Supply Chains and Transportation

Does the Middle East need to open its skies?

Russell Hillberry
Senior economist in the Development Economics Research Group, World Bank
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Thirty years ago, most international travel was routed through national “gateway” airports in cities like New York, London or Tokyo.  Someone travelling between secondary cities such as Atlanta and Manchester would typically make two plane changes en route.  Due in part to changes in international aviation policies, travelers from those same secondary cities now have direct flights to many more international locations.

In the Middle East, however, most international air traffic is still routed through gateway cities.  For example, secondary cities in Turkey lack direct flights to Cairo, so travel to Egypt requires a layover in Istanbul. Why is this?  Does it simply reflect a lack of demand for direct flights involving the secondary cities?  Or might it be due, in part, to restrictive policies governing international flights between Turkey and the Arab states?

A role for policy seems quite likely, as many international air service agreements (ASAs) specify that international traffic should be channeled through national gateways.  In the context of the U.S., Cristea, Hummels and Roberson (2014) show that liberalization of US ASAs led to more international travel through secondary cities like Atlanta or Denver.  While they do not look specifically at the question of city-to-city traffic, Piermartini and Rousova (2013)  find important effects of ASA policies on global air passenger traffic.

In Cristea, Hillberry and Mattoo (2014), we estimate a global model of international air travel, paying particular attention to the existence of direct international flights between city pairs.  We use our model to investigate the likely effects of policy changes on international travel in the Middle East.   Our data are from 2010, and we ask what would have been the situation in 2010 if these more liberal policies had been in place:

  1. If policies embedded in the ASA governing international traffic among the Arab states had been more liberal.
  2. If Turkey had been a full member of the more liberal Arab agreement.

We find that both sets of policy changes would have increased international traffic.  The primary channel for increased traffic, in both cases, would be a larger number of city pairs served by direct international flights.

1)      If the ASA among the Arab states were as liberal as the agreement between the UK and Singapore, international traffic in the Arab world would have been 30% higher in 2010.  Travel along existing routes would have been only 5-8% larger; most of the additional traffic would have occurred on direct flights between city pairs that lacked such a flight.

2)      The accession of Turkey to the Arab agreement would imply even larger changes in passenger traffic.  We estimate that these more liberal policies would have doubled passenger traffic between Turkey and the Arab states.  Moreover, these policy changes imply that  the odds of a direct flight between a Turkish city and a city in an Arab state would have been 1.7 to 3 times higher than it was in 2010.

In concrete terms what does this mean?  Consider the case of direct flights between Egypt and Turkey.  In our 2010 data, the only Turkish-Egyptian city-pairs served by direct international passenger flights were Istanbul-Cairo and Istanbul-Alexandria.   Our estimates imply that liberalization of policy between Turkey and the Arab world would have meant additional direct links between Cairo and the secondary Turkish cities of Ankara and Izmir.  Some of our estimates suggest that policy changes would have meant even more new links between Cairo and secondary Turkish cities, including Antalya, Konya and Adana.  Ours is a statistical model, so predictions for specific city pairs should be taken with a grain of salt.  Nonetheless, these specific predictions are illustrative of the model’s aggregate implications: more liberal air policies between Turkey and the Arab world would connect more city-pairs with direct international flights.

This post first appeared on The World Bank’s Let’s Talk Development Blog. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Russell Hillberry is a senior economist in the Development Economics Research Group, Trade and International Integration Team at the World Bank.

Image: An Airbus A350 XWB aircraft flies over Ataturk International Airport. REUTERS/Osman Orsal

 

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