Clear Skies Over Africa

8/6/2019 Clear Skies Over Africa

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The importance of air transport liberalisation

for shared economic growth

Clear Skies over Southern Africa


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October 2006

The importance o air transport

liberalisation or shared economic growth

Clear Skies over Southern Africa


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Published in October 2006 by:

The ComMark Trust

Maple Place South

145 Western Service Road

Woodmead

South Arica

PostNet suite 598

Private Bag X29

Gallo Manor 2052

Tel +2711 802 0785

Fax +2711 802 [email protected]

www.commark.org

All rights reserved. This publication may not be reproduced, stored, or transmitted without

the express permission o the publisher. It may be quoted and short extracts used,

provided the source is ully acknowledged.

ISBN 0-620-37382-2

Produced by Acumen Publishing Solutions, Johannesburg

Printed by The Bureau, Johannesburg

This report was researched and written by Genesis Analytics

(www.genesis-analytics.com, tel +27 011 214-4080).

The authors are Andrew Myburgh, Fathima Sheik, Fatima Fiandeiro, and James Hodge.

The report incorporates research by Anton Richman and Chris Lyle.


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The Commark Tust is ginl dvl-

pnt inititiv, stblisd in 2003 wit

unding t Uks Dptnt Intn-

tinl Dvlpnt (DFID). It is ngd b

eCIAfrica, Sut aicn cnic dvlp-

nt gnc.

Cm stnds Making Commod-

ity and Service Markets Work for the Poor in

Southern Africa. T pups t tust is t

duc pvt in t gin b putting int

pctic t dvlpnt sttg nwn s

ing ts w t p.

T Tust ws t ipv t lgl,

gult, plic, institutinl nd busi-

nss svic nvinnts in ig-gwt,

p-p scts, s tpicll ctd in

plnt, invstnt, nd ntpis dvl-

pnt ptntil. It cncntts n t c

s: txtils nd ppl, gibusinss, nd

tuis.T ginl tuis sct is bvius

Cms intvntin, in viw its pid

cnt gwt nd its dispptint ip-

tnc s suc jb ctin, incs,

nd ign xcng nings st SaDC

cuntis. T dt, signifcnt sucs in t

tuis sct v bn dictd twds t

dvlpnt tining inititivs, sll busi-

nss suppt nd ling pgs, nd

pductivit nncnt sus. Wil

iptnt, tis s tndd t ign t

undntl, stuctul, sstic sns

t scts undpnc in n

cuntis ltiv t its ptntil.

on suc cnstint lts t t igl

stictd i svic gi wic inibits

cptitin btwn ilins tt pt

css t gin. Tis in tun svl li-

its i tfc nd iss its csts, tb sig-

nifcntl lwing t cptitivnss nd

gwt ptntil t gins cn.

T ddss tis cnstint, Cm c-

issind sc tt s culintd in tis

pt. T sc xcis d tw lind

bjctivs: t ccutl ssss t xtnt

t pviling stictins n t i tvl

t in Sutn aic; nd t pcisl

qunti t fst ti t cnic

csts nd cnsquncs ts stictins

t cnis cncnd.

T cl ssg tis pt is tt tliblistin i tnspt will ssivl

bnft t cnis ll t cuntis in

t gin.

About this publication


5/40

Glossary 6

Overview 7

Experiences o liberalisation 7

Policy conict in Mozambique 8

Two statistical analyses 8

The benefts o liberalisation 9

Impact on national airlines 9

Regional implications 10

Introduction 11

Slow progress in SADC 11

Tangible benefts 12

The role o air transport in enabling growth 12

International experience 13

Initial steps 13

Low-cost airlines 14

International routes 15

SADC case studies 16

The NairobiJohannesburg route 16

Domestic liberalisation in South Arica 16

The Eastern Cape 17

The JohannesburgLusaka route 18

Policy conict in Mozambique 19

The benefts o liberalisation 20

Conclusion 20

The impact o liberalisation 22

on SADC member states

Volume analysis 22

Price analysis 22

Benefts or the tourism industry 23

Implications or airlines and 24

airline employment

Kenya Airways 25

EgyptAir 25

Key actors or success 25

Protection against anti-competitive 26

practices

Employment opportunities 26

Ugandas experience 27

Conclusion 27

Research methods 28

Price analysis 28

Volume analysis 31

The impact o liberalisation 33on tourism in SADC

Impact on oreign tourist arrivals 33

The Mozambique case study 35

Endnotes 36

Reerences 40

Contents


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Glossary

BaSa biltl i svic gnt

CaB Civil anutics Bd

GDP Gss Dstic Pduct

GDS glbl distibutin sst

IaTa Intntinl ai Tnspt asscitin

Lam Lins as d mzbiqu

SaDC Sut aicn Dvlpnt Cunit

T&T tvl nd tuis indust

UNWTo Wld Tuis ogniztin

WTTC Wld Tvl & Tuis Cuncil

WTTC-TSa Wld Tvl nd Tuis Cuncil Tuis Stllit accunts


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Overview

ThIS rePorT sws tt, suld

i tnspt in t Sut aicn

Dvlpnt Cunit (SaDC)

b liblisd, t nti gin will

p t bnfts incsd c-

nic gwt nd plnt pptunitis.

SaDC cuntis cntinu t tifcill

stict intntinl i tvl b liiting t

nub igts t ti citis s wll s t

nub ilins tt cn t t. Ts

stictins it xpnsiv t tvl

b i t SaDC, nd s duc t nub

tuists w visit t gin.

expincs in t gins, including

dvlping ns, v swn tt t lib-

listin i tnspt invibl lds t

signifcnt gins cnsus, nd bsts

cnic ctivit. m spcifcll, it sults

in incsd td, ig lvls ign

dict invstnt, nd incsd tuis ll wic dictl cntibut t jb ctin.

T sults tis sc indict tt,

suld i tnspt in SaDC b ntil lib-

lisd, tn 500 000 dditinl ign

tuists wuld iv in t gin b i v

. T wuld spnd tn US$500

illin, wic wuld incs SaDCs Gss

Dstic Pduct (GDP) b r1.5 billin,

l pcnt. S 35 000 nw jbs wuld

b ctd in t tvl nd tuis indust

ln, nd ut 37 000 in t wid SaDC

cn. Tis is ltivl s w t bst

tuis nd cnic gwt in t gin, s

t cngs t gultins tis will qui

si t intduc tn n t plic

intvntins.

Experiences o liberalisation

aicn cuntis suc s kn, egpt, nd

Ugnd v ld liblisd ti i tns-

pt ts, wit gnll psitiv sults.

kn nd egpts ntinl ilins v dn

wll, nd ti tuis industis v bn-

ftd. Ugnd s lt t bnfts vn tug

it ds nt v ntinl ilin.

T bnfts liblistin pticu-

ll vidnt n t NibiJnnsbug

ut. T i svic gnt btwn t

tw cuntis ws liblisd in m 2000.Liits n dditinl ilins ing t ut

w litd, nd t nub igts llwd

ws incsd u t 14 d. T g-

nt ws ut liblisd in 2003, wn t

ining stictins n t nub igts

w litd. ou sc sws tt, btwn

m 2000 nd Sptb 2005, ntl ps-

sng vlus incsd b 69 pcnt v

t p-liblistin tnd.

T dstic Sut aicn i tns-

pt t ls bnftd cnsidbl

The liberalisation

o air transport

leads to

signicant gains

or consumers,

and boosts

economic activity

The liberalisation

o air transport

leads to

signicant gains

or consumers,

and boosts

economic activity


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liblistin in t l 1990s. Duing t

1990s nd l 2000s pssng vlus n

dstic uts incsd b tn 80

pcnt. Liblistin llwd t nt

tw lw-cst ilins: kulul in 2001, nd

1ti in 2004. Ts ilins initill nl w

n t stblisd ig-vlu uts,

but s t gw t sttd t t sll

cnts suc s Gg nd est Lndn s

wll. T ipct n ts uts s bn

cnsidbl: t kulul sttd ing t

Gg, ttl pssng vlus n tt ut

incsd b 159 pcnt btwn 1998 nd

2005; siill, witin 1ti stt-ing t t est Lndn in 2005, ttl ps-

sng vlus n tt ut incsd b 52

pcnt. T succss Sut aics lw-

cst ilins s nbld t t stt ing

t t SaDC b stts.

T LusJnnsbug ut sti-

ingl dnstts t bnfts llwing

t nt lw-cst ilin. In l 2006

Zbin aiws gd t lt kulul pt

t LusJnnsbug ut n its bl.

T sults v bn dtic; in just t

nts, apil t Jun, pssng vl-

us incsd b 38 pcnt (cpd wit

t s pid t pvius ), nd tict

pics dppd b 3338 pcnt.

Policy conict in Mozambique

mzbiqu psnts cl xpl

cnict btwn t intsts tuis ndts t ntinl ilin. T mzbicn

gvnnt s cgnisd t iptnc

tuis t its ntinl cn, s ctd

in its ctin minist Tuis in 2000,

nd t dting nub plns t

dvlpnt t tuis sct. hwv,

it cntinus t ptct t ntinl ilin b

sticting cptitin n intntinl uts.

Tis tifcill ducs t nub tuists

visiting mzbiqu, tus undining t

gvnnts wn tuis bjctivs.

T cts ts stictins dis-

cnibl in t cst ing Jnns-

bug t mput cpd wit ing

Jnnsbug t Dubn. T ut

is vitl t mzbiqus tuis indust, s

st tuists nt nd lv t gin vi

Jnnsbug.

as Dubn nd mput siil dis-

tnc Jnnsbug, t csts ing

t it dstintin suld b lss

t s. hwv, tun igts t mput

163 pcnt xpnsiv tn tun

igts t Dubn (put dintl, tict t

Dubn is 62 pcnt cp tn tict tmput). Tis cll inuncs t dcisin

Sut aicn ign tuists w v

t dcid btwn t tw citis.

Liblising i tnspt in mzbiqu

wuld llw gt cptitin btwn t

incubnt ilins s wll s t nt nw

ns, including lw-cst pts. Pics n

t Jnnsbugmput ut suld tn

dp t t s lvl ts n t Jn-

nsbugDubn ut. ou sc sws

tt tis wuld incs tuist ivls b 37

pcnt, incs tuist spnd b US$5 il-

lin, nd dd US$9 illin t mzbiqus

GDP. It wuld ct 1 000 nw jbs in t

tuis indust, nd but 2 000 in

t wid cn. at t nt, mz-

biqus ntinl ci, Lam mzbiqu

ailins, s nl 645 pls. Tis ig-

ligts t dispptintl ig csts cn-

tinuing t ptct t ntinl ilin t t

xpns t tuis indust.

Two statistical analyses

T gin btt undstnding t ipct

i tnspt liblistin n i s nd i

tfc vlus in t gin, tw sttisticl,

cntic, nlss w cnductd. Ts

invlvd 12 SaDC b stts, nl

angl, Btswn, t Dctic rpub-

lic Cng, Lst, mdgsc, mlwi,

The Lusaka

Johannesburg

route strikingly

demonstrates

the benets o

allowing the

entry o a low-

cost airline

The Lusaka

Johannesburg

route strikingly

demonstrates

the benets o

allowing the

entry o a low-

cost airline

CLEAR SK IES OVER SOUTHERN AFR ICA CLEAR SK IES OVER SOUTHERN AFR ICA


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mzbiqu, Nibi, Swzilnd, Tnzni,

Zbi, nd Zibbw.

as gds i s, t ipct libli-

stin n i s n 56 uts in SaDC ws

nlsd. T sults sw tt i s

18 pcnt lw n liblisd uts, wic,

ccding t t vilbl littu, culd

v incsd pssng vlus b 1432

pcnt, wit t ig fgu lil.

T nlsis ls sws tt t psnc

lw-cst ilin n givn ut s ducd

pics b n vg 40 pcnt, wic culd

v incsd pssng vlus b 3272

pcnt. T xtnt t wic lw-cst i-lin cn ctull incs pssng vlus

n givn ut will b liitd b stictins

n t nub igts n t ut, s wll

s cts suc s t cpcit t ipts

invlvd.

as gds pssng vlus, t ipct

liblistin n pssng vlus

1999 t 2004 n 16 uts btwn Jnns-

bug nd t dstintins in SaDC ws n-

lsd. T sults sw tt, llwing

libl biltl gnts, pssng vl-

us incsd b n vg 23 pcnt,

nd tt lg, nc- incss in cpcit

llwd b t biltl gnts ut

incsd pssng vlus b n vg

12 pcnt.

