Airline passenger traffic openness and the performance of Emirates Airline

Abstract

Abstract This paper uses cross-sectional data for 155 routes connecting Dubai to various international destinations to assess the relationship between air travel openness, representing airline agreements and the framework governing airlines, and the economic performance of Emirates Airline. We find that increased openness is associated with higher enplanement and lower fares. We also find that code-sharing agreements are associated with higher enplanement and higher fares. Given the complementary nature of such agreements for Emirates, this suggests potential collusive behavior. While these findings are specific to Emirates, they are regionally relevant as most carriers in the Gulf operate in an environment that is similar to Emirates's. Thus, further liberalization of the passenger airline markets of UAE and other Gulf carriers – which includes the elimination of code-sharing-related collusive agreements – would likely result in increased expenditure on air travel and lower production costs (from ensuing competitive pressures). Such outcomes can potentially yield net welfare gains for the UAE and other Gulf countries.