Economic implications of EC air transport liberalisation policy on the Maltese economy

Abstract

Malta, being at the periphery of Europe and having limited transport alternatives at its disposal except for sea links, must intensify its efforts in favour of air transport. The issue of opening up our skies is compounded by the fact that Malta is actively seeking EU membership. Whether it results to be beneficial or not to the local economy, Maltese air transport has to be freed if Malta becomes part of the Community. The resulting implications on the Island's economy, when it adopts EU air transport liberalisation policy, is the main theme of this dissertation. The dissertation analyses probable economic effects on the local economic set-up should EC air transport liberalisation programmes be adopted and implemented locally. Attention is given to the fact that Malta's main service industry - tourism- is dependent, to a great extent, on air fares and the operation of air transport in general. We first look at the evolution of the international legal framework within which airlines have to operate and the subsequent movements towards the liberalisation of aviation in the US and Europe. Next, the local air transport structure will be examined from the beginning to the present date. An analysis of the Bilateral Air Service Agreements, that currently govern the local aviation relations with other European countries, concludes this section. We then proceed to test the hypothetical scenario of transposing EU legislation on air transport liberalisation to the local context and trace out the ensuing implications on the economy. Reference is made to the effects EU air transport liberalisation measures will have on such variables as travel and tourism, net foreign exchange earnings, national output and employment. The concluding chapter attempts to propose the ideal way civil aviation in Malta should proceed after taking into consideration the contemporary environmental forces that surround air transportation. An appendix is dedicated to the impact of air transport liberalisation on the demand for inbound traffic. The challenge that lies ahead of us is to strike a balance between the Island's economic requirements and the future development of the local air transport industry. Nonetheless, some factors may complicate this delicate task. Among these is the present world propensity towards regional integration. It is thus imperative that our air transport is acceded to EU liberalisation policy before Malta's eventual membership. The stakes are too high should Malta refrain from participating in this game - even higher in the airline industry.