論文

The Analysis of Air Service
Liberalization in Kyrgyzstan:
Measuring the Degree of Liberalization
and Impact to Passenger Traffic Flow
Beishenaliev Kanatbek

I. Introduction
The impact of air transport on economic development is considerable. Air
transport is a vital factor that affects trade, tourism, and other significant
sectors of the economy (IHLG, 2019, p.7). In the era of the expansion of themarket economy, air transport plays a crucial role in connecting states into
global markets in a timely and effective way. The air transport industry's
economic impact reached around USD 2.7 trillion; that is 3.6% of global GDP(Airbus, 2019, p.3). Also, the air transport industry supports around 65.5 million
jobs worldwide (IHLG, 2019, p.7; Airbus, 2019, p.3).
As globalization has progressed, air traffic flow has doubled every fifteen
years and continues to increase. The World Bank identified that air traffic
reached around 4.23 billion passengers (WB, 2020). Furthermore, about 58
million tons of cargo were carried by air transport globally in 2018 (IHLG, 2019,p.6). These endeavors included tourists and labor, commodities and goods,
businesses, and investors worldwide.
As many countries recognized the significance of air transport for economic
growth, they have attempted to liberalize their air services over the last several
decades (Arvis et al., 2011). This deregulation is generally called “Air Service
Liberalization.” (ICAO, 2015). The International Civil Aviation Organization(ICAO) defines this liberalization as follows:
It is a process of entering into agreements generally known as liberalized
air agreements characterized by more generous market access, minimal (ifany) capacity regulation, and significantly reduced governmental controls
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on air carrier pricing. Some include other liberalizing provisions andm a t t er s s u ch a s ch ar t er f li ght s, all-c argo ser vi ce s, an d comp ut er
reservation systems. (ICAO, 2018, p.II-3-2).
To promote this direction, the ICAO has initiated the liberalization policy for
all signatories and sets air service liberalization from traditional to transitionaland full liberalization.1
As many previous studies have indicated, air service liberalization significantly
impacts transport development, which is an engine for expanding trade andother related domains of the economy. Some scholars have argued that airservice liberalization leads to an increase in new air services and reduces fares,
promoting air traffic growth and connectivity, bringing about the developmentof the economy and creating new jobs (InterVISTAS-ga, 2006, pp.86-89). The
study of Piermartini et al. (2008) proved a proximate and notable effect of airservice liberalization on air traffic flow. Implementation of a semi-liberal air
service regime leads to passenger traffic growth by 30 percent, but full
liberalization type of bilateral air service agreements (BASAs) could increase
the air passenger traffic between BASA signatory states by up to 78 percent.
Furthermore, there is a direct relationship between airfares and air traffic;
empirical studies of air service liberalization between 1990-2014, depending on
the period of market research, indicate that fares on some routes fell by 10%40% while air traffic jumped around by 18%-75%. Meanwhile, the growth of air
traffic by 16 percent led by liberalization would generate additional employmentof approximately nine million jobs in the air transport industry and tourism
supported by aviation, worldwide (InterVISTAS, 2015, p.60). Estimating
economic benefits, a study made in 2006 shows that each 10 percent rise ininternational air service made a significant increase in GDP by 0.07 percent(InterVISTAS, 2009, p.ii).
I n this context , the United States was the first state that started to
implement such liberalization. Deregulation reform for the international airtransport market began in 1978 in the USA. Since 1992, it pioneered the socalled “open skies” policy with partner states. 2 In theory, this policy enables the
air carriers of signatory countries to operate international flights on a bilateralbasis with the principle of the 5th and 6th freedom rights toward the free airtransport market. 3 On the other hand, the EU also adopted air service
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The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flowliberalization in 1987 and fully implemented it by 1997. As a result of air service
reforms in the EU, competition in air transport increased and led to the declineof airfares up to 34 percent, which caused a growth in passenger traffic flow by
108 percent. Similarly, the United States deregulation reform led to growth in
the air transport market (InterVISTAS-EU, 2009b, p.9).
The US and EU experiences of air service liberalization inspired many
countries to implement such reform and promote competition between air
carriers. This reform has become extremely important for developing states in
the Commonwealth of Independent States (CIS), where lands exist between theadvanced economies of the EU and those of East Asia, since the reform has thepotential to open access to markets, increasing economic growth opportunities.
As one of the landlocked developing economies and the country that has thelowest air connectivity performance among the humble and lower-middleincome transitional economies in the region (Figure 1), Kyrgyzstan has paid
attention to liberalization needs.
Indeed, air passenger traffic is highlighted in this study due to its significancefor landlocked economies and connectivity. In particular, air passenger transport

