European airline reform: An empirical welfare analysis

Abstract

This study empirically explores welfare effects associated with bilateral airline liberalisation on European interstate routes. To this end, a sample of 34 routes with varying liberalisation status has been investigated econometrically for the period 1988 to 1992. The estimated fare and frequency equations show that standard economy fares are lower and departure frequencies are higher on fully liberalised routes than on routes without such liberalisation. Welfare calculations based on the estimated demand equation indicate that full bilateral liberalisation has resulted in consumer welfare gains.