AIRLINE LIBERALIZATION IN THE US AND EUROPE : IMPLICATIONS ON THE ASIA-PACIFIC AIRLINE MARKET

Abstract

The US and Europe have adopted two different approaches of liberalizing their respective aviation market. Their results showed that the average fares have fallen after liberalization. However, the imperfectly competitive structure of the aviation market led to consolidation by the established carriers through hub-and-spokes systems, acquisitions, mergers and alliances. The European experience is more relevant for the Asia-Pacific due to the shared characteristics of fragmented political boundaries in the region. This is also the single most important factor that have made Europe chosen the route of liberalization-by-stage. The current bilateral regime in the Asia-Pacific is still very restrictive, and it is limiting the strong growth of the regional traffic growth. Forces of change are gradually changing the attitudes of the governments. But there is a lack of initiatives for sub-regional, or even regional, types of arrangements. The currency crisis may possibly act as the catalyst for more liberal agreements. The Asia-Pacific needs to re-focus its objective towards consumerism. Regulation on foreign ownership should be more relaxed in order to help the expansion and improvement of some of the inefficient carriers in the region. Trade liberalization in the region should be linked up with the airline services, just like the SAM in Europe. The likely progress of liberalization in the region is probably more liberal bilateral, and maybe multilateral, agreements in the short-run, and ultimately multilateralism in the long term.