Incremental versus trend-break change in airline regulation

Transportation Journal

Volumn 37, Issue 3, 1998, Pages 24-34

  Button, Kenneth ^a   Johnson, Kirk ^b  

^a GEORGE MASON UNIVERSITY   (United States)

^b NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0039982336     PISSN: 00411612     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (52)

1. Commission of the European Communities (1996) Impact of the Third Package of Air Transport Liberalization Measures, COM(96) 415 Final. An earlier, less detailed report on some of the initial reforms in the EU are contained in Commission of the European Communities (1994) The Way Forward for Civil Aviation in Europe, COM(94) 218 Final.
2. Commission of the European Communities (1996) Impact of the Third Package of Air Transport Liberalization Measures, COM(96) 415 Final. An earlier, less detailed report on some of the initial reforms in the EU are contained in Commission of the European Communities (1994) The Way Forward for Civil Aviation in Europe, COM(94) 218 Final.
3. The EU's report does acknowledge continuing concern over high fully flexible fares, congestion problems, ground handling costs, and the role of airline alliances. See also, Comité de Sages for Air Transport (1994) Expanding Horizons - Civil Aviation in Europe, An Action Programme for the Future, European Commission, Brussels.
4. The incremental regulatory reforms imposed on Canadian aviation also make an interesting comparison with the U.S. case. See K.J. Button, (1989) "Liberalising the Canadian scheduled aviation market: the gradualist approach to deregulation," Fiscal Studies, 10: 19-52.
5. These changes in economic regulation have often been accompanied by tighter social regulations designed to protect the environment and groups in society least able to cope in a commercially driven economy.
6. The developments in Europe have stimulated an extensive literature looking at the merits of different approaches to market liberalization. See J. Bendor, (1995) "A mode of muddling through," American Political Science Review, 89: 819-840; M. Dewatripont and G. Roland, (1992) "The virtues of gradualism and legitimacy in the transition to a market economy," Economic Journal, 102: 291-300; M .T. Hayes, (1992) Incrementalism and Public Policy, Longman, London; H.W. Hoen, (1996) "Shock versus gradualism in Central Europe reconsidered," Comparative Economic Studies, 38: 1-20; G. Roland, (1993) "The political economy of restructuring and privatization in Eastern Europe," European Economic Review, 31: 533-40.
7. The developments in Europe have stimulated an extensive literature looking at the merits of different approaches to market liberalization. See J. Bendor, (1995) "A mode of muddling through," American Political Science Review, 89: 819-840; M. Dewatripont and G. Roland, (1992) "The virtues of gradualism and legitimacy in the transition to a market economy," Economic Journal, 102: 291-300; M .T. Hayes, (1992) Incrementalism and Public Policy, Longman, London; H.W. Hoen, (1996) "Shock versus gradualism in Central Europe reconsidered," Comparative Economic Studies, 38: 1-20; G. Roland, (1993) "The political economy of restructuring and privatization in Eastern Europe," European Economic Review, 31: 533-40.
8. The developments in Europe have stimulated an extensive literature looking at the merits of different approaches to market liberalization. See J. Bendor, (1995) "A mode of muddling through," American Political Science Review, 89: 819-840; M. Dewatripont and G. Roland, (1992) "The virtues of gradualism and legitimacy in the transition to a market economy," Economic Journal, 102: 291-300; M .T. Hayes, (1992) Incrementalism and Public Policy, Longman, London; H.W. Hoen, (1996) "Shock versus gradualism in Central Europe reconsidered," Comparative Economic Studies, 38: 1-20; G. Roland, (1993) "The political economy of restructuring and privatization in Eastern Europe," European Economic Review, 31: 533-40.
9. The developments in Europe have stimulated an extensive literature looking at the merits of different approaches to market liberalization. See J. Bendor, (1995) "A mode of muddling through," American Political Science Review, 89: 819-840; M. Dewatripont and G. Roland, (1992) "The virtues of gradualism and legitimacy in the transition to a market economy," Economic Journal, 102: 291-300; M .T. Hayes, (1992) Incrementalism and Public Policy, Longman, London; H.W. Hoen, (1996) "Shock versus gradualism in Central Europe reconsidered," Comparative Economic Studies, 38: 1-20; G. Roland, (1993) "The political economy of restructuring and privatization in Eastern Europe," European Economic Review, 31: 533-40.
