Privatization and Deregulation of the Airline Industry

The aviation industry doubles market size every 15 years. This growth is partly determined by changes in government regulations. The present chapter describes how the privatization and deregulation of airline markets has contributed to this development. First, we describe the historic development of the airlines’ regulatory environments and ownerships across countries, regions, and continents. Areas including the United States, the European Union, China, India, the countries of Africa and the South East Asian Nations serve as the representative markets and are discussed in more detail. It is shown that deregulation in the air transport market has become a mainstream development, and that deregulation has changed aviation markets in many positive ways. Deregulation generally led to stronger competition, reduced fares, increased flight frequencies, more connections, and increased passenger numbers. But deregulation is still far from completion, which illustrates the potential for further improvements of aviation markets. Second, we briefly describe the airlines’ privatization development around the world. Many studies showed that public airline ownership can be associated with major financial losses, while private ownership can help to avoid such losses by improving efficiency and increasing revenues. However, a large share of today's airlines is still completely or partly government owned.