Arab passengers’ airlines framework and performance : Jordan case

Abstract EN

The past two decades have witnessed vivid changes in the air transport services sector.

These changes started in the developed countries, having a drastic effect on the global air transport services sector.

This study performs an ex-post analysis ; investigates the impact of the current passengers’ airlines conduct (e.g.

agreements, alliances etc.) on the performance of the industry (number of passengers, airfares, and welfare) in Jordan.

The estimation result using OLS, 2SLS and GMM- concludes that air liberalization has no effect neither on the number of passengers nor the airfares.

This insignificance can be interpreted by the fact Royal Jordanian has full dominance of the Jordanian air market, having the largest market share.

However, judging on the desirability of openness is the impact on welfare.

Based on the simulation results, increasing competition decreases the total revenue for the producers (as the average airfare has gone down) and increases the consumer surplus.

The net effect of these changes on society welfare is positive ; the consumer surplus increase outweighs the producers’ surplus decrease.

This supports the notion of further liberalization in the air market in Jordan.