10. The developments in Europe have stimulated an extensive literature looking at the merits of different approaches to market liberalization. See J. Bendor, (1995) "A mode of muddling through," American Political Science Review, 89: 819-840; M. Dewatripont and G. Roland, (1992) "The virtues of gradualism and legitimacy in the transition to a market economy," Economic Journal, 102: 291-300; M .T. Hayes, (1992) Incrementalism and Public Policy, Longman, London; H.W. Hoen, (1996) "Shock versus gradualism in Central Europe reconsidered," Comparative Economic Studies, 38: 1-20; G. Roland, (1993) "The political economy of restructuring and privatization in Eastern Europe," European Economic Review, 31: 533-40.
11. Outside of transport this was a demonstrable problem with the privatization of the UK energy sector. See, K.J. Button and T. Weyman-Jones. (1994) "The impacts of privatisation policy in Europe," Contemporary Economic Policy, 12: 23-33.
12. T. Keeler, (1984) "Theories of regulation and the deregulation movement," Public Choice, 3: 399-424.
13. Air freight transport had been the subject of liberalizing reforms in the previous year.
14. S. Borenstein, (1992) "The evolution of U.S. airline competition," Journal of Economic Perspectives, 6: 45-73.
15. EEC Commission (1961) Memorandum on the General Lines of a Common Transport Policy, EEC, Brussels.
16. Fifth freedom rights allow an airline of one country to carry traffic between two countries outside of its own registry as long as the flight originates or terminates in its own country of registry.
17. S.D. Barrett, (1990) "Deregulating European aviation - A case study," Transportation, 16: 311-27.
18. Association of European Airlines (1995) EU External Relations, AEA, Brussels.
19. K.J. Button and D. Swann, (1989) "European Community airlines - deregulation and its problems," Journal of Common Market Studies, 27: 259-282.
20. Commission of the European Communities (1979) Contribution of the European Communities to the Development of Air Transport Services, Bulletin of the European Communities, Supplement 5, Brussels; Commission of the European Communities (1984) Towards the Development of a Community Air Transport Policy, Civil Aviation Memorandum No. 2, COM(84) 72 Final Brussels.
21. Commission of the European Communities (1979) Contribution of the European Communities to the Development of Air Transport Services, Bulletin of the European Communities, Supplement 5, Brussels; Commission of the European Communities (1984) Towards the Development of a Community Air Transport Policy, Civil Aviation Memorandum No. 2, COM(84) 72 Final Brussels.
22. D. Vincent and D. Stasinopoulos, ( 1990) "The aviation policy of the European community," Journal of Transport Economics and Policy, 24: 95-100, 1990.
23. For more details see K.J. Button and D. Swann, (1992) "Transatlantic lessons in aviation deregulation: EEC and U.S. experiences," Antitrust Bulletin, 37: 207-255; K.J. Button, (1992) "The liberalisation of transport services," In D. Swann, (ed.), 1992 and Beyond, Routledge, London.
24. For more details see K.J. Button and D. Swann, (1992) "Transatlantic lessons in aviation deregulation: EEC and U.S. experiences," Antitrust Bulletin, 37: 207-255; K.J. Button, (1992) "The liberalisation of transport services," In D. Swann, (ed.), 1992 and Beyond, Routledge, London.
25. Commission of the European Communities (1985) Completing the Common Market, COM(85)310 Final, Brussels.
26. D. Stasinopoulos, (1992) "The second aviation package of the European community," Journal of Transport Economics and Policy, 26: 83-87.
27. D. Stasinopoulos, (1993) "The third phase of liberalisation in community aviation and the need for supplementary measures," Journal of Transport Economics and Policy, 27: 323-328.
28. K.J. Button, K. Haynes, and R. Stough, (1998) Flying into the Future: Air Transport Policy in the European Union, Edward Elgar, Cheltenham.
29. A. Midttun, (1992) "The European market for aviation: a sociological inquiry into the political economy of a complexly organized market." Journal of Economic Issues, December: 1063-1094.
30. UK Civil Aviation Authority (1993) Airline Competition in the Single European Market, CAF 623, CAA, London.
31. R. Pryke, (1987) Competition among International Airlines, Thames Essay 46, Trade Policy Research Centre, London.
32. United Nations, International Civil Aviation Organisation (1988) Civil Aviation Statistics of the World, ICAO, Montreal.
33. H. Meersman and E. van de Voorde, (1996) "The privatisation of air transport in Europe: interaction between policy, economic power and market performance," Built Environment, 22: 177-191.
