Airlines and Developing Countries: Volume 10

This chapter provides an overview of the century-long economic history of scheduled passenger airlines services in developing countries. Initially there is discussion of what constitutes a developing country and how airlines activities interact with development processes. It is a broad view which compares and contrasts the varying paths civil aviation has taken within different countries and internationally. It offers some insights as to why airlines are where we are today and as to what the future may hold for developing nations.

During the 1920s, military interests in Latin America and international and diplomatic relations gave the impetus to the creation national airlines. In countries like Colombia and Brazil, the technological and commercial approaches of Germany and other Europeans nations influenced the forms airlines took. In the following decade the United States began to exert its influence which was consolidated after the Second World War. The pattern continued until the 1980s and involved strong international regulation, the predominance of publicly owned national airlines, and American technological leadership. Market liberalization then brought about a new scenario involving privatizations of national airlines across the region, intensified competition, and mergers and acquisitions that led to the formation of large carriers. Today, passenger traffic in the region is dominated by two carriers: LATAM and Avianca. Other local airlines remain, often linked to a global alliance member. Air traffic has been grown, with the prospect of further growth after economic recovery flowing the COVID-19 pandemic. Historically, commercial air traffic has adapted to the needs of its vast territory but where institutional changes have played a very important and often decisive role.

This Chapter undertakes an empirical analysis of the relationship between air transport demand and economic growth in Uruguay, Brazil, Argentina, and Chile, using annual data from 1970 to 2019. The results indicate a cointegration relationship between air passenger movements, real exchange rate, and GDP for Brazil and Uruguay, but not for Argentina, while for Chile bivariate cointegration exists. Moreover, exogeneity analysis and impulse response simulations show that in the long run there is a bidirectional causality between transport and economic growth for Uruguay, but for Brazil air transport is not influenced by GDP growth. Air transport is, however, positively affected in the long run by Chile's GDP growth. For Argentina, the probability of causality from air transport to economic growth is low and conversely is not significant.

It is important for stakeholders to understand the driving forces of the aviation industry and economic wellbeing and how these sectors are interconnected. This chapter studies the relationships between the African aviation industry and the economy. It is framed as a causal linkage considering the priority investment sector that enhances the sustainable wellbeing of the society. Analyses were conducted for 38 African countries using time series data from 1981 to 2019. The results show that causal relationships are heterogeneous and context-specific. Four patterns of causal relationships between air travel demand and the economy are identified: unidirectional causality in either directions; bidirectional causality; and indeterminate causal direction. However, the causal direction in any economic or policy-related matter may change with political reforms and changes to economic policy.

This chapter provides an overview of the internal airline market in the Maghreb and examines the determinants of intra-Maghreb air traffic flows. Most accounts of recent developments in the air transport markets in Africa have focused on the Continent as a whole and to some extent on Eastern and Southern African countries. Previous analysis of air transportation in the Maghreb has involved origins and destinations outside of the region. The analysis of domestic and intra-Maghreb traffic shows that the greatest share of traffic is concentrated on routes linking capital cities and commercial centers. Most intra-Maghreb flights are indirect, with some domestic and intraregional flights transferring through European airports. Here, a gravity equation is used to estimate the volume of traffic between Maghreb countries in relation to a wide set of factors. The results suggest that key determinants of air intra-Maghreb air traffic demand are generally in line with findings in other markets, including those involving GDP, fares, conflicts, visa openness, trade, and the quality of airline services.

In the first two decades of the twenty-first century, low-cost carriers grew rapidly in many low- and middle-income economies. In this chapter, we examine the geography and network structure of low-cost carriers in such economies across Asia in 2018. We use these analyses to explore the relationship between budget airlines and economic development. Levels of disposable income and infrastructure adequacy help to account for the significance of low-cost airlines in some middle-income economies. And in turn, these airlines by fostering higher levels of accessibility and personal mobility may help catalyze faster development. However, the environmental externalities associated with aviation, especially atmospheric emissions, raise concerns about the sustainability of this mode. We assess these concerns and focus in particular on the development of low-cost carriers fleets in Asia. We ask whether the acquisition of more fuel-efficient aircraft will ameliorate aviation's environmental impact.

The rapid expansion of low-cost carriers (LCCs) in East and Southeast Asia has brought fierce competition to full-service carriers (FSCs). Competition in the air transport market is at an all-time high, thanks to the ongoing liberalization in air transport in the last several decades. This chapter assesses the efficiency performance of major FSCs in this region. It provides indicative evidence of the close association between FSCs' efficiency, and air transport liberalization and LCCs penetration. Singapore Airlines and Asiana are identified as the star companies in this region for their ability to achieve higher efficiency and, at the same time, report positive growth in productivity.

Here we consider the various ways in which airlines integrate their business activities. The thin markets, long distances, poor infrastructure, and challenging terrain over which many airlines based in developing countries operate can make it difficult to reap the economies of scale, scope, and density that carriers in more developed nations enjoy. There also remain institutional barriers to cross border trade in airline services. As a response to this, airlines from developing regions “cooperate” in a number of ways. This may involve multinational ownership, code sharing, or joint ventures. The rationale for these actions, together with discussion of the outcomes of some of them, is considered here.

The provision of air transport services in small and regional airports is a major concern worldwide as regional aviation is challenged with inadequate revenues. This chapter aims to identify the driving factors for sustaining regional airlines and airports. Nine factors are identified through literature review and expert opinion. Fuzzy-total interpretive structural modeling is used to develop a hierarchical relationship among the factors. Truncated population of the region, national subsidies, and airport infrastructure development have been found to be the strongest drivers for promoting regional airports. This hierarchical model provides a logical structure to the factors.

The low-cost carrier's model made remarkable gains across the globe in the prior decade, although growth was uneven domestically and intraregionally. Within this region, there are significant differences in overall country size, the size of the domestic aviation market, and the number of carriers serving the market. The largest and most developed market is in Russia, but rest of the region also experienced growth in economy airlines' activity as they discovered the power of the model to expand aviation access and lower costs. The success of low-cost carriers, however, has been halting and hampered by government decisions on foreign investment, ownership, and leasing. Still, some carriers have been able to grow and achieve gains over rivals. The recent Russian-Ukrainian war has further complicated the situation.

In recent years, the airline industry has been growing and transforming rapidly in the Asia-Pacific area. This study analyzes and benchmarks the comparative operational efficiencies of the major Asian air carriers. Data envelopment analysis model and disaggregate output efficiency measures are used to evaluate the operational efficiencies of 31 Asian airlines from 2015 to 2019. The findings suggest that nonflag carriers, low-cost carriers, and high-income regions' carriers have significantly higher levels of efficiency than flag carriers, full-service carriers, and low-income regions' carriers in overall, revenue, and passenger traffic efficiencies. The efficiencies between alliance carriers and nonalliance carriers along with those of ASEAN and non-ASEAN carriers are not significantly different.

Air freight transportation is an increasingly important element in the production supply chains of both developed and less-developed countries. This chapter looks at the particular features of air freight transportation that pertain to the developing world. In doing this, it is borne in mind that much of the trade involves international interactions with developed countries and this affects the technology and costs involved. The markets for the transportation of flower products is given particular attention.