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ICRAT 2004 ICRAT 2004 1 Air transport liberalization and its Air transport liberalization and its impact on the aviation and tourism impact on the aviation and tourism industries: industries: a case study on Cyprus’ a case study on Cyprus’ By Sotiroula Liasidou - Lecturer at By Sotiroula Liasidou - Lecturer at Americanos College Nicosia – Cyprus Americanos College Nicosia – Cyprus ICRAT 2004 ICRAT 2004 ZILINA - SLOVAKIA ZILINA - SLOVAKIA

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Page 1: 163 Cyprus

ICRAT 2004ICRAT 2004 11

‘‘Air transport liberalization and its Air transport liberalization and its impact on the aviation and tourism impact on the aviation and tourism

industries: industries: a case study on Cyprus’a case study on Cyprus’

By Sotiroula Liasidou - Lecturer at By Sotiroula Liasidou - Lecturer at Americanos College Nicosia – CyprusAmericanos College Nicosia – Cyprus

ICRAT 2004ICRAT 2004

ZILINA - SLOVAKIAZILINA - SLOVAKIA

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22 ICRAT 2004ICRAT 2004

PRESENTATION’S STRUCTUREPRESENTATION’S STRUCTURE

INTRODUCTIONINTRODUCTION

AIMSAIMS

AIRLINE LIBERALISATIONAIRLINE LIBERALISATION

AVIATION & AVIATION & TOURISM INDUSTRTOURISM INDUSTRIESIES

THE REPUBLIC OF THE REPUBLIC OF CYPRUSCYPRUS

REASERCH FINDINGS & DISCUSSIONREASERCH FINDINGS & DISCUSSION

CONCLUSIONSCONCLUSIONS

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INTRODUCTIONINTRODUCTIONRegulation – an industry is ruled by Regulation – an industry is ruled by the government. the government.

New terminology emerge declaring New terminology emerge declaring deregulation/liberalization deregulation/liberalization

Liberalization - ‘frees an industry from the state’s control Liberalization - ‘frees an industry from the state’s control over prices, entry and exit’ over prices, entry and exit’

Airline Liberalisation Airline Liberalisation

Freedom of entry/exit - Freedom oFreedom of entry/exit - Freedom on n capacity –Freedom ocapacity –Freedom on n fares - Freedom of operationsfares - Freedom of operations - - COMPETITIONCOMPETITION

Transformation of the European Airline’s scene.Transformation of the European Airline’s scene.

Since the 1Since the 1stst of of May 2004 May 2004 CyprusCyprus is is member of the EUmember of the EU..

AAs a consequences a consequence,, the aviation industry’s landscape has the aviation industry’s landscape has been harmonised under the EU provisions.been harmonised under the EU provisions.

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AIMS of the researchAIMS of the research

Assessment of the possible changes and the impact on Assessment of the possible changes and the impact on the Aviation industrythe Aviation industryAs a consequence of this to reveal the impact on the As a consequence of this to reveal the impact on the Tourism IndustryTourism Industry

In this respect, the views of experts from the private and In this respect, the views of experts from the private and public sectorpublic sectorss in the both aviation and tourism industries in the both aviation and tourism industries of Cyprus are studied through in-depth interviews and of Cyprus are studied through in-depth interviews and questionnaires. questionnaires.

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European Airline Liberalisation European Airline Liberalisation ‘The ‘The Three Packages’Three Packages’

First Package or December 1987 First Package or December 1987

Declared flexible terms concerning the fares Declared flexible terms concerning the fares Abandoned the Abandoned the single designation provisionsingle designation provision As well as had released any As well as had released any capacity restrictionscapacity restrictions    

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Second Package (June 1990)Second Package (June 1990)

Released even more the provisions of the Released even more the provisions of the first one first one Allowed Allowed multi-designationmulti-designation of airlines on of airlines on specific routes specific routes As well as it allowed operations under the As well as it allowed operations under the Third and Fourth FreedomThird and Fourth Freedom of air into inter- of air into inter-continental flightscontinental flights  

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Third Package (January 1993)Third Package (January 1993)

Came into effect in 1997Came into effect in 1997 Was the basis for the creation of the Was the basis for the creation of the ‘open skies’‘open skies’ agreement with full traffic agreement with full traffic rights everywhere in the communityrights everywhere in the communityFreedom in entry and exitFreedom in entry and exitAt any capacityAt any capacityAt any route At any route At any rate determinedAt any rate determined

LIBERALISATIONLIBERALISATION

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AVIATION AND TOURISM: A AVIATION AND TOURISM: A RECIPROCAL RELATIONRECIPROCAL RELATION

Transitional Transitional process between the tourist process between the tourist generating area and the tourist destination country, generating area and the tourist destination country, This process is facilitated This process is facilitated through a through a transportation transportation systemsystem The The aviation systemaviation system is an is an essential part of the essential part of the tourism tourism industryindustry, which connects even the most , which connects even the most remote places on earth in a relatively short time, in remote places on earth in a relatively short time, in comparison with other transport modes. comparison with other transport modes.