T cs studis, vlu nlsis, nd

pic nlsis ll sw tt liblistin lds

t ig pssng vlus nd lw pics.

T ls sw tt t cts liblis-

tin in SaDC wuld b siil t ts in tgins t wld. Indictins tt lib-

listin wuld incs pssng vl-

us in t gin b 20 pcnt (n vg

stits in t pic nd vlu cn-

tic nlss). Tis is cnsvtiv c-

pd t pvius studis lsw, wic

und tt liblistin incsd pssng

vlus in t Unitd Stts b 33 pcnt,

nd in t eupn Unin b 40 pcnt. T

stits SaDC lw tn intn-

tinl xpinc suggsts, in pt cting

cnsvtiv ppc, but ls cting

t ct tt t uts wic v bn lib-

lisd lng-distnc ns wic littl

substitutin w d tnspt wuld

b xpctd; t, u fgus undsti-

t t incs in i tvl s sult

liblistin. Fut, ts sults

wll b lw bcus, ltiv t t Unitd

Stts nd eup, liblistin in SaDC tus

s bn dst.

The benefts o liberalisation

T cnsquncs 20 pcnt incs in

i tvl wuld b signifcnt. rsc sws

tt tis wuld sult in 500 000 ign

tuists visiting SaDC v . T wuld

spnd tn US$500 illin n tuis-

ltd ctivitis. Tis, plus t ultipli ct

n t wid SaDC cn, wuld incs

t gins GDP b but US$1,5 billin

, but l pcnt. S 35 000 nw

jbs wuld b ctd in t tvl nd tu-

is indust ln, nd ut 37 000 in t

wid SaDC cn.

Impact on national airlines

T cncn tt i tnspt liblistin

ntinl ilins is lgitit n.

Fllwing liblistin in t pts t

wld, n ntinl cis sud ducd

pfts, bc unpftbl. S jlgc cis v gn int bnuptc

ptctin, bc dunct. hwv, tis

nd nt ppn t ntinl cis in SaDC.

Liblistin suld signifcntl incs

pssng vlus, wic wuld pvid

pptunitis ntinl ilins t xpnd

nd cut csts s sult pting n

lg scl. kn aiws nd etipin ai-

lins xpls aicn ilins tt

succssull pting in liblisd ts.

ot stps cn ls b tn t stngtn

The case studies

show that

the eects o

liberalisation in

SADC would be

similar to those

in other regions

o the world

The case studies

show that

the eects o

liberalisation in

SADC would be

similar to those

in other regions

o the world

OVERV IEw


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ntinl ilins in SaDC. ang ts is sp-

ting t ilin t stt buucc.

Tis ds nt qui pivtistin but t

tt t ilin is un n ccil pincipls.

ot ltntivs gs, llincs, jint

vntus nd ls gnts, ll wic

win-win slutins ntinl ilins.

S gvnnts wll dcid tt

liblistin will v di cnsquncs

ti ntinl ilins. hwv, i t dcid

t suppt t gwt ti tuist indus-

tis v t lt ti ilins, t

stnd t p uc gt bnfts in ts

cnic gwt nd jb ctin.ou sc sws tt, in nuus

SaDC cuntis, t ntinl ilin pls

w ppl tn ts in t tuis sc-

t w pvid svics t tuists iving b

i. Ts fgus suggst tt liblistin

wuld v t incs t ltt ctg

ppl b nl u pcnt t nub

additional jbs in tt sct t utwig t

total nub jbs in t ntinl ilin.

F st cuntis, t bnfts 20 p-

cnt incs in pssng vlus will

utwig n ngtiv cnsquncs ti

ntinl ilins. Tuis ls s gt

nc-n cts n bd cnis tn

ntinl ilins. Tuis scts inl suc

ti inputs lcl cnis, nd t wid

cnic bnfts tuis gt

tn ts ntinl ilins, wic inl

ipt t gds nd svics t nd, suc

s ict pts, quipnt, nd ul.

It is nt ssntil t v ntinl ilin tv lt, gwing tuis sct. Ugn-

ds tuis sct s tivd in t bsnc

ntinl ilin. In 2002 Ugnd llwd

its lss-ing ntinl ci, Ugnd ai-

lins, t g int liquidtin. Dspit t ilu

nub nw pivt ilins, libl-

isd i tnspt plic s ld t substntil

gwt in tuis tfc nd cipts. In 2000

Ugnd std 193 000 intntinl tuists,

w spnt US$151 illin. B 2004 tis fgu

d incsd b 82 pcnt t 350 000 tu-

ists, w spnt US$271 illin ( 79 pcnt

incs). Tuis is nw Ugnds tp ign

xcng n, substntill utclssing

tditinl xpt lds suc s c nd

t. Intntinl pssng tfc t entbb

ipt, ving stgntd 1996 tug

2002, incsd in bt 2003 nd 2004.

Regional implications

Cntinuing t stict ilin ts s

iptnt cnsquncs SaDCs ttc-

tivnss s gin. Wn tuists tgin tvl t eup t bl t visit

nub cuntis n t s tip, nd

t tnd t cnsid t ttctins

nuus cuntis t tn ts

just n cunt. T s suld b tu

in spct SaDC. Tis quis cst-c-

tiv i tvl, s using d il t visit

nub cuntis in t gin n singl

tip is difcult du t t lng distncs nd

tvl tis. ai tvl llws tuists t v

pidl n cunt t nt, tus n-

bling t t visit nub cuntis in

st pid. hwv, gultd i tns-

pt gis s tis cstl nd difcult

t gnis n st ntic, du t t lc

vilbl sts.

Wil stictins n ilin ts cll

t tuis scts individul cun-

tis, t ls t gin s wl,

s ll its cuntis bc lss ttctiv s

tuist dstintins. Tis suggsts tt SaDCsuld gd liblising its i tnspt

ts s piit. Wit undds tu-

snds visits xpctd t visit t gin

t 2010 Scc Wld Cup, tis g-

vnt psnts SaDC cuntis wit j

cllng s wll s j pptunit.

For most

countries, the

benets o a 20

percent increase

in passenger

volumes will

ar outweigh

any negative

consequences

or their national

airlines

For most

countries, the

benets o a 20

percent increase

in passenger

volumes will

ar outweigh

any negative

consequences

or their national

airlines

10CLEAR SK IES OVER SOUTHERN AFR ICA CLEAR SK IES OVER SOUTHERN AFR ICA


11/40

Introduction

NUmeroUS SaDC b

stts cntinu t stict ti

i tnspt ts. T

still using sst i tns-

pt gultin iplntd

just t Wld W 2. F tn 20 s

t t w, gvnnts tugut t

wld plcd stictins n t ptin

ti i ts. Gvnnts nd ilins

c tgt in vius us t g n

t pics tt cnsus wuld b cgd,

nd w n ticts wuld b sld.

Sinc t lt 1970s n cuntis v

vuld ts stictins, nd liblisd

ti i tnspt ts. Tis s llwd

pics nd t nub sts t b dt-

ind tug cptitin pssngs

t tn tug ngtitin btwn i-

lins nd gvnnts. Tis s bugt i

tnspt in lin wit t j intn-tinl industis, nd s ld t signifcnt

gins cnsus nd t cnis

ts cuntis tt v csn t liblis

(Dgnis 2006).

Slow progress in SADC

Liblistin s pgssd pidl in n

pts t wld. hwv, in s gins,

including SaDC, pgss s bn slw. T

cntinud luctnc n SaDC cun-

tis t liblis ti i tnspt gis

is inl ltd t cncns tt liblis-

tin nd t incsd cptitiv pssus

sulting it will undin t vibilit

ti ntinl cis. Ts cncns v-

sdw t signifcnt bnfts lil t is

liblistin. In pticul, iling t lib-

lis s iptnt iplictins t tu-

ist industis SaDC b stts.

In 2003 oxd ecnic Fcsting

(aTaG 2003) cncludd tt: Pps t

j cntibutin tt i svics cn

t cnic dvlpnt in aic is tug

dvlping nd pting intntinl tu-

is. Tuis is t pincipl xpt-n

30 pcnt dvlping cuntis, including

svl SaDC stts, nd it cntinus t gw.

It cilitts pvt ductin b gnt-

ing cnic gwt, pviding plntpptunitis nd incsing tx cllctin,

nd b sting t dvlpnt nd cn-

svtin ptctd s nd t nvin-

nt in gnl. ecnis wit ig gwt

duing t lst dcd ( xpl, mui-

tius, Tunisi, egpt, Gn) v tndd t b

ts w t tuis sct is t c-

nic ctivit.

atifcill sticting t gwt i-

lin ts b cntinuing t ips vius

stictins n cptitin undins t

Failing to

liberalise has

important

implications

or the tourist

industries o

SADC member

states

Failing to

liberalise has

important

implications

or the tourist

industries o

SADC member

states


12/40

dvlpnt tuis, wit iplictins

cnic gwt nd t bilit cuntis

t gnt plnt nd cbt pvt.

Tangible benefts

T iss liblistin ntinl ilins

wll nwn, nd t ilins tslvs

ddictd lbb gup in tis gd. In

cntst, t bnfts liblistin tn

undstitd, s t spd tug-

ut scit. Tis pt is id t ing

ts bnfts discnibl b qunti-ing t. It vluts t lil ipct i

tnspt liblistin n t tuis indus-

tis nd cnis SaDC b stts.

Tis is dn in t ligt pst xpincs

liblistin intntinll, in aic, nd

witin SaDC.

T nlsis is st ut in t sctins:

viw intntinl xpinc;

cs studis liblistin in SaDC,

nd t lil bnfts liblistin

mzbiqu in pticul; nd

tw sttisticl dls tt dnstt

t ipct liblistin n i tns-

pt ts in SaDC. Ts dls

usd in cnjunctin wit tuis ccunts

t Wld Tvl & Tuis Cuncil

(WTTC) nd dt t Wld Tuisogniztin (UNWTo) t clcult t

lil ipct liblistin n pl-

nt nd GDP in SaDC.

In a context o increasing globalisation, air transport plays a vital role

in global, regional, and national economies. In 2004 the air transport

industry in Arica employed 500 000 people and contributed US$11

billion to the continents GDP, an amount similar to the GDP o Tanza-

nia (ATAG 2005). While air transport plays an important role in itsel, its

main role is to acilitate economic activity. I these catalytic eects are

included, it is estimated that the air transport industry in Arica con-

tributes US$55 billion to the continents GDP, and creates jobs or 3,1

million people (Ibid).

The International Air Transport Association (IATA) has ound that a

10 percent increase in air transport boosts GDP by 1,6 percent in thelong run. Forty percent o this increase comes rom additional business

investment, and 60 percent rom improved productivity (Pearce). This

mainly results rom increases in trade, investment, and tourism.

Trade: Air transport is central to transporting manuactured goods, with

40 percent o inter-regional trade in manuactured goods (by value)

being transported by air. It also allows companies to trade more eec-

tively by enabling ace-to-ace meetings. Air transport plays a key role

in developing countries by expanding their citizens opportunities to

join the global economy. For example, exports by air o agricultural

products such as resh vegetables and cut owers mainly to Europe

are one o Kenyas largest industries, and its second biggest earner

o oreign exchange (ibid).

Investment: Good air transport links play a central role in companies

investment decisions. They are especially important or investments in

manuacturing and services, where ace-to-ace contact is important.

Foreign investors are wary o making investments in areas where the

absence o air links makes short visits, on short notice, difcult and

expensive. For this reason, 56 percent o European companies regard

international transport links as essential to deciding where to locate

new business (Healey & Baker 2003). IATA has ound that an increase

in air connectivity o 10 percent (number o routes and ights) typicallyleads to additional investment o 1,4 percent (Pearce).

Tourism: Air transport is certainly vital to tourism. In Arica, 20 percent

o jobs in the tourism sector are supported by tourists arriving by air.

For many countries in Arica, oreign tourists are an important driver o

growth, and these tourists require efcient and eective air services.