Figure 1. Correlation Between Air Connectivity Index and Economic Size of Small
Landlocked Economies in CIS (KGZ - Kyrgyzstan, MLD - Moldova, TJK - Tajikistan,
UZB - Uzbekistan)
Source: The author, based on the following data:
1）“GDP per capita (current US$) - Kyrgyz Republic, Moldova, Uzbekistan, Tajikistan,”theWorld Bank Data, 2019 from https://data.worldbank.org/indicator/NY.GDP.PCAP.
CD?locations=KG-MD-TJ-UZ. (Accessed 10 August 2020).
2）“The Air Connectivity Index,”Arvis et al. (2011) from http://documents1.worldbank.org/
curated/en/859151468161649899/pdf/WPS5722.pdf. (Accessed 10 August 2020).

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increases connectivity with other states and markets (Arvis et al., 2011, p.24). It
also facilitates the development of the tourism sector and sets up and maintains
business and trade relationships between markets that are essential fordeveloping and remote economies (ATAG, 2018, p.16). Furthermore, around 50
percent of all air cargo is carried by passenger flights rather than by cargoplanes (Bowen, 2020).
The major objective of this article is to measure the impact of air service
liberalization on air passenger traffic in Kyrgyzstan. To fulfill the abovementioned objective, the degree of air service liberalization of a country will bemeasured to examine how liberalization reflects on passenger flow. In thiscontext, since the regimes of market access are ref lected in air service
agreements, this study, first, will examine how Kyrgyzstan's BASAs are
structured.
Significance of this study lies in the hypothesis of applicability of theory of
Piermartini et al. (2008) to small landlocked economies in the CIS. Particularly,
they observed more than 2000 BASAs of 184 states and estimated that theliberalization of agreements from 25th to 75th percentile between states linked
by direct air service leads to air-passenger traffic growth by around 30 percent(Piermartini et al., 2008, p.5). In this context, the author argues that thetheoretical model of Piermartini et al. (2008) can also be valid for Kyrgyzstan
and small landlocked economies in the CIS.
To pursue the objective of study, in this article the quantitative method of
research is applied. This methodology includes two approaches. First, theQuantitative Air Services Agreements Review (QUASAR) proposed by the
WTO S ecret a r iat ( WTO, 2 0 0 6a) to measure t he deg ree of a ir ser v ice
liberalization is implemented. Second, the Gravity Model is employed to examine
whether the results of the theoretical model of Priermartini et al. (2008) can beapplied to Kyrgyzstan and similarly to small landlocked economies in the CIS.
This analysis is made in the fourth section as Modeling Impact of Air Service
Liberalization to Passenger Traffic Flow.
The rest of this article is structured as following: the second section contains
the explanation of bilateral regulation structure; the third section is about airservice liberalization in Kyrgyzstan and its degree of liberalization; the fourth
section describes the impact of liberalization to passenger traffic flow in
Kyrgyzstan. The final part of this article provides conclusion remarks on this28

The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow

research.

