Assessing the economic impact of the single African air transport market: The case of Tanzania

Abstract

Tanzania is one of the 21 (out of 54) African countries that are yet to ratify the Single African Air Transport Market (SAATM) launched in 2018 as the first project of the African Union's agenda 2063. SAATM aims to create a single unified air transport market for Africa thereby opening skies across the whole continent and aiding the economic integration agenda. Using the two-stage least squares estimator that is robust to endogeneity bias, this study empirically assesses the economic effects of liberalization of air services between Tanzania and other African countries. The results show that removing restrictions on designation, flight frequency, and capacity for air transport between Tanzania and other parts of Africa would lead to a rise in the number of air passengers. Specifically, the results suggest that between 2010 and 2018, routes linking Tanzania and other African countries that were governed by liberal bilateral air services agreements (BASAs) enjoyed slightly lower fares compared to routes governed by restrictive BASAs. The results also suggest that air travel demand is not very sensitive to fare implying that the increase in the flow of passengers by an average of 16.9% between 2010 and 2018 can be attributed to the enhancement in service quality (as measured by flight frequency), and increased competition resulting from the entry of new players or intensified competition among existing ones. The policy implication of this study might be the need for Tanzania to embrace the SAATM initiative.