Air transport, and by implication air transport liberalisation, also

contributes signifcantly to trade and investment. Air transport has a

particularly important role to play in the growth o SADC, whose econ-

omies are geographically isolated, sometimes landlocked, and oten

hamstrung by poor transport inrastructure. n

The role o air transport in enabling growth

12CLEAR SK IES OVER SOUTHERN AFR ICA


13/40

International experience

The reGULaTory w gv-

ning intntinl i tnspt

ws stblisd t Wld W

2. Its building blcs biltl

i svic gnts (BaSas)

td gnts btwn stts tt gu-

lt ilin tvl btwn t. Ti pi

pups is t cntl t ccss (wic i-

pts nd citis svd) nd nt (wic

ilins svic ts uts). Ts g-

nts pl n iptnt l in nsuing

st nd t bjctivs. hwv, t

v ls bc cnis cutiling

cptitin btwn ilins.

Until t lt 1970s st i svic g-

nts tigtl gultd t bviu

ilins. T tpicll nl llwd n stt-

wnd ilin c cunt t pt n

givn ut (singl dsigntin). T gvn-

nts invlvd it gd n tis btwnt, quid tt tis b dtind vi

IaTa. Fut, t nub sts wn

b c ilin (cpcit) ws tn gd n

b t spctiv gvnnts, split n

50:50 bsis btwn ti ntinl cis.

as sult, ts ilins d littl incntiv

t cpt wit n nt, nd tus t

nub pssngs cid nd t i s

w ctivl dtind b gnts

btwn t gvnnts nd ilins.

In st ts singl stt-wnd i-

lin ws llwd t pt. an xcptin

ws t aicn dstic t w

nub pivt sct ilins w llwd

t pt und t gis t Civil a-

nutics Bd (CaB). T bd gultd

wic uts ilins culd sv, nd w

uc t culd cg (Bnstin 1992).

Initial steps

T initil div twds liting stictins n

i tnspt dvlpd in t Unitd Stts.

Ppul pssu p-cnsu dgul-

tin ld t t 1978 Dgultin act, wic

ndd t CaBs l s gult. Tis d

pund ct n t aicn i tnspt

t, s it llwd cptitin, t

nt nw ilins, nd t ctin t

ub-nd-sp sst i uts.1

as sult liblistin, b 1988 ps-

sng vlus d incsd b 41 pcnt

(mcknzi 1982). ovll, sinc 1980 libli-

stin s bnftd aicn cnsus b

US$25 billin (in 2006 US dlls).2

Dstic liblistin gv iptus t

aicn inititivs t liblis intntinl

biltl gnts. F 1978 t 1980 t

Unitd Stts ntd int libl biltl

gnts wit nub eupn (T

Ntlnds, Gn, Blgiu) nd asin

Domestic

liberalisation

gave impetus

to American

initiatives

to liberalise

international

bilateral

agreements

Domestic

liberalisation

gave impetus

to American

initiatives

to liberalise

international

bilateral

agreements


14/40

(Singp, Tilnd, k) cuntis. Ts

pn t gnts litd stictins n

pics, t nub igts, nd t nub

sts d, nd llwd ilins t nt

dditinl ts. ailins d t cpt

pssngs. Cptitin dtind pics,

nd t nub pssngs cid. Wil

t pn t gnts t lt 1970s

did ld t signifcnt liblistin, s uts

w lss liblisd tn ts, nd vn t

st liblisd gnts still stictd t

uts (cit-pis) tt ilins culd svic.

Ts ining stictins w litd b t

pn sis gnts t 1990s.In t lt 1980s nd 1990s t eupn

Unin llwd aics ld wit pcss

psd liblistin, culinting in t stb-

lisnt t Singl avitin mt in 1992.

Tis ws n ntil nw i tnspt gi

tt ndd ll stictins n pic nd nt

(IntVISTaS-g2 2006). It llwd gt

cptitin, nd pssng vlus s b

44 illin ( 33 pcnt) 1993 t 2002.

as sult ts succsss, liblis-

tin spd t t cuntis. In 1999 ai-

cn inists in cg civil vitin gd

t t yussu Dcisin ( dcisin t

iplnt t yussu Dcltin

1988), wic cittd ti cuntis t lib-

lising ti i tnspt ts b nd-

ing dstic lws. T gd t lit ll stt

invlvnt in stting s, nd nd st

stictins n nt nd t nub igts

sts tt ilins culd (eCa 1999).

In pctic, t yussu Dcisin sbn inl iplntd tug cngs in

biltl gnts. Pgss s bn d

in est nd Wst aic, but iplnttin

witin SaDC s bn slw.

Low-cost airlines

an iptnt cntibut t t succss

liblistin in t eupn Unin nd t

Unitd Stts ws t nt nw tp

ilin: t lw-cst n-ills ilin.3 Ts

ilins dticll lwd i s, wic

signifcntl incsd pssng vlus.

In t Unitd Stts t pin in tis fld

ws Sutwst ailins. Dgultin in t

lt 1970s llwd Sutwst t xtnd its

svics its bs in Txs tugut t

cunt. Sutwst s bn bl t us its

lw cst bs t ticts up t 60 pcnt

cp tn t pviling pics. In eup,

dgultin cilittd t nt lw-cst

ilins suc s rni nd esJt.

T ct n s is cll swn b

t Lndn-Bcln ut: in mc 1998esJts s w 6080 pcnt lw tn

ts Bitis aiws, nd t nub

pssngs n tis ut incsd b 400 p-

cnt btwn 1997 nd 2006.

T lw-cst dl s bc nd

ppul, nd t nub pssngs

ing n lw-cst ilins in eup s gwn

xpnntill, incsing t illin in

1994 t 100 illin in 2004.

Lw-cst ilins bl t cp

i s bcus ti pting csts

lw tn ts tditinl incubnt

ilins. Wil lw-cst ilins llw di-

nt ppcs, t st pt t lw

ti csts b sipliing ti ptins s

wll s ti svics t cnsus. T d

nt pvid cnncting igts, nd pssngs

nt issud wit ticts. Iptntl, lw-

cst ilins put n sts int ti i-

plns, nd d nt ls, wic ns

t cn v sll cbin cws. Tis is nsn w lw-cst ilins d nt uts

tt t tn fv us. T ut

duc ti csts b ing singl tps

ict, ing t uncngstd ipts (tus

llwing st tunund tis), nd nsu-

ing tt t iniis t unt ti

ti ict nt cing pssngs.

as sult, ti csts tn 6070 p-

cnt lw tn ts tditinl incu-

bnt ilins. Figu 1 sws w ts cst

svings d. mst ts cst svings

The number

o passengers

fying on low-cost

airlines in europe

increased rom

three million in

1994 to 100

million in 2004

The number

o passengers

fying on low-cost

airlines in europe

increased rom

three million in

1994 to 100

million in 2004



15/40

gnic t bt lw nd ig tfc uts, nd

t pplicbl t ll uts in SaDC.

m cntl lw-cst ilins v bn suc-

cssull luncd in nub dvlping

cuntis including mlsi (ai asi), Indi,

nd sutn aic (kulul nd 1Ti).

International routes

T liblistin Unitd Sttseupn

Unin uts bgn in t lt 1970s s t

aicn gvnnt wd t xtnd t

bnfts liblistin bnd its wn b-ds. Duing t lt 1970s nd l 1980s t

Ntlnds, Blgiu, Gn, nd Lux-

bug ntd int libl biltl g-

nts wit t Unitd Stts. as sult,

pics ll, nd pssng vlus incsd.

accding t n stud, s dppd b 35

pcnt (Dsn t l 1992); nt (mil-

lbiu & hnsn 1995) und tt s d

lln b 3545 pcnt, nd pssng vl-

us d incsd b 40 pcnt.4

T liblistin gnts t 1980s

w llwd b pn sis gnts in

t 1990s, wic ndd st t in-

ing stictins n cptitin in ts -

ts. T fst pn sis gnt btwn

t Unitd Stts nd b t eu-

pn Unin ws wit t Ntlnds, l-

lwd b gnts wit austi, Blgiu,

nd Fnc, ng ts.5

a stud pn vitin btwn t Unitd

Stts nd t eupn Unin, cnductd bt Bttl Gup t eupn Cis-

sin in 2002, und tt pssng vlus

t austi nd t Ntlnds d incsd

b 102 pcnt nd 80 pcnt spctivl.

hwv, t bnfts t t eupn

cuntis w lss d, nd pssng

vlus d nl incsd b 10 pcnt n

vg s sult t dditinl liblis-

tin t 1990s (signifcnt liblistin d

ld ccud in t 1980s). T pt sti-

td tt n pn vitin btwn t

Unitd Stts nd t eupn Unin wuld

gnt cnsu bnfts 2,7 billin t

2,8 billin . Btwn 2 800 nd 9 000

jbs wuld b ctd in t eupn Unin,

nd btwn 2 000 nd 7 300 in t Unitd

Stts.

a 2006 stud t ipct stictiv

biltl gnts n 1 400 uts wld-

wid (IntVISTaS-g2 2006) und tt ts

bstcls pt nt nl btwn spcifc

wll-studid cunt pis suc s t Unitd

Stts nd t Unitd kingd, but ls in

ug vit ts, invlving cuntis ll sizs, stgs cnic dvlpnt, nd

pliticl ssts, in v pt t wld,

It und tt ving stictins n cpc-

it (t nub igts sts n ut)

wuld incs pssng vlus b but

25 pcnt, nd llwing dditinl ilins t

nt t t tug ultipl dsign-

tin cluss wuld incs tfc ws b

50 pcnt. Ts sults suggst tt libl-

istin s j bnfts cuntis und

t wld.

Figure 1: How low-cost airlines save money compared with incumbent

airlines

Source: Adapted rom Doganis (2006).

Smaller administrationand fewer staff/offices

6%

Reducedsales/reservation

costs6%

No agents orGDS commissions

12%

No free in-flight catering,fewer passenger services

10%

Minimal station costsand outsourced handling

14%

Outsourcingmaintenance/single

aircraft type4%

Use cheapersecondary airports8%

Lower flight andcabin crew costs6%

Higher aircraftutilisation4%

Higher seatingdensity30%

15INTERNAT IONAL ExpER IENCE


16/40

The INTerNaTIoNaL xpinc

liblistin s bn v-

wlingl psitiv. Tis sctin

viws xpincs liblis-

tin in SaDC b stts, nd

dnstts tt tis s gnll bn

in lin wit xpincs lsw in t

wld. It tn vluts t lil bnfts

mzbiqu liblising its biltl g-

nts wit Sut aic.

The NairobiJohannesburg route

T ipct liblistin in sutn

aic is cll dnsttd b dvlp-

nts n t NibiJnnsbug ut. In

2000 kn nd Sut aic gd n ul-

tipl dsigntin (llwing n ilins t

t ut), nd incsd t nub

dil igts u t 14 (incsing cpc-

it). T gnt ws ut liblisd

in 2003, wn t ining stictins n

cpcit w litd.

Figu 2 sws tt, t liblistin,

pssng vlus incsd b 69 pcnt.6

Wil s tis cn pbbl b ttib-

utd t n incs in dnd ising

ccltd cnic gwt in bt cun-

tis, nd incsd td btwn t, it is

cl tt liblistin cntibutd t signi-

icnt incs in pssng vlus v tpid.

Domestic liberalisation in SouthArica

T Sut aicn dstic t ws lib-

lisd in 1990, sulting in n incs in ps-

sng nubs 80 pcnt btwn 1994

nd 2004. Liblistin llwd nw ilins

t nt t t, nd t gt

SADC case studies

Figure 2: Passenger volumes on the JohannesburgNairobi route,

19982005

Source: ACSA.

0

5,000

10,000

15,000

Month/Year

20,000

Multiple designation

and increase in capacity

25,000

Jan1998

Jul1998

Jan1999

Jul1999

Jan2000

Jul2000

Jan2001

Passengervolumesper

month

Jul2001

Jan2002

Jul2002

Jan2003

Jul2001

Jan2004

Jul2004

Jan2005

Jul2005

Lifting restrictions

on capacity

0

5,000

10,000

15,000

Month/Year

20,000

Multiple designation

and increase in capacity

25,000

Jan1998

Jul1998

Jan1999

Jul1999

Jan2000

Jul2000

Jan2001

Passengervolumesper

month

Jul2001

Jan2002

Jul2002

Jan2003

Jul2001

Jan2004

Jul2004

Jan2005

Jul2005

Lifting restrictions

on capacity


17/40

cptitin. Wil n ild, tw succss-

ul ntnts t t scduld i svics -

ts w Ci nd Ntinwid ailins.

