University of Huddersfield Repository Ismaila, D. The Impact of International Air Transport Liberalisation: The Case of Nigeria Original Citation Ismaila, D. (2013) The Impact of International Air Transport Liberalisation: The Case of Nigeria. Doctoral thesis, University of Huddersfield. This version is available at http://eprints.hud.ac.uk/20346/ The University Repository is a digital collection of the research output of the University, available on Open Access. Copyright and Moral Rights for the items on this site are retained by the individual author and/or other copyright owners. Users may access full items free of charge; copies of full text items generally can be reproduced, displayed or performed and given to third parties in any format or medium for personal research or study, educational or not-for-profit purposes without prior permission or charge, provided: • The authors, title and full bibliographic details is credited in any copy; • A hyperlink and/or URL is included for the original metadata page; and • The content is not changed in any way. For more information, including our policy and submission procedure, please contact the Repository Team at: [email protected]. http://eprints.hud.ac.uk/ THE IMPACT OF INTERNATIONAL AIR TRANSPORT LIBERALISATION: THE CASE OF NIGERIA Danjuma Adamu Ismaila A Thesis Submitted to the University of Huddersfield in Partial Fulfilment of the Requirements for the Degree of Doctor of Philosophy The University of Huddersfield Business School October 2013 Copyright statement i. The author of this thesis (including any appendices and/or schedules to this thesis) owns any copyright in it (the “Copyright”) and s/he has given The University of Huddersfield the right to use such copyright for any administrative, promotional, educational and/or teaching purposes. ii. Copies of this thesis, either in full or in extracts, may be made only in accordance with the regulations of the University Library. Details of these regulations may be obtained from the Librarian. This page must form part of any such copies made. iii. The ownership of any patents, designs, trademarks and any and all other intellectual property rights except for the Copyright (the “Intellectual Property Rights”) and any reproductions of copyright works, for example graphs and tables (“Reproductions”), which may be described in this thesis, may not be owned by the author and may be owned by third parties. Such Intellectual Property Rights and Reproductions cannot and must not be made available for use without the prior written permission of the owner(s) of the relevant Intellectual Property Rights and/or Reproductions. ii Abstract The impact of air transport liberalisation suggested by economic theory and globalisation inspired Nigeria to adopt a more liberal policy towards its international Air Service Agreements (ASA). The policy involves implementing the Yamoussoukro Declaration with some African countries, an Open Skies Agreement with the US, and the easing of some market access regulations with several other countries. This study explores the extent to which international air transport liberalisation has impacted the Nigerian air transport market over the ten years (2001-10) since its commencement. The objectives of the study include, among others: to review the country’s ASAs and determine the level of liberalisation in those agreements, to study the performance of the ASA in terms of international air traffic demand in the market, to determine the impacts of liberalisation on passenger welfare in the market, and to evaluate the impact of further liberalising market access and carrier ownership. The study employed the use of secondary data relating to traffic volumes and socio- economic variables from the market. These were subjected to analytical methods commonly used in the study of liberalisation, including descriptive statistics, entropy and econometric modelling in order to establish relationships among the variables. Also, primary data were collected from a field survey and analysed to complement some of the findings. The empirical findings were able to fulfil the objectives of the study. It was discovered that most countries’ ASAs were not fully liberalised, but have some level of liberalisation. For a country to attain market access liberalisation, the ASA should grant fifth freedom rights, free pricing, multiple designations, and free determination of capacity and frequency. Another salient discovery was that liberalisation of market access and carrier ownership could spur traffic demand in all route markets, which could substantially increase total annual international traffic flows. The impact on traffic could trigger changes in air fares that would enhance consumer welfare. Nigeria’s airport infrastructure is found to be capable of accommodating the expected traffic increases as a result of the liberalisation. Although there were some adverse effects from the policy which include capital flight and the possible liquidation of home carriers, the thesis concludes that liberalisation could stimulate traffic demand in the market significantly, which could enhance revenue to the industry for sustainable development. The study concludes with recommendations and areas of further research. iii Table of Contents Abstract ............................................................................................................................................... iii Table of Contents .............................................................................................................................. iv List of Figures ..................................................................................................................................... xi List of Tables .................................................................................................................................... xiii Acknowledgements .......................................................................................................................... xv List of Abbreviations....................................................................................................................... xvi Chapter One : General Introduction ......................................................................................................... 1 1.1 Background of the research .............................................................................................. 1 1.2 Statement of the Research Problems ................................................................................ 6 1.3 Research Hypothesis ........................................................................................................ 9 1.4 Aim and objectives of the research .................................................................................. 9 1.4.1 Aim ........................................................................................................................... 9 1.5 Rationale of the Research .............................................................................................. 10 1.5.1 Economic Justifications .......................................................................................... 10 1.5.2 Who Benefits from the research .............................................................................. 11 1.5.3 Originality ............................................................................................................... 12 1.6 Scope and limitations ..................................................................................................... 13 1.7 Organisation of the thesis ............................................................................................... 14 Chapter Two : Literature review: Liberalisation Theory and Impacts ................................................... 17 2.1 Introduction .................................................................................................................... 17 2.2 Economic Regulation in Air Transport .......................................................................... 17 2.2.1 Air Service Agreements (ASA) as instruments for air traffic regulation ................ 18 2.2.2 Bilateral Air Transport Policy in Africa .................................................................. 21 2.3 Arguments for Regulatory Reform ................................................................................ 23 2.3.1 Economic Theory of Liberalisation ........................................................................ 24 2.4 Deregulation and Liberalisation – Concept and development ....................................... 27 2.4.1 Deregulation in US and the Global Spread ............................................................. 28 2.5 Economic Impacts of Liberalisation: Empirical evidence ............................................. 30 2.5.1 Impact on market competition ................................................................................ 30 2.5.2 Impact on passenger traffic ..................................................................................... 33 2.5.3 Impact on Flight Frequency .................................................................................... 36 2.5.4 Impact on Air fare/Consumer welfare ..................................................................... 38 2.5.5 Impact on cost efficiency ........................................................................................ 41 2.5.6 Impact on Contemporary Development in Aviation ..............................................