Estimating the economic effects of airline deregulation

Abstract

This paper introduces a simple and relatively new approach to analyze the economic effects of airline deregulation. Using this approach, we empirically investigate the (de) regulatory reform initiated in the Turkish airline industry during the 2000s. As an estimation methodology, we employ cointegration test in the presence of structural breaks to account for the effect of (de) regulatory changes. Cointegration test confirms the existence of a long-run relationship among deregulation, prices, and the number of passengers carried by airlines. The analysis of structural breaks suggests that deregulation impacts on prices and the number of passengers through actual competition and the increased accessibility of air travel, respectively.