Ti succss in t dstic t p-

vidd t wit plt luncing sv-

ics t t SaDC b stts s wll s

t eup.

Liblistin llwd lw-cst ilins t

nt t Sut aicn dstic t in

t l 2000s. T fst succssul lw-cst

ntnt ws subsidi Ci clld

kulul. It sttd ing in 2001, nd ws l-

lwd in 2004 b 1ti. Ts lw-cst ilins

initill cncnttd n t stblisd,ig-vlu uts in Sut aic suc s

Dubn, Cp Twn, nd Jnnsbug. T

tn xtndd ti svics t sll twns

suc s Gg nd est Lndn.

T nt lw-cst ilins vitl-

isd ts uts, nd pssng vlus

incsd. Figu 3 sws tt, ptl s

sult kululs nt in Sptb 2003,7

pssngs t nd Gg in t Wst-

n Cp incsd b 159 pcnt btwn

2001 nd 2005. Tis is pticull bl

s Gg is sll twn wit ppultin

but 160 000 (2005 stit), 48 pcnt

w liv n lss tn r1 600 (US$246)

nt. Wil kululs nt did cntibut

t tis incs, it ls spilld v n t t

incubnt ig-ills ilins; btwn 2001

nd 2004, t nub pssngs cid

b t ltt ilins incsd b und 60

pcnt.

The Eastern Cape

est Lndn in t estn Cp is nt

succss st (s fgu 4). at 1ti

ntd t ut in august 2004,8 pssng

nubs incsd b 52 pcnt 98 500

in t scnd qut 2004 t 150 000 in t

scnd qut 2006. Tis s vitlisd

t estn Cp s dstintin ign

tuists. B 1tis nt, t fst t

t scnd qut 2004, ign tuists

visiting t estn Cp ll b but svn

pcnt. hwv, iditl t its nt,

t nub tuists incsd b but 13

pcnt (Sa Tuis: vius).

accding t Susn Wilsn t est-

n Cp Tuis Bd, tuis in t est-

n Cp s civd dtic bst

t nt lw-cst ilins. Sls lid

Figure 4: Passenger volumes on the JohannesburgEast London route,

20012005

Note: 1times arrival on the route is marked by a vertical line.

Source: ACSA.

Figure 3: Passenger volumes on the JohannesburgGeorge route,

20012005

Source: Kulula.

0

100,000

200,000

300,000

400,000

500,000

2

000

2

001

2

002

2

003

2

004

2

005

0

50 000

100 000

150 000

200 000

1/1998

3/1998

1/1999

3/1999

1/2000

3/2000

1/2001

3/2001

1/2002

3/2002

1/2003

3/2003

1/2004

3/2004

1/2005

3/2005

1/2006

17SADC CASE STUD IES


18/40

pcgs t t estn Cp v incsd

b tn 50 pcnt s sult. Tis x-

pl psiss t dict bnfts libli-

stin tuis, nd ls suggsts tt t

nt lw-cst ilin lds t signifcnt

dditinl tuist ivls t tn l

dicting tuists w d tnspt.

T nt lw-cst ilins s bn p-

ticull iptnt est Lndn. est Ln-

dn is tn igt us b d t

tw in nt pints ign tuists t

Sut aic, nl Jnnsbug nd Cp

Twn. Ts citis ls t in sucs

dstic tuis. Tuis is pticull

iptnt t estn Cp s it is n

t pst pvincs in Sut aic, wit

p cpit GDP r9 092 (US$1400) 48 p-

cnt blw t ntinl vg r18 727

(US$2 880).9 T incs in tuis llwing

1tis nt is pbbl ving signifcnt

ipct n t pvincs cn 52 p-

cnt incs in ign tuist ivls in t

estn Cp tnslts int n dditinl 62

000 ign tuists , nd n dditinl

r65,8 illin (US$10 illin) in tuist spnd.10

The JohannesburgLusaka route

Fllwing its succss insid Sut aic,

kulul s bgun t t h, Lus, nd

Wind. T JnnsbugLus ut

dnstts t ptntil ipct lw-cst

ilins vn n pviusl ibund uts.

el in 2006 Zbin aiws signd wt

ls gnt wit kulul tt nbld t

ltt t stt ing t Jnnsbug-Lus

ut, wic Zbin aiws d stppd

ding lving Saa s t sl pt. a

wt ls invlvs t lsing ict wit

igt cws, nd pssibl cbin cws nd

intnnc suppt s wll. (a d ls

invlvs just t ict witut n ddi-

tinl suppt.)

In just t nts t ws spc-

tcul ipct n pics nd pssng vl-

us; Figu 5 sws tt pssng vlus

incsd b 38 pcnt (-n-), nd

i s dppd b 33 pcnt t t tp ndnd 38 pcnt t t btt nd. T lil

ipct n t Zbin cn is signifcnt.

In 2004 s 16 600 tuists ivd in Zbi

b i. a 38 pcnt incs tnslts int n

dditinl 6 300 tuists , nd dditinl

tuist spnd US$8,9 illin .11

T JnnsbugLus ut is n

nl; s Zbin aiws d stppd

ing t ut, kulul culd stt ing using

cpcit ssignd t Zbin aiws. hw-

v, in gnl, SaDC uts will nl b bl

Figure 5: Passenger volumes on the JohannesburgLusaka route,

AprilJune 2005 and 2006

SAA air ares to Lusaka beore and ater the entry o Zambian Airways

(Kulula)

Source: Kulula or data on passenger volumes and prices beore the entry o Zambian Airways

(Kulula); SAA (www.ysaa.com) or prices ater the entry o Zambian Airways.

0

7,500

15,000

22,500

30,000

37,500

45,000

AprJun 2005

Numberofpassengers

AprJun 2006

up

38%

0

2,500

5,000Rands

7,500

10 000

Before Zambian Airways

(Kulula) entry

After Zambian Airways

(Kulula) entry

R6325

R9388

R1988

R3224

down

33%

down

38%



19/40

t xpinc t nt lw-cst ilins,

nd t ull bnft t ding s, i bilt-

l gnts liblisd.

Policy conict in Mozambique

mzbiqu cll dnstts t ptn-

til cts cnict btwn gvn-

nts tuis plic nd its plic twds its

ntinl ilin. T mzbicn gvnnt

s cgnisd t iptnc tuis. In

2000 it ctd minist Tuis, nd it

s dtd nub plns t dvl-pnt t sct.12 hwv, it cntinus

t ptct t ntinl ilin b sticting

intntinl uts. Tis tifcill ducs

t nub tuists visiting mzbiqu,

nd undins t tuis plic. T csts

suppting t ntinl ilin cll ut-

wig t bnfts liblistin in ts

jb ctin nd cnic gwt.

T gvnnt s gdull vd

twds liblistin. T stt-wnd

dstic ilin, Lam mzbiqu ailins,

pviusl d npl in bt t dstic

nd intntinl ts. In 2002 t ds-

tic t ws ptill liblisd, llwing

sll ilins t stt ing intnl uts.

T gvnnt ttptd t pivtis Lam

in 1997, but t pivtistin gnc, Unidd

Tcnic p rstutu d epss,

ws nt stisfd wit n t bids (NoraD

2002).

accding t t ecnic IntlligncUnit (2003), t signs tt t mz-

bicn gvnnt wnts t ull liblis t

cunts i tnspt ts, but it is cing

ppsitin vstd intsts witin t

cunt. It cntinus t stict intntinl

uts, wic is ving dtintl ct n

tuis.

mzbiqu s stunning tuist ttc-

tins. Wit 2 500 ilts cstlin,

wit bcs, nd cl blu wt, it is n

idl bc lid dstintin. T inti

s wildli nd uggd untins. abut 10

pcnt mzbiqus lnd s bn

st sid wildli ngnt, including

ntinl ps, g svs, nd unting

s (NoraD 2002). Tis ic ntul it-

g puts it in n xtl gd psitin t

ttct tuists. hwv, its biltl i sv-

ic gnts it xpnsiv tuists

t gt t.

T gnt btwn Sut aic

nd mzbiqu ds nt llw tn

n ilin c cunt t ptic-

ul ut, nd sticts t nub sts.

T sults vidnt in t cst ing tmput Jnnsbug cpd wit

ing Jnnsbug t Dubn (fgu

6). Dubn nd mput siil distnc

Jnnsbug, s igts t it

Jnnsbug suld cst lss t

s. hwv, i ipt txs xcludd,

t cpst tun t mput is 163 p-

cnt xpnsiv tn t Dubn (ltn-

tivl, ing t Dubn is 62 pcnt cp

tn ing t mput).13

T, wil Dubn nd mput

bt bc lid dstintins, vitull t

Figure 6: The costs o travelling rom Johannesburg to Durban and Maputo

by various means

Source: Genesis calculations, SAA website and the Greyhound website.

Note: The costs o road travel have been estimated using AA rates. These costs do not include

toll ees and fxed costs. The costs o air and bus tickets were obtained or 16 September,

returning on the 24th.

0km

125km

250km

375km

500km

Durban (liberalised) Maputo (restricted)

R 0

R 500

R1 000

R1 500

R2 000

Distance from Johannesburg Cheapest return ticket

1SADC CASE STUD IES


20/40

s distnc w Jnnsbug, -

ing t mput is signifcntl xpn-

siv. Tis will cll inunc t dcisin

tuist ing in vss w s t

dcid btwn t tw dstintins.

The benefts o liberalisation

Liblistin wuld llw gt c-

ptitin btwn t incubnt ilins nd

nw ilins, including lw-cst ns. Tis

suld cus pics n t Jnnsbug

mput ut t ll t t lvls xpincdn t Jnnsbug-Dubn ut dp

37 pcnt (ssuing tt ipt txs d nt

cng).

Tbl 1 uss tw dint sus

lsticit t psnt tw dint scnis.

elsticit is t dg t wic pssng

vlus sttc in spns t givn ll in

pics.

Scenario one: assuing tt pssng vl-

us incs b 37 pcnt,14 tis wuld

incs tuist spnd b t lst US$5 il-

lin, nd dd n dditinl US$9 illin in

GDP t wid cn (s ppndix

dtils). Tis wuld incs pl-

nt in tvl nd tuis b 1 000 nd in t

wid cn b 2 000, ing n vll

incs in plnt 3 000 (s ppndix

dt nd td).15 Wil ts fgus

bsd n studis in t SaDC cuntis, t

suggst tt t incs in plnt s

sult liblistin is lil t b gt

tn t nti nub ppl pld t

Lam, wic is 645.16

hwv, vn i liblistin did ld t

t ilu Lam, st ts pls

wuld pbbl b bsbd in n xpndd

i tvl sct (s t nub ppl -ing b i incss), in t wid tvl nd

tuis indust. T, t ipct n t

mzbicn cn sticting tis sin-

gl ut pbbl vstl utwigs n gins

in plnt vnu cntinuing t

suppt Lam.

expincs n t Jnnsbug t

Gg ut suggst tt ts stits

b cnsvtiv; t nt lw-cst i-

lins n tis ut ld t 159 pcnt incs

in pssng vlus.

Scenario two: Tis is bsd n n incs in

pssng vlus 67 pcnt, nd d-

nstts tt t sults scni n

quit cnsvtiv. T cnic lit-

tu suggsts tt pssng vlus culd

incs b up t 67 pcnt in spns t

pic ll 37 pcnt. Tis wuld gnt

n incs in cnic ctivit tn

$25 illin, nd sult in 5 500 jbs.ai tnspt liblistin is lil t bing

ug bnfts t mzbiqu. T ptntil

tt t t ntinl ilin will b tn

cpnstd b t incs in pl-

nt nd GDP.