II. Air Service Regulation Structure
Today, air transport is one of the most regulated industries worldwide(OECD-ITF, 2019, p.11). Although air travel began in the 1920s, the debate overwhether civil aviation should be regulated arose in the mid-1940s. Created in1944 by the Chicago Convention on International Civil Aviation (here and afteras the Chicago Convention), under the UN's auspices, the International Civil
Aviation Organization (ICAO) develops standards and recommended practices
in the field of civil aviation. ICAO's main objectives, referred to in Article 44 of
the Chicago Convention, are to ensure the orderly and efficient operation of the
air industry around the world to meet the needs of the population for safe,
regular international air transport (ICAO, 1944). Today, 193 states are registeredas ICAO Member States (ICAO, 2019), and the central fundamental principle of
the Chicago Convention is the recognition of contracting states, where eachstate has full sovereignty over its air space (including water). Therefore, toharmonize air service regulation and perform international flights safely
worldwide, the ICAO has created the basis for air service regulation (OECDITF, 2014, p.13).
The fact is that ICAO does not control and supervise the negotiations andconsultations between states. It only recommends the states draft the air
ser v ice ag reements' texts followi ng t he ICAO Template A ir S er v ices
Agreements. It calls all member-states to register with ICAO all signed airservice agreements and amendments to that (ICAO, 2018, p.II-3-4). Indeed, thisICAO Template framework is the comprehensive text of air service agreements,
which provides traditional, transitional, and full liberalization approaches,
optionally. Therefore, each state is responsible for deciding what content andconditions to include in the agreements.
The agreements usually contain the requirements, the framework, and airservice performed between the countries, including the air transport market
access. In this context, the air transport market refers to the actual andpotential volume of passengers and goods carried by air on the routes between
a pair of cities, markets [airports] of pair states, pair of regions, or global market(ICAO, 2018, p.IV-2-1). In other words, air transport market access means the
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character and set of fundamental rights that are granted to air carriers by theauthorized bodies of states. In this sense, the level of market access is definedby how the states give or limit air carriers with the rights to access themarket.
So, the right of access to the market includes a combination of the following
key rights: Right for creation (the ability to create carriers on the territory of
the states by foreign individuals or legal entities); Route right (the right to fly on
the certain order of a party, agreed geographical described routes); Operationalright (the right to perform certain types of transportations by a certain airline
or airlines to the territory of another state, by certain types or capacities ofaircraft); Overflight right (the right that grants air carriers of one state to
overfly without landing over the territory of another state, or 1st freedom ofair); Technical stop right (means the right granted to a carrier of one state toland with non-commercial purposes in another country's territory, or 2 nd
freedom rights); and Traffic right (the right which includes a combination ofownership to the route and operation, including the right to transport theagreed products and passengers, 3rd-9th freedom rights) (ICAO, 2018, pp.IV-2-1 IV-2-19).
In fact, each state negotiates with the other government(s) over air service
agreement contents. Indeed, in international air transport, a set of market
access rights is the subject of bilateral consultations between the states, which
is more common. In contrast, a multilateral structure of agreements (between
three or more countries) is rarer than bilateral regulation, but usually more
liberal (OECD-ITF, 2019, p.21). In this sense, states frequently use the structureof bi latera l or mu lt i latera l ag reement s , wh ich i nclude t he proces s of
consultations for exchange of the preferences and benefits of relevant sets ofrights mentioned above.
As mentioned in the previous section, there are three types of approaches inthe signing of the air service agreement described in ICAO Manual on theRegulation of International Air Transport: one is traditional, and the others aretransitional and full liberalization (ICAO, 2018, p.II-3-2). Unfortunately, airtransport remains protectionist worldwide. As of 2015, among 2260 registered
air service agreements of the 173 states contained in the ICAO World Air
Services Agreements (WASA) database, there were 2190 traditional agreements(82%), 320 - transitional agreements (12%), and 147 full liberalization agreements
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The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow(6%) (ICAO, 2015).
However, the numbers of such liberalized agreements and amendments havecontinued to increase. As a matter of fact, ICAO indicates the increasing
numbers of clauses regarding air carriers' fair competition to operate airservices and refers preventative practices of unfair competition in air service
agreements and amendments (ICAO, 2015), and calls the states:to the extent feasible liberalize international air transport market access,air carrier access to international capital and air carrier freedom to
conduct commercial activities. (ICAO, 2017, p.2-19).
The following sections will a na lyze if the a rg ument that a ir service
liberalization policies conceivably may open access to markets, increasing
economic growth opportunities is valid in the case of Kyrgyzstan.

