Chapter 2: Airline liberalization in the US
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This chapter reviews the history of aviation liberalization policy in the United States, with the objective of revealing whether competitive opportunities have increased for carriers serving US-international routes. Empirical analysis using US Department of Transportation data at the route level shows routes covered by liberal air service agreement charge fares that are 5.7 per cent lower than fares charged on routes that are not covered by such agreements. Mean findings also show greater frequency of service to passengers and a large number of carriers serving routes covered by these liberal agreements. These findings are consistent with previous research examining welfare gains associated with aviation policies that loosen restrictions on fare setting and entry. Findings from this study are interpreted as suggesting that additional welfare gains are available from negotiating with the remaining countries who have not negotiated more liberal aviation service agreements.

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