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Economic Regulation of Air Transport (Part 2): The Effects

Dr. Albert Plesman Airport

A liberalized air transport system can be a key factor for rapid economic development, as some countries have demonstrated. For example, the Netherlands, which has a relatively small domestic market compared to France and Germany, has been a pioneer in opening up its bilateral air services agreements.

The first "Open Skies" agreement in the world was signed by the Netherlands and the US in 1992, which boosted Amsterdam’s Schiphol airport as a major trans-Atlantic hub and enabled its flag carrier, KLM, to increase its network coverage in Europe and North America. Similarly, Singapore has benefited from its liberalized air transport system, which has made it a leading aviation and trade center in Asia.

The importance of international markets for KLM, the Netherlands' national airline, was emphasized by its President and CEO, Pieter Elbers. He said: "KLM has always relied on access to global destinations, as we operate from a small country. Our growth and innovation have been closely linked to the liberalization of the airline industry.

The 'Open Skies' agreement with the US enabled us to expand our network and our partnerships. This also had a positive impact on Amsterdam Schiphol airport and the Dutch economy, creating jobs and opportunities".

One of the most successful and extensive examples of liberalization is the EU single aviation market, which has led to a nearly complete deregulation of the EU single aviation market. This has allowed for significant growth of the European aviation sector and a democratization of air transport: European air transport users now have an unparalleled choice of air travel options at competitive prices. The number of routes, both within the EU and internationally, carrier frequencies, and the number of passengers has risen considerably.

The EU single aviation market allows all EU air carriers to operate freely within the EU. This has led to the fast expansion of EU low-cost carriers, such as Ryanair, Easyjet and Wizzair, which rank high among the top carriers in Europe in terms of passengers and market value. The European aeronautical industry has also been very successful.

The EU has pursued a proactive aviation policy that benefits not only its member states, but also other countries around the world. By negotiating EU-level aviation agreements with third countries, the EU aims to foster economic growth, enhance market access, increase investment opportunities, and improve air travel for passengers and businesses. These agreements also promote high standards of safety, security, environmental protection, and social rights in the aviation sector.

The EU has been a leader in developing a comprehensive aviation policy that benefits not only its member states, but also other countries around the world. By negotiating EU-level aviation agreements with third countries, the EU aims to achieve four main objectives:

  1. Create new economic opportunities for airlines and other stakeholders,

  2. Ensure market access and fair competition,

  3. Promote investment opportunities and regulatory convergence, and

  4. Facilitate air travel for passengers and cargo.

These agreements have positive impacts on trade, tourism, environment, security, and consumer protection.

A closely aligned Common Aviation Area between the EU and its neighbors has been established by the EU, and it is working on EU-level air transport agreements with several important partners. The EU air transport agreement with the Western Balkan States has resulted in a nearly threefold increase in passenger numbers since it was signed.

The liberal agreement with Morocco has resulted in a twofold increase in the number of passengers travelling between EU and this country. Similarly, the agreements with US and Canada have contributed to a significant expansion of more than 3 million passengers in the EU markets connected to these countries.

Finally, Turkish Airlines CEO Dr. Temel Kotil, stated that "international trade between Africa and Turkey has increased from non-existent to 20% thanks to Turkish Airlines flying to different points in Africa", and that "Turkish Airlines' growth has boosted the Turkish economy by a multiplier of the economy''.

Increased air traffic has a positive effect on employment and GDP, as shown by a 2006 study that found a 0.07% increase in GDP for every 10% increase in international air service frequency (IATA, 2009). However, this benefit may not be fully realized if foreign carriers are restricted on New Zealand routes. A study that examined the impact of liberalization in New Zealand warned that such restrictions could negate the advantages of liberalization.

It is clear that liberalization plays a key role in improving air service levels and lowering fares, thus leading to increased traffic volumes and economic growth and employment.

To be Cont'd

PMC Global Aviation

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