Conclusion

It is cl tt t liblistin i sv-

ics incss pssng vlus, dcss

Table 1: The estimated impact o liberalising air transport between South

Arica and Mozambique

Scenario 1 (elasticity o 1)17

Impact on passenger volumes 37% 67%18

Increase in Tourists arriving by air 9,011 16,220

Increase in tourist spend (US$) +$5mil +$8 mil

Multiplier eect on economy (US$) +$9mil +$17 mil

Total impact on GDP o economy (US$) +$14 mil +$25 mil

Additional direct employment +1,264 +2,275

Additional indirect employment +1,934 +3,481

Total impact on employment +3,198 +5,757

Source: Genesis calculations.

Notes: These calculations are based on 2004 tourism data obtained rom the World Tourism

Organisation. The level o employment in the tourism sector is a fgure or 2003; more recent

data was not available.



21/40

pics, nd llws t nt nw pls.

T xpls in tis sctin illustt ts

cts. on t in bnfts t lib-

listin i tnspt is its psitiv ipct

n tuis. Tis is cll illusttd b dvl-

pnts in t estn Cp, pvinc in

Sut aic cctisd b xtnsiv pv-

t nd tuis ptntil. h t nt

lw-cst ilins s ld t t juvntin

t tuist indust wit signifcnt bnfts

jb ctin. Tis suggsts tt cuntis

suc s mzbiqu ging signifcnt

gins ti tuis scts b cntinuing

t stict ti i tnspt ts.

21SADC CASE STUD IES


22/40

IN ThIS sctin, tw cntic (st-

tisticl) dls usd t stit

t dp in pics nd incs in ps-

sng vlus tt v sultd

t liblistin i tnspt

in t gin tus . Ts stits

tn usd t clcult t incs in tu-

is xpnditu lil t ccu ut

liblistin.

T tw dls invlvd t us twdint dt sts nd sttisticl tcniqus.

hwv, t suppt t s cnclusin:

tt liblistin witin SaDC s sultd in

signifcnt bnfts in ts ig pssn-

g vlus nd lw pics.

Volume analysis

T vlu nlsis stits t ipct

nting int liblisd biltl gnts,

nd t sult lg nc- incss in

cpcit llwd in biltl gnts. It

uss siil ppc t t Bttl Gups

2002 stud t ipct pn sis g-

nts n t Unitd Stts nd t eupn

Unin.

Dt n pssng vlus Jn-

nsbug t 16 cuntis in SaDC, aic (ut-

sid SaDC), eup, nd asi w usd. T

incs in pssng vlus sulting

incsd dnd ws cntlld, tus llw-

ing t ipct liblistin t b isltd.

Tbl 2 sws t ipct liblistin

n pssng vlus 1999 t 2004 n

16 uts Jnnsbug t dstintins

in ts 16 cuntis.19 at cntl t

dnd i tvl, it sws tt liblisd

gnts incsd pssng vlus b

23 pcnt. Lg nc- incss in cpc-

it incsd pssng vlus b 12 p-cnt. Du t indqut dt, t ct

lw-cst ilins n pssng vlus ws

nt clcultd.20

Price analysis

T pic nlsis vluts w uc lw

pics in ts tt v liblisd,

nd ts in wic lw-cst ilin p-

ts ( tis xcis, css-sctinl dt

The impact o liberalisation

on SADC member states

Table 2: The impact o liberalisation on passenger volumes between

Johannesburg and 16 SADC member states, 1999-2004

Impact on passenger volumes (per quarter) Average % change

Moving to a more liberal bilateral agreement +23%

Large once-o increases in capacity allowed by the bilateral

agreement (ie, not including phased increases designed to

accommodate increased demand)

+12%


23/40

ws usd). Dt ws vilbl uts

tn t vlu nlsis, nd bigg

st cuntis (six cuntis) nd uts (56

uts)21 ws usd. T stud ws liitd t

SaDC b stts ws gvnnts /

ilins pvidd intin n t sttus

ti biltl gnts; t Tnzni,

Btswn, mlwi, Sut aic, mdgsc,

nd muitius. Ts cuntis ccunt 88

pcnt SaDCs cbind GDP 78 pcnt

tuist ivls t ts dstintins b

i,22 nd s psnt t bul cnic

nd tuist ctivit in t gin.

Tbl 3 sws t ipct liblistinn 56 uts witin SaDC.23 as dtild in

t ppndix, nub gssins24 w

cnductd, wic pducd ng vl-

us.25 Tbl 3 psnts nt nl t sults

t pd ppc, but ls t sults

t t gssins. T sults sw tt

i s n liblisd uts 18 pcnt

lw. T cnic littu suggsts tt

tis ductin cn b xpctd t incs

pssng vlus b 1432 pcnt, wit t

ig nub lil.26

Fut, t sults sw tt t

psnc lw-cst ilin ducs i

s b 40 pcnt, wic cn b xpctd

t incs pssng vlus b 3272 p-

cnt.27 T xtnt t wic lw-cst i-

lin cn ctull incs pssng vlus

n givn ut will b liitd b t bilt-

l gnts stictin t nub

igts n t ut, s wll s cts suc s

t cpcit t ipt in qustin.Nwspp pts suggst tt t bilt-

l gnts in spct tw t uts

n wic lw-cst ilins pt (Jnns-

bugh nd JnnsbugWind)

liit t nub xt igts tt cn b

plcd n t. Tis cn b xpctd t liit

t nub dditinl pssngs bl t

t dvntg ts lw s, nd s

cp t incs in pssng vlus sult-

ing t ptin ts lw-cst i-

lins (andw 2005). Tis suggsts tt,

t ull incs in pssng vlus t

tilis, ts gnts wuld v t

b liblisd.

T sults t cs studis, vlu

nlsis, nd pic nlsis ll bdl c-

spnd. T ll suggst tt liblistin willsult in ig pssng vlus, s wll s

lw pics. Tis dnstts tt t xp-

inc liblistin in SaDC s bn sii-

l t tt in t gins t wld. T

cntic nlsis sws tt liblistin

tugut SaDC wuld incs pssng

vlus in t gin b but 20 pcnt.28

Tis is cnsvtiv stit cpd

t studis wic v und tt liblis-

tin s incsd pssng vlus b 33

pcnt in t Unitd Stts (du t dstic

liblistin), nd 40 pcnt in t eupn

Unin. In pt, tis cts cnsvtiv

ppc in t cus t sc. It ls

cts t ct tt t liblisd uts

lng-distnc ns wic littl sub-

stitutin w d tnspt wuld b

xpctd, nd s t nubs undstit

t incs in i tvl liblistin.

mv, cpd wit t Unitd Stts

nd eup, liblistin in SaDC s bndst tus .

Benefts or the tourism industry

ai tnspt s signifcnt ultipli cts

n t cn cnis cncnd, st

ntbl n t tuis sct. Tis sctin

utlins t dt nd td usd t clcu-

lt t ipct liblistin n t SaDC

Table 3: The impact on air ares o two actors

Impact on air ares o: Percentage

change in are

Range o values

An open market agreement governing the route 18% 14% to 18%

A low-cost airline present on the route 40% 34% to 44%

23THE ImpACT OF L IbERALISAT ION


24/40

tuis sct, nd givs t sults.29 (a ull

dsciptin is givn in t ppndix.)

T ipct liblistin n GDP nd

plnt is tw-ld. T dict ipct

dditinl ign tuists n t tvl nd

tuis indust invlvs ilins, tls, c

ntl cpnis, nd s n. T indict

ipct invlvs nuctuing, cnstuc-

tin, nd dditinl gvnnt xpnditu.

T clcult ts indict cts, GDP nd

plnt ultiplis w pplid t t

dict ipcts. T stitd ipcts sw

t sults 2006 s i ts cuntis d

ld xpincd t ull bnfts lib-listin, nl 20 pcnt incs in

pssng vlus. Tw cts tt suld

duc t ipct liblistin n SaDC

w tn int ccunt, nl tt s

t gwt in vlus visits will c

witin SaDC, nd tt liblistin s

ld ppnd n s uts.

Tbl 4 sws t ipct i tnspt

liblistin n t SaDC tvl nd tuis

(T&T) indust s wll s t wid cn.30

ou clcultins sw tt i SaDC31 libl-

isd its i tnspt ts, t wuld b

substntil gins plnt nd c-

nic ctivit. m tn l illin ddi-

tinl ign tuists wuld iv b i, nd

t wuld spnd tn US$500 illin

in t tuis sct. Tis, plus t ultipli

ct n t wid SaDC cn, wuld

incs t gins GDP b but US$1,5 bil-

lin , but l pcnt. Just w

tn 35 000 nw jbs wuld b ctd in

t tvl nd tuis indust, nd ut

37 000 in t wid SaDC cn ttl

tn 70 000 jbs. Ts clcultinsdnstt tt cuntis in SaDC -

ing signifcnt nd, n t c it, unw-

ntd scifcs b cntinuing t cnstin

ti i tnspt ts.

Implications or airlines and airlineemployment

on bstcl t t liblistin i tns-

pt witin SaDC is its ptntil ngtiv

iplictins ntinl ilins. Tis is ptic-

ull lvnt witin SaDC s n ilins

stt-wnd, lsing n, nd und-

cpitlisd. Intntinl xpinc suggsts

tt tis cncn is ptill justifd. Lib-

listin in eup nd t Unitd Stts ld

t dps in pfts n ilins, nd s

ging bnupt. hwv, liblistin ds

nt invitbl n tt ll ntinl ilins

will cllps. In eup nd t Unitd Stts,s ntinl cis v stuggld, but

ts v dptd t nd tiving in t

nw, cptitiv nvinnt. hwv,

vn wn ntinl ilin is lil t su

liblistin, it is cl tt ntinl gv-

nnts suld nt llw tis t ul ut t

dvlpnt t tuist indust. Tuis

cntibuts t cnic dvlpnt

nd plnt tn ntinl ilins.

a pvius Cm Tust stud (ric-

n nd Ll 2005) s swn w ntinl

Table 4: The projected economic impact o air transport liberalisation on

SADC

Arrivalsbyair

Additionalarrivalsand

directimpactonT&T

Impactonwider

economy(outsideof

T&T)

Totalimpacton

economy

Foreign tourists arrivals* 3 736 800 651 271

Foreign tourists spending by air travellers

(US$ millions)**

3 539 708 996 1 704

Employment in the T&T industry** 195 831 34 131 37 010 71 141

Total impact on oreign tourist spending as

a % o GDP***

0.60%

Source: Calculated by Genesis.

Notes: * This estimate is based on WTO data or 2004 the latest available.

** The data is or 2006, and is rom the WTTC-TSA.

*** This was estimated using GDP fgures or 2004 obtained rom SADC

(www.sadc.int), as more recent data was not available or these countries.



25/40

ilins cn bnft liblistin lng

wit ti cuntis tuist industis, wit

kn aiws nd egptai bing tw nt-

bl aicn xpls. T sw tt libli-

stin suld b sn s n pptunit, nt

just tuis but ls t ilin indus-

t, s it lds t lg incss in pssng

vlus t lw ilds.

T ltntiv t liblistin is lil t

pv uc cstl t bt ntinl c-

i nd t cn in t diu t, wit

pbbl incsing nd public subsid

t t ci, nd n incsing pptunit

cst dvlpnt t ntinl cn.

Kenya Airways

In 1996 kn aiws bc t fst ai-

cn ntinl ci t b pivtisd, llwing

pcss tt includd 26 pcnt cpitl

injctin b kLm. Dspit stbcs cts

tis in kn, nd sultnt ngtiv

tvl dvisis, i tfc nd tuis bt

cntinu t gw. kn aiws is pftbl,

nd cntinus t pn up nw uts, ntbl

t Wst aic. Tis s lpd t stblis

Nibi s j int- nd int-ginl ub

including d igts t mbs, ptl

t t cstl tuist s s wll s ds-

tintin in its wn igt.

EgyptAir

In t 1970s nd 1980s, egpt dptd

libl i tnspt plicis id t xpliting

its wlt itg sits nd cstl ssts.

T sults v bn ipssiv. ov t pst

20 s, intntinl i pssng tfc nd

tuist ivls v gwn b igt pcnt

(11 pcnt v t pst 10 s)

dspit pliticl unctintis in t gin,

nd j stbcs cts tis. Tis

gwt s bn civd b cul c-

dintin vitin nd tuis plicis. T

t s ign cis s incsd,

but t ntinl ci, egptai, s ld its

wn, intining 30 pcnt s int-

ntinl pssng tfc.

