The political economy of why flights are so expensive in Africa

Andrea Goldstein of the OECD emails an old but very interesting paper (ungated here) in response to my post on the AfDB blog about African Airlines.

He makes two points and offers two recommendations

First, in the experience of OECD countries, "liberalisation delivers in terms of quantity, quality, and cost of air transport."

Second, what allowed liberalisation to take place was a political dynamic, driven by interest groups (trade associations and organised consumers) pushing for reform.

So what can or should the OECD do to support policy reform?

One, establish an international authority capable of enforcing safety standards (the ICAO is an obvious candidate).

Two, aid could be used to accelerate the restructuring and privatisation of African airlines.

Neither of these address the issue of opening the skies, which is down to African governments, and African consumers and trade groups to lobby for.

Why are flights in Africa so expensive?

Part of the reason is the lack of competition on so many routes, because countries restrict the rights of airlines from third countries to connect them with other countries - so called "fifth freedom" rights - despite an agreement to do this in 1999.

A comprehensive 2010 World Bank study led by Charles Schlumberger looked at a number of specific examples of what happened when routes have been liberalized in Africa. When the Nairobi-Johannesburg route was fully opened up in 2003, passenger volumes increased 69-fold. When the domestic South African market was liberalized, passenger volumes increased by 80 per cent. On average in the Southern African Development Community (SADC), routes that were liberalized saw fares drop by 18 per cent. The study estimates that full liberalization in the Southern African Development Community (SADC) region would increase passenger volumes by around 20 per cent.

More here (by me) on the AfDB Integrating Africa blog.