Infrastructure
Research
Transportation
Impact from International air service liberalization in Mongolia
12:43 PM
Full liberalization (i.e., “open
skies”) will ultimately have the greatest positive economic impact on Mongolia
and is forecast to produce the results discussed in the study. But there are
political and economic realities that will likely prevent full liberalization
from being adopted immediately. Therefore, immediate adoption of full open
skies may not be practicable. However, maintaining the status quo for air
services would result in the withholding of significant economic benefits for
the citizens of Mongolia.
The impacts of further
liberalization on the Mongolian international air market were estimated using a
gravity model developed by InterVISTAS which forecasts traffic between any two
countries (or groups of countries) based on the two countries’ economic
characteristics, trade levels, geographic relationship and the characteristics
of the air service bilateral between the two countries. By specifying changes
to the terms of the bilateral, the model can be used to estimate the traffic
impact resulting from liberalization.
The long term estimated impacts
of full international bilateral liberalization were:
International traffic to/from
Mongolia increases by 112% within 2-3 years of implementation.
Traffic to/from Asia accounts
for nearly two thirds (65%) of the total projected increase in traffic (China,
South Korea and Other Asia). Many of these Asian markets (notably China) are
projected to achieve high levels of economic growth in the next decade.
Increased air services and air traffic to/from these countries will support
Mongolia further leveraging its own growth through better ties with other
emerging economies. At the same time, liberalization will also stimulate air
service to large, established markets such as Europe and North America.
It is projected that
liberalization will reduce passenger air fares by an average of 42%. Assuming
full liberalization and based on the traffic increases projected in the report,
the total fare savings across all Mongolian air passengers on international
flights is estimated to be US$ 121 Million (MNT 158.4 Billion).
Liberalization is also
projected to increase international air cargo volumes by 62% and increase
domestic air traffic (through onward connections) by 43% to 87%.
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