Key actors or success

F ilins t t dvntg t pp-

tunitis d b liblistin, t nd

cptitiv cst bs nd t bilit t ttct

pssngs. Intntinl xpinc suggsts

tt, t civ tis, ilins suld b un

indpndntl t stt buucc. Tisds nt ncssil qui pivtistin, but

ds qui ccilistin. on x-

pl is etipin ailins, wic is succssull

un s n indpndnt cptin wil still

wnd b t etipin gvnnt.

In gnl, ilins in SaDC suld v

lw pting csts tn ti cptits

utsid t gin, s t bnft

lw lbu csts. In t pst, ts lw

lbu csts w st b ig csts

cpitl du t ig cunt is in SaDC

tn in eup. T Cp Twn Cnvntin32

s pvidd cnis lcl ilins t

vc tis pbl, nd ccss cpitl t

lw ts.

Wil lw-cst bs is iptnt, ilins

ust ls b bl t ttct pssngs. Tis

is stis difcult SaDC ilins s t

tn unnwn t pssngs utsid

t gin, nd t stuggl t t

tslvs ctivl. ailins cn t stpst vc tis disdvntg. mst ip-

tntl, t cn nt int llincs. on slu-

tin is t jin glbl llinc suc s t St

allinc onwld. B jining t St alli-

nc, Sut aicn aiws s bn bl t

t itsl ctivl t nw nd un-

ili cnsus.

ant xpl intgtin is Ci,

pivt Sut aicn ilin. It s n-

cis gnt wit Bitis aiws in ts

wic it s tn n tt ilins clus

For airlines to

take advantage o

the opportunities

oered by

liberalisation,

they need a

competitive cost

base and the

ability to attract

passengers

For airlines to

take advantage o

the opportunities

oered by

liberalisation,

they need a

competitive cost

base and the

ability to attract

passengers



26/40

nd liv. F pssngs pspctiv,

tis lvl intgtin ns tt t is lit-

tl dinc btwn Bitis aiws nd

Ci igt, tus nbling Ci t ttct

pssngs w twis b w -

ing n n unili ilin.

an xpl ls intgtin is kn

aiws. It s gd its msfi qunt

i pg wit kLms Fling Dutcn

pg,33

tus ing its svics ttctiv t kLms lg bs qunt

is.

Protection against anti-competitivepractices

Ntinl ilins witin SaDC wll b

cncnd tt lg ilins culd us ti

bul t pus t ut t ginl t.

hwv, nub lg ilins sving

t gin, suc s Sut aicn aiws

nd vius eupn ilins, lctd in

cuntis wit ctiv cptitin gncis.

Tis pvids t ilins in t gin wit

signifcnt ptctin ginst nti-cpti-

tiv cnduct. F xpl, ilins ing ut

t SaDC cuntis t Sut aic cn

bing Sut aicn aiws b t Sut

aicn cptitin utitis. Tis ptcts

t ginst nti-cptitiv pctics b

tis ilin. Sut aics cptitin ut-

itis quit willing t nc t Cpti-

tin act, s swn b t spt dcisins

ginst Sut aicn aiws.

Employment opportunities

S ntinl gvnnts wll dcid

tt liblistin will v di cnsqunc

ti ntinl ilins. In ts css, it will

b btt plnt nd cnic

gwt i t cs t suppt t gwt

ti tuis industis v t lt

ti ntinl ilins. T tuis sct

pls n ppl tn t igl

cpitl-intnsiv ilin indust.

In nub SaDC cuntis, t ntinl

ilin pls w ppl tn ts

dictl pviding svics t tuists iving

b i (s tbl 5). Ts nubs suggst

tt, n vg, liblistin wuld v t

incs t nub ppl pviding ts

svics b nl u pcnt t additional

jbs t utwig t total nub jbs p-vidd b t ntinl ilin.

In st SaDC cuntis, t bnfts

20 pcnt incs in pssng vlus

will utwig t cts dclin in

t ntinl ilins cptitiv psitin.

als, t tuis sct s gt nc-

n bnfts t lcl cn tn t

ntinl ilin. It inl sucs its inputs

lcll, wil ntinl ilins inl ipt

t gds nd svics t nd suc s i-

ct pts, quipnt, nd ul.

Table 5: Employment by national airlines versus employment generated in

the tourism industry by visitors arriving by air

Country

Number o employees

in the national airline

Employment in the tourism

sector attributable to visitors

arriving by air

Botswana 320 4 925

Malawi 450 18 642

Namibia 483 4 483

Zimbabwe 1 200 4 004

Zambia 116 2 838

Mauritius 2 000 68 121

South Arica 10 684 137 697

Tanzania 270 122 689

Source: Survey o airlines and Genesis calculations.

Note: The employment data or SAA has been drawn rom its 2005 Annual Report and

excludes 3000 people employed by its subsidiary SAA Technical, which maintains SAA

aircrat as well as those o other airlines. However, to be conservative, we have included this

number.



27/40

Ugandas experience

a lt nd gwing tuis sct ds

nt dpnd upn t xistnc ntinl

ilin (ricn nd Ll 2005), nd Ugn-

ds tuis sct s tivd in t bsnc

ntinl ci. In 2002 Ugnd llwd

its lss-ing ntinl ci, Ugnd ai-

lins, t g int liquidtin. Dspit t ilu

nub nw pivt ilins, libl-

isd i tnspt plic s ld t substn-

til gwt in tuis tfc nd cipts. In

2000 Ugnd civd 193 000 intntinl

tuists, w spnd $151 illin. B 2004 tisd incsd t 350 000 tuists (n 82 p-

cnt incs), w spnt US$271 illin ( 79

pcnt incs). Tuis is nw t cun-

ts nub n ign xcng n,

substntill utclssing tditinl xpt

lds suc s c nd t. Intntinl

pssng tfc t entbb ipt, ving

stgntd 1996 tug 2002, incsd

in bt 2003 nd 2004.

Conclusion

T bnfts SaDC liblising its int-

ntinl i tnspt ts will b igl

signifcnt. ov t pst 25 s, cuntis

und t wld v liblisd ti i

tnspt gis, wit cnsidbl bnfts

ti ilin industis in ts utput

nd plnt s wll s ti vll

cnis.In t eupn Unin, i tvl s

incsd b 33 pcnt, nd in t Unitd

Stts, dstic liblistin s ld t n

incs 41 pcnt. Siil gins v bn

sn in SaDC nd t aicn cuntis tt

v liblisd, vn ptl s.

Tw sttisticl xciss suggst tt lib-

listin witin SaDC culd incs tfc

vlus b up t 20 pcnt. Using tis sti-

t t qunti t ipct n t tuis

indust, clcultins suggst tt i SaDC34

liblisd its i tnspt ts, t

wuld b substntil gins plnt

nd cnic ctivit tugut t gin.

Liblistin wuld incs GDP b $1,5 bil-

lin , but l pcnt, nd n

dditinl 70 000 jbs wuld b ctd.

Ts clcultins dnstt tt cun-

tis in SaDC ing signifcnt scifcs

b cntinuing t stict ti i tnspt

ts. Wil cncns tt t ntinl i-

lin nt psp in t liblisd nvin-

nt vlid, t is littl t suggst tt

tis wnts giving up t signifcnt c-

nic wds tt is gwing tu-is indust.



28/40

ThIS SeCTIoN pvids dtild xplntin t cntic nlsis t pics nd

vlus i tnspt invlving SaDC b stts. T tw nlss cplnt c

t. hwv, t bsd n dint dt sts nd us dint cntic ppcs,

nd w will t discuss t sptl.

Price analysis

In t pic nlsis, w stitd t ipct () i tnspt liblistin nd (b) t ps-

nc lw-cst ilin n t ts cgd b ilins.

Data

W usd css-sctinl dt tt w cllctd () Glbl Distibutin Sst; (b) su-

v ntinl gvnnts nd ilins in t gin; nd (c) tw cunt/cit-lvl dt sts.

F t Glbl Distibutin Sst w cllctd dt n i s, t nub igts wn,

nd t nub ilins tvlling n givn ut.35 ou us t lwst s su

t vg pid b tuists is in lin wit t ppc usd b cdic uts in tis

fld (pticull Dsn & Ttw 1992).

W tid t suv ll gvnnts in SaDC n t cntnts ti biltl gnts.

W civd psitiv spns Tnzni, Btswn, mlwi, Sut aic, muitius, ndmdgsc, nd w t liitd t ts cuntis in u nlsis. T suv cntind

qustins but t nub ilins llwd t pt n givn uts t nd ts

cuntis (singl ultipl dsigntins), cpcit stictins n ts uts (stictins n

t nub igts, tc), nd ft d igts (t igt t pic up pssngs nd c

t t nt dstintin).36 W cllctd dt n GDP, ppultin, nd GDP p cpit

t Wld Bn,37 nd dt n gt cicl distncs t CePII dtbs distncs.38

Estimation

W dlld ts cgd b ilins s unctin distnc, distnc squd, t stitd

nub igts, t stt liblistin t biltl gnt gvning t ut in

qustin, nd psnc lw-cst ilin. In lin wit Dsn nd Ttw (1992),39 w

Research methods

APPeNdIx


29/40

ttptd t cntl ndgnit btwn tfc vlus/liblistin nd pic b using

tw-stg, lst-squs gssin. as w w unbl t btin pssng vlus t

vius uts includd in u spl, w usd t nub igts p w s px

pssng vlus. W dlld t nub igts s unctin GDP, ppultin, nd dis-

tnc.40 T tw stgs swn blw:

Stage 1

Flights = 0

+ 1Log(Distance) +

2Log(GDP) +

3Log (Population) + e

W:

Flights = t nub igts wn p w n t givn ut

Distance = t Gt Cicl Distnc btwn t tw citis n t ut

GDP = t pduct t GDP bt cuntis (i, t GDP t dstintin cunt ulti-plid b t GDP t igin cunt)

Population = t pduct t ppultin bt cuntis (i, t ppultin t dstin-

tin cunt ultiplid b t ppultin t igin cunt)

Stage 2

FarePerKm = 0

+ 1Distance +

2Distance2 +

3OpenSkies +

4LowCost +

5FlightsFit + e

W:

FarePerKm = t cpst p t givn ut41

Distance = t Gt Cicl Distnc btwn t tw citis n t ut xpssd in 1000

2 AppENDIx RESEARCH mETHODS

Figure 7: Relationship between are per kilometre (including airport taxes) and distance

Source: Calculations by Genesis; ares obtained rom a Global Distribution System.

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000


30/40

Distance2 = squd t Distance

OpenSkies = du vibl indicting uts wic nt stictd b t biltl g-

nts tt gvn t42

LowCost = du wic sus t psnc lw-cst ilin n t ut.43

FlightsFit = t pdictd vlu igts btind Stg 1

Distnc ws includd in t gssin t cptu cnis lngt. a pii, w xpctd

t cfcint n distnc t b ngtiv, s w xpctd t cst p ilt t dcs s

t fxd csts incud t tinls w spd v ilts.44 W includd squd

t distnc t llw t pssibilit tt its inunc v t p ilt ws

nn-lin. T tinl tis spcifctin is vidnt wn n xins t ltinsip

btwn t p ilt nd distnc, s swn in fgu 7. Givn t stng cnvx l-

tinsip, w xpctd t cfcint n t squd distnc t t b psitiv.

W btind t llwing gssin Stg 1 (stndd s in pntsis):

Flights = 17.53 6.44 Log(Distance) + 2.04 Log(GDP) 0.7193 Log(Population)

(7.155) (1.169) (0.379) (0.297)

R2 = 0.45

T sults t scnd stg t odin Lst Squs rgssins (oLS) swn

in tbl 6.