III. The Analysis of Bilateral Regulation and Degree of Air
Service Liberalization in Kyrgyzstan
3.1. Background of the Kyrgyz Republic
Kyrgyzstan is a relatively new state which faces economic challenges. It
gained independence from the USSR on August 31, 1991. Kyrgyzstan is one of
the smallest countries in the region, with a population of 6.5 million (WB, 2019).
Today, the country is listed among the lower-middle-income countries; its GDP
reached USD 8.455 billion (GDP per capita USD 1309.4) in 2019 which increasedby 76 percent compared to 2010 (WB, 2019). It is the second-lowest income state
among former USSR states (WB, 2019).
Due to Ky rg yzst a n's geog raph ic remoteness , it has fewer econom ic
opportunities than non-landlocked states due to higher trade and transport
costs and a limited integration degree into well-developed global markets. Vastand high mountains dominate a landlocked Kyrgyzstan’s terrain; around 94
percent of its territory is mountains. Significantly, landlocked countries'
transport costs are higher, on average 50% compared to non-landlocked
developing states. Consequently, landlocked states' export potential is lower, andon average, accounts for 60% of the average country's trade volume that hasaccess to open sea (WB-UN, 2014, p.2). The tourism industry which facilitates
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the economy is less competitive due to higher transportation costs, as well.
Thus , si nce Ky rg yz st a n ha s no d i rect acces s to t he sea a nd ha s a n
undeveloped ra ilway system, a ir tra nsport is a crucia l element for its
transportation system and economy, since it is facilitating the flow of people,
goods, and investment. Today, the air transport and tourists arriving by air
support around 36000 jobs. Also, in total, around USD 198 million, which is 2.4
percent of Kyrgyzstan's GDP, is supported by air transport and tourists arriving
in Kyrgyzstan by air transport (IATA, 2020).
Table 1. Low and Lower Middle-Income Landlocked Economies of Former USSR
1

2

3

4

5

6

7

State

Popul
ation,
millionGDP
percapita,USD(2018)

Incomegroup

ACIranking

Internatio
nal
tourism
arrivals,million

TTCI
score
2019

8

9

Kyrgyzstan

6.45

1,309.4

Lowermiddle
income

127

0.423

3.2

110

515.1

8.3

Moldova

2.65

4,498.5

Lowermiddle
income

36

0.16

3.3

103

458.7

7.3

Tajikistan

9.32

8,70.8Lowincome

118

1.035

3.3

104

165.3

6.3

Uzbekistan

33.58

1,724.8

Lowermiddle
income

120

5.346

n/a

n/a

1,550.9

4.5

TTCI Internatio
ranking nal visitor
impact,USD
million(2019)

10
Contributionof travel andtourism toGDP, %

Source: The author, based on the following data:
Compiled by the author, based on the following data:
1）“Population, total - Kyrgyz Republic, Moldova, Tajikistan, Uzbekistan,”the World Bank Data,
2019 from https://data.worldbank.org/indicator/SP.POP.TOTL?+locations=KG-MD-UZTJ&locations=KG-MD-TJ-UZ. (Accessed 10 August 2020).
2）“GDP per capita (current US$) - Kyrgyz Republic, Moldova, Uzbekistan, Tajikistan,”theWorld Ba nk Data , 2 019 from https: //data .worldba nk .org /indicator/ N Y.GDP. P CA P.
CD?locations=KG-MD-TJ-UZ. (Accessed 10 August 2020).
3）“Low-Income Economies [29],”“Lower-Middle Income Economies [50],”the World Bank, 2019from https://datahelpdesk.worldbank.org/knowledgebase/articles/906519 -world-bankcountry-and-lending-groups. (Accessed 10 August 2020).
4）“The Air Connectivity Index (ACI) 2007,”Arvis et al. (2011, p.43) from http://documents1.
worldbank.org/curated/en/859151468161649899/pdf/WPS5722.pdf, (Accessed 10 August2020).
5）“I nternationa l tourism, number of arriva ls - Kyrg yz Republic, Moldova , Tajikista n,
Uzbekistan,”the World Bank Data, 2018 from https://data.worldbank.org/indicator/ST.INT.
ARVL?locations=KG-MD-TJ-UZ. (Accessed 10 August 2020).
6）“The Travel & Tourism Competitiveness Report 2019,”WEF (2019, p.viii) from http://www3.
weforum.org/docs/WEF_TTCR_2019.pdf. (Accessed 10 August 2020).
7）“Economic Impact Report,”(2020 Annual research: Key highlights - for Kyrgyzstan, Moldova,
Tajikistan, and Uzbekistan), the World Travel&Tourism Concil, 2020 from https://wttc.org/
Research/Economic-Impact. (Accessed 10 August 2020).