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‘‘The island of Cyprus is The island of Cyprus is situated at the crossroads situated at the crossroads

of three continents, of three continents, Europe, Asia and AfricaEurope, Asia and Africa in in

the Mediterranean seathe Mediterranean sea.’.’

‘‘Its history and culture is a Its history and culture is a living proof of its age-living proof of its age-

long function as a bridge long function as a bridge between civilizations of between civilizations of

the Southeast Europe and the Southeast Europe and Middle East’ (PIO,2000)Middle East’ (PIO,2000)

  

THE REPUBLIC OF CYPRUS

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TOURISM INDUSTRYTOURISM INDUSTRY

  

•The unique beauty of the island with a long lasting history in combination with the three main attraction ‘cores’ of sun-sea-sand, generated demand for tourism•Approximately 2,6 millions   tourists arrive on the island each year•Undoubtedly, tourism development has been considered as the ‘magic wand’ for the economic development and viable progress of the country

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AIRLINE INDUSTRYAIRLINE INDUSTRYThe airline industry of Cyprus has been based on the law, The airline industry of Cyprus has been based on the law, which was inherited by the British Colonial rules which was inherited by the British Colonial rules DeclaringDeclaring a regulatory status characterized by bilateral a regulatory status characterized by bilateral agreements between different countriesagreements between different countries

  RegulationRegulation  

Cyprus Airways Cyprus Airways Flag Carrier (Monopoly - Bilateral Agreements – Flag Carrier (Monopoly - Bilateral Agreements –

Protectionism in the markets of Greece and the UK)Protectionism in the markets of Greece and the UK)Plethora of Charter Airlines Vertically Integrated with major Plethora of Charter Airlines Vertically Integrated with major European Tour Operators – Seat Only purchase prohibitedEuropean Tour Operators – Seat Only purchase prohibitedHelios Airways – Helios Airways – 11stst private company - private company - flights to restricted flights to restricted destinations destinations

  

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METHODOLOGY METHODOLOGY

Methodological triangulation – Methodological triangulation – combination combination qualitative & quantitativequalitative & quantitative methods methods

A non-probability sample and in particular a A non-probability sample and in particular a purposive sample is used, both in the interviews and purposive sample is used, both in the interviews and the questionnairesthe questionnaires

Semi-structured interviewsSemi-structured interviews

Respondents 22 people expertise in the field of Respondents 22 people expertise in the field of tourism and the aviation industriestourism and the aviation industries

Distribution of questionnaires at the end of each Distribution of questionnaires at the end of each interview (interview (7-point Likert scale format7-point Likert scale format 11 very unlikely very unlikely –7 very likely) –7 very likely)

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RESEARCH FINDINDS & RESEARCH FINDINDS & DISCUSSIONDISCUSSION

Impact on the Aviation industryImpact on the Aviation industrySignificant Impact (85%)Significant Impact (85%)

New airlines will enter the New airlines will enter the marketmarketOn charter flights.On charter flights.On seat availability - On faresOn seat availability - On faresOn frequencies-On seat demand On frequencies-On seat demand On outbound/inbound trafficOn outbound/inbound trafficOn Cyprus Airways On Cyprus Airways Increase interest on the two Increase interest on the two illiberal routes Larnaca-London illiberal routes Larnaca-London Heathrow / Larnaca-Athens Heathrow / Larnaca-Athens SpataSpataRenovation of the two airports Renovation of the two airports Larnaca and Paphos Larnaca and Paphos (BOT).Regional Hubs(BOT).Regional Hubs

Insignificant Impact (15%)Insignificant Impact (15%)Saturation of the market Saturation of the market Small MarketSmall MarketIs adequately covered by the Is adequately covered by the existing airlines existing airlines

