers.

To back up its findings, InterVistas-ga2 used case studies of numerous markets where air service has been liberalized.

United Arab Emirates open-skies agreements help set the stage for the growth of Dubais airport into a major international hub as well as for the rapid growth of Emirates Airlines, it said. Domestic deregulation in India and Brazil have helped the development of low-cost carriers in both countries, it said, and the liberalization of service to secondary airports in the U.K. led to a big increase in international flights to them.

But it was Europe that was one of the studys prime examples. The consulting firm said the creation of a Single European Aviation Market in 1993 increased intra-European air travel by 44 million passengers, allowed the addition of 618 new roundtrip flights and doubled the growth rate in traffic when the numbers are adjusted to account for the impact of the 9/11 terrorist attacks.

The open market also enabled the explosive growth in low-cost carriers in Europe, it said. Once the impact of deregulation began to be felt, the study added, traffic increased more than capacity as lower fares meant carriers were filling a higher percentage of seats.

Regarding air travel liberalization worldwide, InterVistas-ga2 post-liberalization traffic growth between countries has typically averaged between 12% and 35%, much higher than before.

Based on those results and the firms simulation and modeling, InterVistas-ga2 said it identified 320 more country-pair markets where liberalization would increase traffic, on average, by almost 63%. That compares with typical world traffic growth of 6% to 8%, the firm said, and would create about 24 million full-time jobs and generate an additional $490 billion in gross domestic product  --  also as much as the size of Brazils economy.

The firm also said simulation of full liberalization of the U.S.-U.K. market, which still contains strict limits on service to London, would increase traffic almost 29% because of lower fares and more nonstop service from U.S. cities to Heathrow and Gatwick airports.


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