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The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow

Indeed, as a landlocked economy, the country has been faced with challengesof air connectivity. According to research by Arvis et al. (2011), the Kyrgyz
Republic was ranked as 127th (Table 1, column 5) among 200 countries andterritories in terms of Air Connectivity Index (ACI). For instance, otherlandlocked low and lower-middle-income former USSR economies were ranked
as following: Moldova - 36th, Tajikistan - 118th, and Uzbekistan - 120th (Arvis etal., 2011, p.43). Notably, the ACI indicates the connectivity of the country to therest of the world. Thus, the position [score] of the ranking is smaller if thecountry is better connected by air service to many other countries worldwide
and the international air transportation costs are relatively low. Among the CIS
states with small economies, Kyrgyzstan has fewer individual nodes in their airtransport network. Thus, it has a lower ACI index, as shown in Figure 1.
The other issue related to economic growth in developing countries is tourism
competitiveness. As shown in Table 1, Kyrgyzstan has the worst Travel andTourism Competitiveness Index (TTCI) compared to similar states, meaningthat the country is less competitive than other low and lower-middle-income
economies in the region. As shown in Table 1 (columns 7 and 8), Kyrgyzstan
ranks as 110th in terms of TTCI (WEF, 2019, p.viii). Covering 140 countries, theWorld Economic Forum evaluates countries' tourism environments with the
TTCI index that reflects sustainable development of the travel and tourism
sector, which facilitates economic g rowth ( W EF, 2 019). Unfortunately,
Uzbekistan is not ranked with TTCI due to the lack of data for WEF analysis.
However, the World Travel & Tourism Council (WTTC) estimates the global
tourist impact to Uzbekistan's economy to around USD 1.5 billion, which isthree times more than the tourist impact to Kyrgyzstan (Table 1, column 9)(WTTC, 2020). Moldova and Tajikistan ranked as 103rd and 104th, accordingly(WEF, 2019, p.viii). Among these states, the economy of Kyrgyzstan heavily
relies its income on the tourism sector, which contributes 8.3% of the GDP(Table 1, column 9, a nd 10). Surprisingly, Tajikista n has two times theinternational arrivals of Kyrgyzstan, but the tourist impact is three times lessthan in its neighboring country (Table 1, column 6, and 9).
As indicated above, the location is a significant factor in transportation, trade,and tourism sectors, which reflect the economic and social opportunities andbenefits. Map 1 illustrates the location of small landlocked economies of theformer USSR. Among indicated countries, Moldova is more integrated with a
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well-developed EU market, since it is geographically a part of Europe. Thislocation suggests that Moldova, having better connectivity and better tourism
competitiveness (Table 1, column 5, and 8) has more opportunities in trade andtourism, compa red to other considered countries. Both Tajikista n a nd
Uzbekistan also have more favorable conditions that enable them to develop
their business and tourism more effectively than Kyrgyzstan, since thesecountries are better connected to markets. Furthermore, Tajikistan andUzbekistan have larger populations and numbers of international arrivals (Table
1, column 2, and 6), which are potential air passengers.
There is a strong linkage between the degree of air service liberalization andthe level of air connectivity (Piermartini et al., 20 08; Zhang et al., 2014;
InterVISTAS, 2015; ICAO 2016; OECD-ITF, 2019, p.19). ICAO and many other
schola rs suggest that to increase a ir connectivity, ma rket access (e.g.
liberalization) should be improved (ICAO, 2020).
Moreover, if one uses the data filed in the ICAO and WTO documents, acomparative analysis is possible among countries with similar characteristics.
Therefore, [this article assumes the hypothesis that] the theoretical model of
Piermartini et al. (2008) could be applicable not only for Kyrgyzstan but also forother landlocked transitional economies, such as Moldova, Tajikistan, andUzbekistan which share a geographical and economic background in common.
Kyrgyzstan and other small landlocked economies in the CIS could also increase
air passenger traffic growth and improve air connectivity by liberalizing theirMap 1. Location of Kyrgyzstan, Moldova, Tajikistan, and Uzbekistan
Source: The author, based on the Google Maps from https://www.google.com/maps. (Accessed
10 August 2020).

