Cheaper and faster: The role of air services agreements on transportation

Abstract

Rules of international air transportation services that apply to signatories' airlines are defined by air services agreements (ASAs). We assess the impact of bilateral ASAs on air transportation using an unique data set providing direct observations of bilateral air transport cost and time for a standardised good, for 1190 country‐pairs, between 2011 and 2015. Our results show that ASAs reduce transportation cost by 8% while they only impact transportation time for landlocked countries and Regional Trade Agreements (RTA) members. Our estimates also reveal that bilateral trade decreases cost of transport, which highlights the role of backhauling in air transportation.