Table 6: Results o price estimation

Regression

1 2 3 4

Fare / km(excl. taxes)

Fare / km(incl. taxes)

Distance 0.360*** 0.361*** 0.575*** 0.576***

(0.075) (0.074) (0.071) (0.072)

Distance2 0.023*** 0.023*** 0.039*** 0.039***

(0.007) (0.007) (0.006) (0.006)

LowCost 0.640*** 0.497** 0.589*** 0.523**

(0.186) (0.206) (0.179) (0.196)

OpenSkies 0.222* 0.210* 0.263** 0.257**

(0.119) (0.108) (0.117) (0.113)

FlightsFit 0.021 0.010

(0.016) (0.015)

Constant 2.278*** 2.363*** 3.145*** 3.184***

(0.198) (0.213) (0.189) (0.213)

Observations 56 56 56 56

R squared 0.60 0.61 0.79 0.79

Robust standard errors in parentheses.

* signifcant at 10%; ** signifcant at 5%; *** signifcant at 1%

F bustnss, w n t gssins using bt t ull p ilt (wic includs



31/40

ipt txs) nd t p ilt xcluding ipt txs. as is vidnt, t sults

t gssins d nt dpnd n wic su w us. In pticul, t cfcints n t

pts intst, tLowCost nd OpenSkiesduis, d nt cng cnsidbl css

spcifctins. assuing tt ilins tgt t fnl pic tt cnsus c, w bliv tt

using t ull p ilt is pppit tn t tt xcluds txs. T c-

fcints nDistanc ndDistance2 cn t u xpcttins t displ t xpctd signs,

nd signifcnt t t n pcnt lvl. a pii w xpctd tt ig tfc vlus b

vitu cnis dnsit wuld sult in lw vg csts, nd t lw s.

hwv, tis ws nt ctd in t dt, s t cfcint n t pdictd vlus igts

(FlightsFit) is insignifcnt. Tis b bcus t nub igts is p px ps-

sng vlus, sinc w v n nwldg t siz pln usd. as suc, w ls

stitd t pic qutin xcluding t nub igts (rgssins 1 nd 3). W nt tt

xcluding t nub igts t stitin ginll incss t gnitud t

cfcints nLowCost nd OpenSkies. Sinc including t pdictd nub igts s nsignifcnt ipct n t sults, w t rgssin 3, wic uss t ull p ilt

nd xcluds t nub igts s t pppit stitin.

Using rgssin 3 s t bsis nlsis, t cfcint n OpenSkies 0.263 suggsts

tt uts gvnd b liblisd gnts 26 cnts p ilt cp tn nn-lib-

lisd uts, ll ls bing qul. Givn tt t n t ull p ilt is r1,47,

tis iplis ductin in pic ugl 18 pcnt. Siill, i t is lw-cst ilin -

ing t ut, w xpct s t b ducd b but 40 pcnt.

Volume analysis

In t vlu nlsis w stitd t ipct () nting int n pn sis gnt;

nd (b) nc- lg incs in t cpcit llwd n t ut.

Data

W cllctd dt n () liblistin vnts btwn Sut aic nd t cuntis in SaDC

nd lsw, (b) dt t aipts Cpn Sut aic n t nub pssn-

g iving t nd dpting Jnnsbug Intntinl aipt v nt 1998

t 2004,45 (c) qutl dt n td vlus,46 (d) GDP p cpit nd ppultin dt,47 (d)

dvs vnts cting i tvl t t lvnt cuntis. Tis gv us pnl dt st

qutl dt 16 cuntis v svn s.

Estimation

W dlld pssng vlus s unctin () dnd i tvl (wic w dlld

s unctin td ws, GDP p cpit, ppultin, dvs vnts, nd t ti t

(ssnl cts); nd (b) t sttus t biltl gnt in qustin, including t xist-

nc ltivl liblisd gi nd signifcnt incs in cpcit llwd b t bilt-

l.48 T, w usd dl wit t llwing spcifctin:

Log(Volume)it

= 0

+ 1Log(Trade)

it+

2Log(GDP) +

3Log(Population) +

4Liberalised

it+

5CapacityIncrease

it+

6AdverseEvents

it+

7Seasonal

it+ e

it



32/40

W:

Volume = t ttl nub pssngs ing n t ut (su ivls nd dptus t

Jnnsbug ipt)

Trade = t ttl ipts nd xpts t tw cuntis n it sid t ut (l

2000 US Dlls)

GDP = t pduct t p cpit GDP t tw cuntis n it sid t ut (l

2000 US Dlls)

Population = t pduct t ppultin t tw cuntis n it sid t ut

Liberalised = du t pid tt uts gvnd b lgl liblisd biltl

gnts49

CapacityIncrease = du t pid duing wic ut is gvnd b biltl tt

s cngd t llw signifcnt incs in cpcit wn n t ut50

AdverseEvents = du t cv t dvs vnts cting t uts51

as xpctd, t husnn tst suggstd tt fxd cts gssin ws pppit. 52

T sults t gssin swn in tbl 7.

W n t gssins using tw dint spls. F t cunt spl, w gggtd

Table 7: Fixed eects analysis o volumes and liberalisation events

Country sample City sample

Log (trade) 0.131** 0.106*

(0.064) (0.058)

Log (per capita GDP) 0.071** 0.086***

(0.028) (0.025)

Log (population) 0.125*** 0.121***

(0.019) (0.016)

Adverse events -0.429*** -0.381***

(0.092) (0.077)

Liberalisation 0.210*** 0.219***

(0.053) (0.050)

CapacityIncrease 0.113** 0.091**

(0.044) (0.043)

Quarter2 -0.016 -0.007

(0.036) (0.031)

Quarter3 0.112*** 0.128***

(0.034) (0.030)

Quarter4 0.062* 0.073**

(0.035) (0.031)

Constant -31.182*** -30.861***

(4.726) (4.016)

Observations 445 529

Number o routes 16 19

R-squared 0.52 0.51

Robust standard errors in parentheses. * signifcant at 10%; ** signifcant at 5%;

*** signifcant at 1%



33/40

t vlus n t uts t dint citis t btin cunt ut. T cit spl includs

t spt citis. W nt tt u sults d nt dpnd n t spl usd. W pd t

cunt spl bcus t ppultin nd td dt btind w cunt-spcifc nd nt

cit-spcifc. T cfcints n t indpndnt vibls displ t xpctd sign. Dnd-

sid cts, cptud b t td, GDP p cpit, nd ppultin vibls ll psitiv nd

signifcnt.53 advs vnts d ngtiv nd signifcnt ipct n td vlus. Bcus

tis is dubl-lg qutin, w ndd t cnvt t duis int pcntg dincs

using t ntilg (Gujti 1995). at ting t ntilg w und tt liblisd gnts

d incsd pssng vlus b 23 pcnt, nd tt lg nc- incss in cpcit

incsd pssng vlus b 12 pcnt.54

The impact o liberalisation on tourism in SADC

Tis sctin utlins t dt w usd, u td, nd t sults t nlsis t ipct

i tnspt liblistin n t wid cn. Dt n ign tuist spnding, pl-

nt, nd ultipli cts n t cn w btind t Wld Tvl nd Tuis

Cuncil Tuis Stllit accunts (WTTC-TSa), t stnddisd Unitd Ntins su-

nt t cnic ipct t tvl nd tuis sct. Tis dt ws vilbl ll

SaDC b cuntis xcpt mzbiqu.55 Dt n t nub ign tuists nd t

pptin tt ivd b i w sucd t Unitd Ntins Wld Tuis ognistin

(UNWTo).56 Tis sctin ls discusss t clcultins tt undpin t nlsis t ipct

mzbiqu liblising t Jnnsbugmput ut.

Method

T stit t ipct liblistin n tuis in SaDC, w sud fv dint ipcts,

nl t ipct n ign tuist ivls, t dict ipct ign tuist spnding, t

ttl ipct n GDP, t dict ipct n plnt in t tvl nd tuis indust, nd t

ttl ipct n plnt. T llwing ul w pplid t clcult t ipcts:

Impact on oreign tourist arrivals

Impact on foreign tourist arrivals = foreign tourist arrivals by air (excluding intra-SADC

tourism) estimate of impact of liberalisation onpassenger volumes

Impact on oreign tourist spending and on GDP

Direct impact on foreign tourist spending = foreign tourist spending % of tourists

that arrived by air x estimate of impact of

liberalisation on passenger volumes

Total impact on GDP = direct impact on foreign tourist spending GDP multiplier



34/40

Impact on employment in the T&T industry and on total employment

Direct impact on employment in the T&T industry = direct T&T industry employment

foreign tourist spending of tourists

that arrived by air as a % of T&T

consumption estimate of impact of

liberalisation on passenger volumes

Total impact on employment = direct impact on T&T industry employment employment

multiplier

T sucs t dt usd in t clcultins swn in tbl 8.

Table 8: Calculation o the economy-wide eect o liberalisation

Variable Source Calculations (i any)

Foreign tourist spending WTTC-TSA

Direct T&T Industry employment WTTC-TSA

% o tourists that arrived by air58 WTO Foreign tourists that arrived by air as a percentage o

total oreign tourist arrivals

Estimate o impact o liberalisation on passenger volumes Genesis calculations

GDP multiplier59 WTTC-TSA Total T&T economy GDP divided by direct T&T GDP

Employment multiplier60 WTTC-TSA Total T&T economy employment divided by Direct T&Temployment

Foreign tourist arrivals by air (excluding intra-SADC tourism) Genesis calculations Foreign tourist arrivals by air [ 1 (measure o the

extent o liberalisation in the SADC region)]

Indirect impact on GDP Genesis calculations Total impact on GDP minus direct impact on oreign

tourist spending

Foreign spending o tourists that arrived by air as a % o T&T

consumption

WTTC-TSA and WTO Foreign spending o tourists that arrived by air as a

percentage o T&T consumption

Indirect impact on employment Genesis calculations Total impact on GDP minus direct impact on T&T

industry employment

Impact on GDP as a % o GDP SADC website and Genesiscalculations

Total impact on GDP as a percentage o SADC GDP

W t tw cts int ccunt tt wuld duc t lil ipct liblistin n t

tuist industis SaDC cuntis:

Intra-SADC tourism: in d t v t divsin tuis witin SaDC, w stitd

t pcntg tuist ivls b i t SaDC b stts. T igin tu-

ist ivls iving b i is nt ptd in t WTo dt. hwv, w btind tis dt

Sut aic Sttistics Sut aic (Stts Sa), nd mdgsc nd muitius t

WTo dt, s lst ll ti tuists iv b i. T pcntg tuists lsw in

SaDC w iv b i is 12 pcnt Sut aic, 9,3 pcnt muitius, nd 5,6 pcnt



35/40

mdgsc. W t ssud tt 10 pcnt tuists w iv b i

lsw in SaDC, nd nc ducd t nub ign tuists w ivd b i b 10

pcnt.

The extent of liberalisation in SADC: W t tis int ccunt b xining t liblistin

dt cllctd t pic nlsis (tis ctd t stt liblistin six SaDC -

b stts). Tis ds nt ct ll uts in SaDC; wv, indictins tt t cuntis

wic w d nt v tis intin stictd tt ts wic w d v

intin wic suggsts tt w vstitd t xtnt liblistin nd t

undstitd t gins liblistin. W wigtd t pptin uts tt lib-

lisd b u stitd ipct liblistin n pssng vlus, t t int ccunt t

ct tt tt liblisd uts wuld v ig pssng vlus. T, w ducd

u fnl sults t dict ipct liblistin n ign tuist ivls b i, nd t

dict nd ttl ipct liblistin n GDP nd plnt, b 13 pcnt.57

The Mozambique case study

Du t t bsnc WTTC stud mzbiqu, w d t us fgus t SaDC

studis t stit t dict ipct tuis n t mzbicn cn, s wll t ulti-

pli cts. W ssud tt tuists spnd US$500 p visit, wic is t vg SaDC.

T ctul spnd clcultd WTo dt mzbiqu 2004 is US$135; wv, tis

fgu is cll t lw tuists iving b i. It pbbl iss bcus 84 pcnt tu-

ists w visitd mzbiqu in 2004 ivd b d. T US$500 fgu is blw tt

mdgsc (US$1 157) nd muitius (US$1 564), bt wic v n bc sts, nd

w t vst jit tuists iv b i. It is ls blw t vg spnd tuist

visiting Sut aic (US$987) nd Tnzni (US$1 046), bt wic v signifcnt nubs

tuists iving b d. T, tis fgu is lil t b pticull cnsvtiv. T

ultipli fgus usd t vgs SaDC, wit utlis vd. as t ultiplis

SaDC ll int ltivl tigt bnd, t sult tt t ipct n mzbiqu liblis-

tin will utwig t cst Lam clsing is nt snsitiv t using ts vg fgus.