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The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow

air services. Even Moldova, Tajikistan, and Uzbekistan could have a moresignificant liberalization effect than Kyrgyzstan for several reasons. First,
Kyrgyzstan has the record for the worst connected state to the international airtransport market (Arvis et al., 2011). Second, the country is the second-lowest
state in GDP (WB, 2019). Third, Moldova, Tajikistan, and Uzbekistan have better
tourism performances and tourism potential. Finally, Kyrgyzstan's fleet is lesscompetitive, since the European Union (EU) banned all Kyrgyzstan's airlines
from landing in EU countries due to their low safety standards (EU, 2020).
Above -ment ioned cha llenges of t he country considered, Kyrg yzsta n
introduced the concept of liberalization policy in 20 02. The government
published a policy document entitled “The Concept of Development of Civil
Aviation of Kyrgyz Republic for the period 2002-2010.” The document contained
various goals and objectives aiming at the development of air transport andemphasized the need of regional and bilateral cooperation within the frameworkof an “open skies” policy (MOJ, 20 02). Unfortunately, this policy was not
implemented at all until 2012 when the discussion started again by the initiativeof the Ministry of Economy.
S i nce t hen , a debate st a r ted b et ween supp or ter s a nd opp onent s ofliberalization policy among policymakers, practitioners, and the businesscom mu n it y. W h i le t he M i n ist r y of E conomy genera l ly suppor ted t heliberalization policy, it expressed concern that infrastructure building wasnecessary for aviation safety, and that there was a challenge to implement thepolicy. On the other hand, the Ministry of Transportation argued that thenational airline industry was not competitive enough to international ones andthus liberalization might be harmful.
Nevertheless, Kyrgyzstan’s officials and business community today hope thatliberalization can stimulate the air travel market, increasing air passenger
traffic and making international air travel more accessible for tourists andcitizens (MOE & GIZ, 2013, pp. 34, 41, 10; Times of CA 2019; RAI, 2019). Then,
Kyrgyzstan's government unitarily declared the introduction of the 5th freedom
rights regime in the country in early 2019 (MOJ, 2019). This liberalization
measure mea ns t hat foreig n ca rriers ca n la nd in Kyrg yzsta n , pick up
passengers and cargo, and fly to another third country, thus enlarging the airservice network and connectivity.
Unfortunately, the granted right [5th freedom] is the only regime accepted by
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the government as a policy to liberalize air service. As a consequence, there are
no new transit passenger services set-up through Kyrgyzstan since thedecla rat ion of t he 5t h f reedom , except a few schedu led c a rgo f l ight s(Kyrgyzaeronavigatsia, 2019). However, it is inevitable for the government toconsider other regimes of market access in order to create a competitiveenvironment in the air transport market. Yet, the government has not paid
attention to other regimes. The regimes are the air service capacity clause, airservice pricing, airline's withholding or ownership, designation of air carriers,
exchange of statistics, and cooperation agreements among airlines, which areemphasized by the WTO as the related indicators of accessibility to the airtransport market (Piermartini et al., 2008, p.5).
How has Kyrgyzstan implemented the liberalization policy so far? The next
section will first discuss the structure of air service agreements.
3.2. Kyrgyzstan’s Bilateral Structure of Air Service Agreements
As discussed in the previous section, the Chicago Convention from over 75
years ago harmonizes and establishes a general framework and rules forinternational civil aviation, including the main approaches for regulating air
service agreements and market access between countries. Today, Kyrgyzstan is
an independent state which became a full-fledged member of ICAO by ratifying
the Chicago Convention in 1992 (MOJ, 1992).
Membership in ICAO allowed the country to perform the first international
flights in its history, and thus the country began to take the first steps toward

International Air Passenger
Traffic in Kyrgyzstan, million

2.6
2.5
2.4
2.3
2.2
2.1
2
1.9

2015

2016

2017

2018

2019

Year

Figure 2. International Passenger Traffic in Kyrgyzstan for 2015-2019
Source: The author, based on the data on international passenger traffic in Manas, Osh, andIssyk-Kul airports from http://www.airport.kg/about/indicators. (Accessed 4 August 2020).

