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Arab Passengers’ Airlines Framework and Performance: A Cross-Countries Analysis

Khalid Sekkat

No 695, Working Papers from Economic Research Forum

Abstract: The present paper summarizes the findings of four country studies (Jordan, Egypt, Morocco and United Arab Emirates; UAE), which investigated the relationship between the current passengers’ airlines framework and the performance of the sector in the country. Their analyses aimed at investigating the impact of further liberalization on passengers and on welfare. To address this question, the four studies adopted the same analytical framework, which is an extended version of the well-known Structure-Conduct-Performance (SCP) framework. Such a framework has been widely used and debated in the industrial organization literature. It states that the structure of an industry determines firms’ conduct, which, in turn, determines performance. However, the literature suggests that the direction of causality might run in other directions. Hence, our extended version of the framework allows causality go either directions. The analysis shows that Arab countries perform less than the rest of the World and are losing ground in terms of passengers carried although the countries under consideration show a highly contrasted picture. The results suggest that that increased competition decreases fares as well as carriers’ revenue but increases consumer surplus. The net effect on society welfare is positive; the consumer surplus increase outweighs the producers’ surplus decrease.

Pages: 18
Date: 2012, Revised 2012
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