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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
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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
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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
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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
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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
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(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
14CLEAR SK IES OVER SOUTHERN AFR ICA
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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
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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
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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
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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%
1CLEAR SK IES OVER SOUTHERN AFR ICA
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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
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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.
20CLEAR SK IES OVER SOUTHERN AFR ICA
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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.
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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%
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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
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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.
24CLEAR SK IES OVER SOUTHERN AFR ICA
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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
25THE ImpACT OF L IbERALISAT ION
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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.
26CLEAR SK IES OVER SOUTHERN AFR ICA
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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.
27THE ImpACT OF L IbERALISAT ION
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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
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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
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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
30CLEAR SK IES OVER SOUTHERN AFR ICA
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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
31 AppENDIx RESEARCH mETHODS
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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%
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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
33 AppENDIx RESEARCH mETHODS
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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
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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.
35 AppENDIx RESEARCH mETHODS
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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
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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