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The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flowits linkage to the international air transport market. The first international
flight was operated from Osh Airport (the second largest airport in the country)
by the Osh Squadron on the Osh-Urumqi-Osh route on a Tu-154 aircraft inNovember 1992. Later, the first international flight was performed from Manas

Table 2. Data on Air Transport Market of Kyrgyzstan
1
Signatory state

2
Income group3
KGZ’s
Traffic
2015

4
KGZ’s
Traffic
2019

6
Annualtraffic
average
KGZ
+38%
-

7
City
pairs

119361-5
5Y
traffic
change
KGZ
+191%
-

UAE
UK
Qatar
KuwaitSwitzerland
Germany
Turkmenistan
Malaysia
Saudi Arabia
TurkeyCzech RepublicHong Kong
GreeceTajikistan
Indonesia
ThailandUzbekistan
Austria
Armenia
India
Kazakhstan
Mongolia
RussiaUkraineGeorgia
China
South Korea
Belarus
IranPakistan

High
High
High
High
High
High
Upper-middle
Upper-middle
High
Upper-middle
High
High
High
Low
Upper-middle
Upper-middle
Lower-middle
High
Upper-middle
Lower-middle
Upper-middle
Lower-middle
Upper-middle
Lower-middle
Upper-middle
Upper-middle
High
Upper-middle
Upper-middle
Lower-middle

41033
301296
23288
30816
14029
63255
5992
1481756
85294
-

3759
365934
9607
48885
7324
1101864529
1736443
57091
-

+100%
+21,5%
- 58%
+59%
- 48%
+73%
- 24%
+17%
- 33%
-

+20%
+4,3%
- 11.6%+11.8%- 9.6%+14.6%- 4,8%+3.4%- 8.25%
-

1
2
1
1
1
2
1
22
1
-

2
-

8
9
Carriers Flag of carrier
operatetheservices
2
2-UAE
1
3
2
1
1
4
1
5
1
-

1-KWT
1-KGZ, 2-TUR
1-KGZ, 1-TJK
1-UZB
1-KGZ
1-KGZ, 3-KAZ
TUR
1-KGZ, 4-RUS
1-CHN-

Source: Compiled by author, based on the following data:
1）“World Bank Country and Lending Groups,”the World Bank, 2019 from https://datahelpdesk.
worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups.
(Accessed 10 August 2020).
2）“Dynamics of passenger traffic at Manas, Osh and Issyk-Kul airports by destination for 20152019,”Civil Aviation Authority of Kyrgyz Republic, 2019.
3）The author’s calculation of Five year and Annual passenger traffic change in Kyrgyzstan
based on data in column 3, and 4.
4）“Central schedule of regular flights of KR,”Kyrgyzaeronavigatsia SE, 2020 from http://kan.
kg/en/flight_schedule. (Assessed 10 August 2020).

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Airport (the country's largest airport) and went through the route between
Bishkek and Istanbul in October 1994.
Today, the international airports of Kyrgyzstan are served by regular flightsof 16 airlines (3 national and 13 foreign), which connect Kyrgyzstan with dozens
of cit ies ( Ky rg yzaeronav igat sia , 2 019 ; M I A , 2 019). The schedu led a i rtransportation routes cover the countries of the CIS, Asia, and the Middle East.
Meanwhile, the air traffic flow in Kyrgyzstan annually demonstrates positive
dynamics, however, the number of international air passengers increased only
by 20 percent over the past five years, as shown in Figure 2 (CAA, 2019a; CAA,
2019b; CAA, 2019c; MIA, 2020).
In the framework of international air service, the air transport market of the
Kyrgyz Republic is based on the bilateral structure of air service agreements.
Today, since the independence of Kyrgyzstan, the government has signed
BASAs on air services with thirty states (CAA, 2020). However, only one thirdof the states with which Kyrgyzstan has BASAs have scheduled air services to
Kyrgyzstan as shown in Table 2 (Kyrgyzaeronavigatsia, 2019).
3.3. Degree of Air Service Liberalization in Kyrgyzstan
As mentioned in previous sections, in order to examine the objective of thisarticle, in particular how liberalization affects air passenger growth, first, thelevel of air service liberalization achieved by a country should be defined.
Following the QUASAR methodology, the analysis of Kyrgyzstan’s BASAs was
conducted i n t h is sect ion i n order to assess t he deg ree of a ir ser v ice
liberalization. QUASAR is a quantitative methodology which measures, on auniversal scale, the degree of air service liberalization in the air transport
market.
The QUASAR methodology was created by the WTO Secretariat with theaim of projecting comprehensive evaluations of market access regimes that arecontained in air service agreements. Following the QUASAR methodology,
Piermartini et al. (2008) analyzed more than 2000 BASAs of 184 states that areavailable in the ICAO World Air Service Agreements (WASA) database. They
categor i zed ag reement s by d i f ferent prov isions a nd compi led a n A i r
Liberalization Index (ALI) scoring table (Piermartini et al., 2008, p.25), where
Kyrgyzstan was ranked as the 30th country in air service liberalization with theaverage score of ALI=5.93 [as for 2006].
38