36/40

Endnotes

1. a gd xpl ub nd sp sst is

Dubi. Pssngs ing Jnnsbug

cn it dictl t eup, instnc t

Pis, t cn t Dubi nd tn ctc

cnncting igt t Pis. Pssngs ing t

Indi Jnnsbug cn ls t Dubi

nd tn ctc cnncting igt t Indi.

2. misn (1995), citd b Viscusi (2001), s

t fgu $18 billin. accding t t US

Dptnt Lb, tis is qul t $25.35

billin in 2006 dll ts. ttp://dt.bls.gv/

cgi-bin/cpiclc.pl, ccssd n 22 august 2006.3. Tis discussin is lgl tn Cpt 6

Dgnis (2006).

4. Tis is clcultd using millbius nd

hnsns (1995) fnding tt dnd

i tvlin their model d n lsticit

btwn 0.,8 nd 0.95, t cnwldg

tt tis stit is lw tn tt t

studis.

5. T eU cuntis tt ntd int pn sis

gnts austi (1995), Blgiu (1995),

Dn (1995), Finlnd (1995), Fnc (1998),

Gn (1996), Itl (1999), Ntlnds

(1992), Ptugl (2000) nd Swdn (1995). TBttl Gup 2002.

6. Tis stit pplis t t pid t libl-

istin, nd is bsd n n xtpltin t

p-liblistin tnd. T pcntg cts

t vg incs in ntl pssng vl-

us n t ut.

7. 1ti ws ls ctiv in tis t lt

2005 t l 2006.

8. 1ti ws llwd b kulul, wic subs-

quntl stppd ing t ut in l 2006.

9. Tis is bsd n 1999 fgus btind t

estn Cp pvincil gvnnt wbsit,

www.cpv.gv.z.

10. Tis is bsd n ign tuist ivls

119 236 est Lndn in 2004 nd t

vg spnd ign tuist r1 062

(US$163) in t estn Cp in 2004. Dt

sucd Sa Tuis.

11. Tis is bsd n t vg tuist spnd in

Zbi US$312. Tis nlsis is bsd n

dt t Wld Tuis ognistin n

Sut aicn tuists in Zbi in 2004.

12. Ts t Ntinl Tuis Plic nd

Iplnttin Sttg (s citd in Blnic t

l 2004), nd t Sttgic Pln t Dvl-pnt Tuis in mzbiqu 2004

2013 (s citd in Blnic t l 2004).

13. Ts w t cpst tun ticts includ-

ing txs c ut btinbl n t Saa

wbsit, www.s.c, n 25.08.2006,

tvl n 16 Sptb nd tuning n t

24t. T pic tict t Dubn ws r775

(US$108), nd, t mput, r2 008 (US$280). ai-

pt txs n t Jnnsbugmput ut

w r798 (US$111), nd, n t Jnnsbug-

Dubn ut, r315 (US$44).

14. Tis ssus n lsticit 1. elsticit is

su t dg t wic pssngvlus sttc in spns t givn ll in

pics. F xpl, n lsticit 1 iplis

tt 10 pcnt ductin in pics lds t

10 pcnt incs in pssng vlus.

15. T GDP nd plnt ultiplis bsd

n dt btind t WTTC Tuis St-

llit accunts (TSa). F ts clcultins,

t vg ll SaDC cuntis xcluding

mzbiqu ws usd, s dt mz-

biqu ws nt vilbl.

16. Lam wbsit, www.l.c.z.

17. T WTTC rpt n t ipct i


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tnspt liblistin n egpt usd n ls-

ticit 1.9.

18. T ipct n pssng vlus ws clcu-

ltd t ll in i s (xcluding ipt

txs), nl 60 pcnt, nd ssuing n

lsticit 1.8. Cnsus lil t s

dcs in i s (including ipt txs)

37 pcnt.

19. as dtild in t ppndix, t vlus t

dnd cntl vibls v t cct

signs, nd t sults bust t vius

spcifctins.

20. W d nt v dt () t pid wn

lw-cst ilins ntd t ginl ts;

nd (b) s t cuntis w t

lw-cst ilins ntd, pincipll Nibi.

21. In d t cnduct t cntic nl-

sis, w ndd intin n t sttus

biltl gnts, vlus nd/ pics.

Wil w d ccss thistorical dt n ()

vlus nd (b) t sttus biltl g-

nts Sut aic, w nl d current

dt n pics nd t cunt sttus bilt-

ls. T, s w did nt v dt t

s pid pics nd vlus, w culd

nt includ bt pics nd vlus in t

s nlsis.

22. T WTo ds nt v dt n ivls b i

Btswn, Nibi, t DrC, Swzilnd.

I w d fgus Btswn, tis wuld v

incsd t pcntg w nc, but i

w d nubs Nibi nd t DrC tis

wuld lw t pcntg.

23. Ticts pics tvl n 16 Sptb,

tuning n 24 Sptb. T uts

lss tn 400 ilts v bn xcludd

t nlss, Tis is bcus t cst

ing ts v st uts is dint t

tt ing lng ut, nd w dnt v

nug uts tis lngt t dl ts di-

nt cst ltinsips ctivl.

24. rgssin is sttisticl dlling

tt ttpts t vlut t ltinsip

btwn n vibl (td t dpndntvibl, in tis cs pics) nd n

t vibls (td t indpndnt vi-

bls, in tis cs distnc nd t psnc

lw-cst ilin nd liblisd biltl

gnt)

25. as dtild in t ppndix, w ttptd t

cntl ndgnit btwn tfc vl-

us nd pic b using tw-stg lst

squs gssin. Svl gssins w

un; w und tt u sults w bust t

t vius spcifctins.

26. Tis is su lsticit t dg

t wic pssng vlus sttc in

spns t givn ll in pics. millbiu

nd hnsn (1995) und tt pic duc-

tin 10 pcnt wuld incs pssng

vlus b igt pcnt. hwv, tis sult

is cn businss clss tict pics,

s t-nlsis sws. It fnds tt tt

incss 18 pcnt in pssng vlus

in spns t pic ll 10 pcnt is

cn cn clss ticts. Fut-

, t lsticit dnd is cll ig

n s uts tn n ts. S Bns t l

2001.

27. Ibid.

28. Tis is n vg u stit t ipct

liblistin u pic nd vlu

cntic nlss. In d t cnvt t

pic nlsis stit t ipct n pssng

vlus, w ssud n lsticit 1.

29. Dt n ign tuist spnding, plnt,

nd t ultipli cts n t cn ws

btind t Wld Tvl nd Tuis

Cuncil Tuis Stllit accunts, wic is

t Unitd Ntins sunt t ipct

t tvl nd tuis sct n t bd

cn. Tis dt ws vilbl ll SaDC

b cuntis xcpt mzbiqu. Dt n

t nub ign tuists nd t pp-

tin tt ivd b i w sucd t

WTo. T dt usd xplind ut in

t ppndix.

30. Ts stits xclud mzbiqu nd

t DrC, du t lc dt in t cs

mzbiqu (s t cs stud n pg 35),

nd lc cnfdnc in t DrC dt. T

stits t individul cuntis nt

ptd, s t ctul ipct liblistin

n ts cuntis wuld v dpnding n

ti individul cctistics. hwv, s

mzbiqu wuld lil bnft gtl

liblistin t iplictin is tt tis fgu

undstits t bnfts liblistin t

t gin.

31. Tis xcluds mzbiqu nd t DrC.

32. T Cnvntin n Intntinl Intstsin mbil equipnt, 2001 nd t Pt-

cl n mtts Spcifc t aict equipnt

ws ld in Cp Twn 29 octb t 16

Nvb 2001. T dt 32 stts v signd

t cnvntin, nd it ntd int c n

1 mc 2006, t nts t t igt

tifctin. T pi bjctiv bt t

cnvntin nd ptcl is t duc t cpi-

tl csts invlvd in buing lsing ict

quipnt. a lgl w tt llws t

ctin nd ncnt scuit instu-

nts will pvid cnfdnc t lnds nd

institutinl invsts bt witin nd utsid

37ENDNOTES


38/40

t cunt cncnd, ing it pssibl t

cnvt illiquid lns int liquid scuitis, nd

ttct ign cpitl. T in pups t

cnvntin is t t stblis n int-

ntinl lgl gi cting, ncing,

gisting, nd piitising scuit intsts

nd intsts ld b cdits, cnditinl sll-

s, nd lsss in spct t ctgis

ig-vlu, uniqul idntifbl quipnt,

nl () is, ict ngins, nd li-

cpts (ict bjcts); (b) ilw lling

stc; nd (c) spc ssts.

33. ttp://www.n-iws.c, ccssd n

n 5 Sptb 2006.

34. Tis xcluds mzbiqu nd t DrC.

35. Tis dt ws cllctd b Su knnd, mD

mzist Tvl, n bl Gnsis anltics.

36. Tid nd ut d igts cnstin

nub cts tt iptnt t cp-

titin n ilin uts. Ts cn includ t

nub igts, tp ict, nub

pssngs, w n ilins cn (singl

ultipl dsigntin), nd wic ipts

ilins cn . Fit d igts igts

tt llw n ilin t pic up pssngs nd

c t t nxt dstintin.

37. Wld Dvlpnt Indicts dtbs. S

ttp://si-xt.wldbn.g.

38. Cnt DetudsPspctivst DIntins

Intntinls (CePII) dtst, vilbl t

ttp://www.cpii./nglisgp/bdd/dis-

tncs.t.

39. Dsn nd Ttw (1992) n pnl dt

gssins, s t d pics v ti

st uts. as w nl d cunt dt

n pics, w w bl t un css-sctinl

gssins nl.

40. Tis spcifctin is siil t tt Dsn

nd Ttw (1992), w in ti fst stp

gssd pssng vlus n n ppul-

tin, n inc, nd distnc. T pdictd

vlu pssngs tis fst stg ws

tn usd s gss in t scnd stg.

41. Dt n s ws cllctd n 15 august 2006 t cpst tict vilbl 16 Spt-

b 2006, tuning n w lt n 24 Sp-

tb 2006.

42. T uts Jnnsbug t addis abb,

Nibi nd entbb; antnniv t Ni-

bi; Gbn t h; nd D s Sl

t entbb ll gvnd b pn sis

gnts.

43. T uts wit lw-cst ilin Jn-

nsbug t Lus, h, nd Wind.

44. Tis is in lin wit millbiu & hnsn (1995:

127). hwsv, t gss t lg p

il n t lg distnc.

45. F sns cnfdntilit w w nl p-

vidd dt ts uts wn b tn

n ilin. evn tug w d pssng

dt 2005, w w unbl t us it bcus

t dt btind t Wld Bn gs up

t 2004 nl.

46. Cissin Custs nd excis. Dt

cn b ccssd ttp://www.tips.g.z.

W did nt v dt n td vlus witin

t SaCU , wic ns w did nt v

dt Nibi nd Btswn.

47. Wld Dvlpnt Indicts dtbs. Dt

cn b ccssd ttp://si-xt.wld-

bn.g.

48. Tis spcifctin is lgl in lin wit tt

usd in t Bttl Gup pt (2002), wic

stitd t ltinsip btwn pssn-

g vlus n givn eU-US ut nd t

lvnt cst nd dnd cts. Its bsic

dl spcifctin includd g duis

t uts, l US dispsbl inc, l GDP

t lvnt eU cuntis n t uts,

t l xcng t, nd cst indx cn-

stuctd ul nd lbu pptins.

49. Ts includ Fnut (wl pid), D s

Sl (t t 3d qut 2003), nd kn

(t t 4t qut 2002).

50. Ts invlvd nc- incss cpc-

it u t svn igts (+75%) mlwi

(4t qut 1999), DrC (3d qut 2004) nd

hng kng (2nd qut 2002); nd n incs

in t nub igts u t 14

kn (2d qut 2000).

51. T dvs vnts w includ () pliti-

cl unst in mdgsc v psidntil

lctin (2nd qut 2002); (b) pid pliti-

cl unst in Zi

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