THE PERCEIVED IMPACT OF WTO (WORLD TRADE ORGANIZATION) ON AIR TRANSPORT SERVICES A CASE STUDY

Abstract

Abstract : This research studied the perceived impacts of the application of the principle of the World Trade Organization (WTO) on the aviation industry in general, and the three areas of Air Transport activities specifically covered by WTO. Services covered by the agreement included: Aircraft Repair and Maintenance, the Selling and Marketing of Air Transport Services, and Computer Reservation System (CRS). To provide an overview, changes in Air Transport industry with regard to competition and industry's pressures, along with World Trade Organization principles, functions and structure were discussed first. To identify those impacts of WTO, this research used multiple-case approach to analyze views of respective officials of five major selected Airline companies. In the empirical section, financial impacts of WTO on five selected companies were quantified for two dimensions: Financial and Operating Structure. After a thorough analysis of five case studies, the following main outcomes emerged from this investigation: In the area of operating costs, most companies expect the overall impact to be positive and there will be a reduction in overall cost. Airline mega companies will be easily able to reduce staff and administrative costs without any restrictions, while few others will try to find ways which are an acceptable to all parties, to do so. For the operations structure, airline companies are expected to seek different motives for changing their operation structure, through regional integration to reduce cost through synergy, transfer of technology and related skills and market access. In the area of profitability, companies expect that the airline will experience moderate increase in profit, but this will be in the long run. In the area of Aircraft Repair and Maintenance Services, airline companies seem to be satisfied with their current policies. Most of the major airlines own facilities for major maintenance and/or contracting out, hence, the perceived change is very limited. Direct Selling and Marketing Air Transport Services: Most airlines expect a significant impact of WTO in this area; the reason being the company will not need to go through agents as is the case in most countries, and this will save the commission payable to the agent. Computer Reservation System(CRS) Services: This area is expected to be affected by WTO. International Civil Aviation (ICAO) is currently reviewing its Code of Conduct and the WTO coverage of CRS is being taken into account so as to avoid any regulatory conflict. There is considerable potential for improvement of the application of the WTO disciplines to the three activities mentioned above. In the area of regulatory regime, most airline companies will try to achieve a sensible and enlightened regime that steers between excessive regulation and destructive laissez-faire so that International Air Transport can continue to function in a safe and orderly manner. And yet, the review process, to begin by the end of this decade, will probably be a better indicator of the WTO member's confidence in the WTO as a regulatory regime for air transport. The implementation of WTO principles will encourage customers to ask for more benefits to be given to them in the form of high quality of services and low prices.