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Competition Competition ‘‘European private airlines will enter the Cypriot market European private airlines will enter the Cypriot market

as far as there will not be any governmental as far as there will not be any governmental restriction and the skies of the country will be open restriction and the skies of the country will be open to competition’to competition’

On fares – Lower fares On fares – Lower fares

On the capacity On the capacity

On slots allocationOn slots allocation

On in-flight servicesOn in-flight services

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New strategy for Cyprus New strategy for Cyprus AirwaysAirways

To enter a strategic alliance To enter a strategic alliance

Exploitation of it’s present to GreeceExploitation of it’s present to Greece

New strategy on the faresNew strategy on the fares

‘Although for Helios Airways the opportunity is to reschedule its flights to destinations that are considered prosperous for the air traffic for example Larnaca-Athens route’

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‘‘A carrier can depart from Stockholm A carrier can depart from Stockholm then to arrive in Athens and then to then to arrive in Athens and then to operate to Crete and to have as a final operate to Crete and to have as a final destination Cyprus.’ destination Cyprus.’

Operation of the 5Operation of the 5thth Freedom right Freedom right

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Impact on the Tourism Impact on the Tourism IndustryIndustry

Significant effect (85%)Significant effect (85%)Accessibility of the Accessibility of the

marketmarketMore flexible airline servicesMore flexible airline servicesIncrease of the incoming tourismIncrease of the incoming tourismDecrease of the tourism package Decrease of the tourism package price due to lower fares which price due to lower fares which accounts for 40%-50% in totalaccounts for 40%-50% in totalGreat effect on the SMEs, having Great effect on the SMEs, having as s result the vertical as s result the vertical distribution of the revenue distribution of the revenue

Insignificant effect (15%)Insignificant effect (15%)DueDue to the to the existence of existence of charter flights charter flights

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‘‘The impact will attributable to the decrease of air fares The impact will attributable to the decrease of air fares because of the competition among the different carriers.’because of the competition among the different carriers.’

‘ ‘ As a positive impact, is considered the increase of tourism As a positive impact, is considered the increase of tourism arrivals which leads in an increase of the country’s arrivals which leads in an increase of the country’s

revenues.’revenues.’

‘ ‘There will be a significant increase in the arrivals from There will be a significant increase in the arrivals from Greece manly because Greek and Cypriot carriers will Greece manly because Greek and Cypriot carriers will

enter the routes of Larnaca-Athens having as a result the enter the routes of Larnaca-Athens having as a result the introduction of lower fares andintroduction of lower fares and an increase in the an increase in the

arrivals.arrivals.’’

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Negative or positive impacts on the Negative or positive impacts on the tourism industrytourism industry

Positive impacts (75%)Positive impacts (75%)Decrease of the tourism Decrease of the tourism packagepackage

Increase of tourism arrivalsIncrease of tourism arrivals

Increase of revenueIncrease of revenue

Increase of independent Increase of independent travellers travellers

Developments of different Developments of different forms of tourismforms of tourism

Negative impacts (25%)Negative impacts (25%)Increase of mass tourism Increase of mass tourism with socio-cultural with socio-cultural problemsproblems

Low spending tourism-Bag Low spending tourism-Bag packerspackers

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CONCLUSIONCONCLUSION

The findings of the study revealed that there The findings of the study revealed that there would be a remarkable impact concerning the would be a remarkable impact concerning the different aspects of the two industries.different aspects of the two industries.

A liberalised environment will force in a sense A liberalised environment will force in a sense the natural development and performance of the the natural development and performance of the airlines and made them able to compete in every airlines and made them able to compete in every aspect of operationaspect of operationFlexibility in the airline industry leads to positive Flexibility in the airline industry leads to positive impact on the tourism industry since Cyprus is impact on the tourism industry since Cyprus is an islandan island

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CONCLUSIONCONCLUSION

The importance of the airline industry on the The importance of the airline industry on the island and the fact that is the most popular island and the fact that is the most popular transport mode leads to the conclusion that a transport mode leads to the conclusion that a liberalised aviation industry will contribute liberalised aviation industry will contribute even further on the development of tourism. even further on the development of tourism. Airline Liberalization should be the Airline Liberalization should be the cornerstone and the motivation for the cornerstone and the motivation for the development of sustainable development of sustainable tourism.Therefore the benefits will be more.tourism.Therefore the benefits will be more.

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Thank youThank you for your attention for your attention!!

Any Questions?Any Questions?