Introduction

The emergence of International trade on the world arena has seen the introduction of bilateral and multilateral agreements in many sectors of the world economy. In the tourism sector for example, many believe that such agreements will help expand the benefits of this already viable sector. One of these agreements is the  much talked about liberalization of air services which proponents have been quick to hail not only an economic catalyst  but a spur for even more travel. What a laugh!!

Original article: “Economic Impact of Air service Liberalization” by Intervistas consultants – Commissioned by IATA (June 2006)

Essay by David Ekesong
Master in Tourism Destination Management Student 2008/2009

According to this article, bilateral agreements in the aviation industry have a long history of increasing travel flows.  As a result a multilateral agreement will bring about even a much bigger flow. Such a travel flow at a time when the tourism sector is already seeing a certain degree of exponential growth will mean that countries will see enormous economic benefits as a result of  increased visitation. In addition,  they argue that new airline services coming into destinations as a result of liberalization can lead to changes in the underlying structure of the regional economy by creating new capabilities, and forming a different set of transactor expectations. These reactions can literally create new industries in a region, and allow the area to compete for economic opportunities throughout the world. While this might be so, in my opinion however, they completely neglect the  demerits of such an enormous degree of liberalisation.  For example,trade in tourism services is characterised by disparities in the share of business and distribution channels between tourist sending and receiving countries. Much of the economic and political power in the tourism industry including aviation is held by developed countries. Anti-competitive practices, such as restrictions on the movement of persons, limit the potential benefits of  half-baked liberalisation , particularly for developing countries who will surely see their flag carriers crumble in the wake of fierce competition from bigger and more viable airlines. In addition, while their simulated cases clearly show a marked difference in travel flow between pre-liberalization and post-liberalization, their results are based on case studies that already have quite an impressive number of visitation and thus completely neglecting emerging destinations that will also undoubtedly be affected by such an air service multilateral agreement.