34. K.J. Button, (1996) "Aviation deregulation in European Union: do actors learn in the regulation game?." Contemporary Economic Policy, 14: 70-80. The EU also has the experiences of extensive liberalization of other transport markets to draw upon. See K.J. Button and T. Keeler, (1993) "The regulation of transport markets," Economic Journal, 103: 1017-28.
35. K.J. Button, (1996) "Aviation deregulation in European Union: do actors learn in the regulation game?." Contemporary Economic Policy, 14: 70-80. The EU also has the experiences of extensive liberalization of other transport markets to draw upon. See K.J. Button and T. Keeler, (1993) "The regulation of transport markets," Economic Journal, 103: 1017-28.
36. For an examination of the uncertainties confronting the U.S. regulators prior to 1978 see A.E. Kahn, (1988) "Surprises of airline deregulation," American Economic Review, Papers and Proceedings, 78: 316-22.
37. J. Dutheil de la Rochère, (1994) "European Community policies on airline concentration," Journal of Air Transport Management, 1: 103-107.
38. UK Civil Aviation Authority (1995) The Single European Aviation Market: Progress So Far, CAP 654, CAA, London.
39. R. Pryke (1991) "American deregulation and European liberalisation," in D. Banister and K.J. Button, Transport in a Free Market Economy, Macmillan, London.
40. There is a more technical issue concerned with the usefulness of simply looking at the number of carriers on a route. The degree of competition when there is one carrier with 95 percent of a market and two carriers sharing the remaining 5 percent is unlikely to differ significantly from a monopoly. (Use of more technical measures of market concentration that allow for such effects [e.g., Herfindahl indices] reveal significant increases in (e.g., S.A. Morrison and C. Winston, [1995] The Evolution of the Airline Industry, Brookings Institution, Washington) competition on routes in the U.S. since 1978, albeit with some cyclical ups and downs.) Comparable work for the EU is still to be conducted.
41. See also R. Caves, L. Christensen, M. Tretheway: and R.J. Windle, (1987) "An assessment of the efficiency of U.S. airline deregulation via an international comparison," in E. Bailey, (ed.), Public Regulation: New Perspectives on Institutions and Policies, MIT Press, Cambridge.
42. F. MacGowan and P. Seabright, (1989) "Deregulating European airlines," Economic Policy, 4: 283-344.
43. C. Ng, and P. Seabright, (1995) "Regulation, competition and cost efficiency of European flag carriers," paper to the New England Conference on Efficiency and Productivity, Armidale.
44. T.H. Oum, and C. Yu, (1995) "A comparative study of the cost competitiveness of the world's major airlines," in T.H. Oum. (ed.) Airline Economics and Policy: Selected Papers of Tae Hoon Oum, Korean Research Foundation for the 21st Century, Seoul.
45. The EU criteria essentially involve assessing whether a state-owned carrier would, if privately owned, have been able to raise finance equal to the subsidy on the free market. Limited subsidies may also be given on grounds similar to those laid down under the ESP system in the U.S.
46. Technically, X-inefficiency exists when producers, usually due to a lack of commercial incentive, do not produce on their lowest attainable cost curve.
47. D. Encaoua, (1991) "Liberalizing European airlines: cost and factor productivity evidence," International Journal of Industrial Organinition, 9: 109-24; D.H. Good, L.H. Röller, and R.C. Sickles, (1993) "U.S. airline deregulation: implications for European transport," Economic Journal, 103: 1028-1041.
48. D. Encaoua, (1991) "Liberalizing European airlines: cost and factor productivity evidence," International Journal of Industrial Organinition, 9: 109-24; D.H. Good, L.H. Röller, and R.C. Sickles, (1993) "U.S. airline deregulation: implications for European transport," Economic Journal, 103: 1028-1041.
49. The Herfindahl index of U.S. domestic airline industry concentration went from 0.106 in 1977 to 0.093 in 1982 to 0.123 in 1987. See, Borenstein op cit.
50. P. Hanlon, (1996) Global Airlines: Competition in a Transnational Industry, Butterworth-Heinemann, London.
51. Even if the EU market is more resilient to economic cycles this may be due to new institutional arrangements such as alliances rather than being an inherent property of incrementalism. See, K.J. Button, (1996) "Liberalising European aviation: is there an empty core problem?." Journal of Transport Economics and Policy, 30: 275-291.
52. K.J. Button, (1997) "Lessons from European transport experience," Annals of the American Academy of Political and Social Science, 553: 157-167.