Benchmarking data and analysis

Following from the graph theoretical approach that the study adopted as the conceptual framework, the starting point for collection of data for benchmarking was the construction of the real-world airline networks for the three regions of SADC, ASEAN and MERCOSUR. These networks were derived from direct (non-stop) scheduled flights between the airports that the study established as the significant nodes in each member state of a region. The real-world networks were then abstracted as graphs. The graph theoretic measures the study elected to adopt from the literature review chapter were used as the common metrics on which SADC’s efforts at liberalisation were benchmarked. The objective of benchmarking is satisfied by comparing, in graph theoretic language, network efficiency gains achieved by the anomalar and the two exemplar networks, between onset of reforms and April 2011. The distinction between effective and ineffective strategy execution centred on the extent of the transformative effect of liberalisation on each of the three regional networks as judged by the four graph theoretic measures of;

 Connectivity

 Accessibility

 Circuity

 Market concentration

The analysis was carried out quantitatively as follows:

 Connectivity was assessed on the basis of improvements towards maximally connected graph and route length per airport

 Accessibility was measured by reduction in number of steps or distances

 Circuity was assessed by the reduction in degree of circuity

 Market concentration was analysed on the basis of a guideline that classified concentration ratios into three categories of low, moderate and

high. The modalities of how the scales were developed are expounded in chapter 5.

4.5.1.1 Sources of data for benchmarking

Data for the construction of networks was gathered from the OAG. The OAG is a statistical database that contains information on scheduled flights of all airlines. It provides, inter alia, information on the number of flights scheduled by operating carriers between airport pairs each day and the number of seats these flights provide. This provides adequate measures for flight frequency between city pairs. Grubesic et al (2008) argue that airline schedule data remains the most complete source of network connectivity information available for analysis. The data also distinguishes service provision between the designated airline (operator) and the carrier actually providing the service (partner). Another important feature is that it classifies the nature of flight operations in accordance with the commercial agreements on the routes. The flights are categorised as regular, code-share or leased space.

This study only considered those flights offered by carriers owned within each region. Where the OAG database yielded intra-regional routes with flight connections offered by carriers based outside a region, the existence of commercial agreements (e.g. code-shares) were used to determine the inclusion of such services in the analysis. For SADC, non-SADC African carriers using fifth freedom traffic rights to operate in the region were included in the analysis. This is because the provisions of the YD allow these airlines to sell tickets for the intra-SADC sectors they operate. This affected routes served by Ethiopian Airlines (ET) and Kenyan Airways (KQ). For non-African airlines such as Air Portugal (TP), their regular flight operations were not counted as intra- SADC connections as the YD applies to African carriers only and non-African carriers are not able to market intra-SADC flights.

As a market concentration ratio, the HHI is based on actual passenger numbers carried by each airline on a route. This data is not readily available. Data sets on flight operations and seat capacity that are available from the OAG database

could be used as surrogate indicators of market share. Flight frequencies instead of seat capacity formed the basis on which the HHI was calculated. This decision stemmed from the likely distortions that the diversity of aircraft sizes used on the routes would cause in such calculations

4.5.1.2 Assumptions on regional community membership

To facilitate comparison across the study, this research assumed all current member states to have had full membership for the whole period under review (July 1998 to April 2011). Madagascar, as a result of this rule, though not a SADC member in July 1998 was counted as a member. The rule was also applied to associate members and pending applications for membership in the MERCOSUR. Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela were therefore treated as members in the analysis of MERCOSUR. The motivation for applying this rule was the need to eliminate complications in calculating and assessing network changes. As the study uses a graph as a unit of analysis, changing number of nodes would create complications in interpretation of results over the period under review.

4.5.1.3 Better practice data in exemplary regions and analysis

The identification and documentation of better practice in exemplary regions was done qualitatively by reviewing literature on liberalisation in ASEAN and MERCOSUR. The study made use of secondary sources of data. The main sources of evidence were;

 Peer reviewed published academic work on the two regions

 IATA commissioned studies on liberalisation

 ICAO-based analysis

 Technical reports from the World Bank

 Online secretariat reports from the ASEAN and MERCOSUR regions.

The study also made use of audited financial statements of those airlines that are listed on the stock exchange such as Singapore Airlines, GOL and LAN

Chile. The management reports contained in these audited statements were considered a rich source of qualitative data as they provided an insight into the gains of liberalisation from the perspective of key participants on the two regional air transport markets.

The analysis of what constitutes better practice was carried out qualitatively and it was structured around four thematic issues that are widely acknowledged as facilitators of improvements in air service provision. These are the;

 Nature of traffic rights that exist within the region particularly the granting of fifth freedom traffic rights

 Extent of private sector participation in the regional air transport market

 Existence of operational competition regulations

 Strategic health of the airlines that serve the regional market