The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow

ALI is an expert-based informed index that was constructed to assess sevenmajor regimes of air service agreements that are related indicators toaccessibility of air transport markets. Namely it addresses grant of rights,
designation, withholding, capacity, tariff approval, statistics, and cooperative
arrangement (WTO, 2006a, pp. I.12, II.649-II.668).4
Table 3 provides the QUASAR ALI Weighting System which measures eachof the seven features of BASAs indicated above in four different variants of the
ALI schemes, namely standard (ALI_st) and other alternative indexes, such as
5th freedom (ALI_5th), withholding or ownership (ALI_own), and designation
Table 3. ALI Weighting System (QUASAR)
Provision/Regime
Grant of rights

Capacity

Tariffsrd

Designation
Statistic
Cooperative
arrangements
TOTAL

ALI_5th

ALI_own

ALI_des

th

3 ,4

0

0

0

0

5th freedom

6

12

5

5.5

7th freedom

6

5

5

5.5

Cabotage

6

5

5

5.5

Predomination

0

0

0

0

“Other restrictive”

2

1.5

1.5

1.5

Bermuda I

4

3.5

3.5

3.5

“Other liberal”

6

5

5

5.5

Free determination

8

7

7

7.5

Dual approval

0

0

0

0

Economy of Origin

3

2.5

2.5

2.5

Dual disapproval

Withholding

ALI points
ALI_st

6

5

5

5.5

Zone pricing

4 or 7

3.5 or 6

3.5 or 6

3.5 or 6.5

Free pricing

8

7

7

7.5

Substantial ownership andeffective control

0

0

0

0

Community of interest

4

3.5

7

3.5

Principal place of business

8

7

14

7.5

Single designation

0

0

0

0

Multiple designation

4

3.5

3.5

7.5

Exchange of statistic

0

0

0

0

No exchange of statistic

1

1

1

1

Not allowed

0

0

0

0

Allowed

3

2.5

2.5

2.5

50

50

50

50

Source: QUASAR, the WTO (2006b, pp. I.9, II.649-II.661) from https://docs.wto.org/dol2fe/
Pages/SS/directdoc.aspx?filename=Q:/S/W00.pdf&Open=True. (Accessed 10 August 2020).

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Table 4. Air Liberalization Index for Kyrgyzstan’s air service agreements
1

2

3

4

5

6

Signatory state

Date of signing

ALI_
st

ALI_
5th

ALI_
own

ALI_
des

Transitional, semi-liberal BASAs (ALI_st 15-40)**
United Arab Emirates Dec 03, 2014

28

31.0

24.0

29.5

United Kingdom*

Dec 08,1994

20

24.0

17.0

22.0

Qatar

Jan 21, 2018

18

15.5

15.5

20.5

KuwaitDec 13, 2015

17

21.5

21.5

19.5

Switzerland

Oct 25, 2002

16

14.0

14.0

18.5

Germany*

May 13, 1997

11

9.5

13.0

13.5

Traditional BASAs (ALI_st 0-15)**
Turkmenistan*

Dec 24, 1993

11

9.5

9.5

14.0

Malaysia*

Nov 17, 2000

10

15.5

8.5

13.0

Saudi Arabia

Dec 02,2014

10

8.5

8.5

13.0

TurkeyOct 14, 1994 (amended in Sep 01, 2018)

10

8.5

8.5

13.0

Czech Republic

Apr 29, 2004

8

7.0

7.0

11.0

Hong Kong* (China)

July 15, 1999

8

7.0

14.0

7.5

GreeceNov 01, 2004

7

6.0

6.0

10.0

Tajikistan

May 26, 2004

7

6.0

6.0

10.0

Indonesia*

July 18, 1995

6

12.0

5.0

5.5

ThailandJan 15, 2003

5

4.5

4.5

8.5

Uzbekistan

Sept 04, 1996

5

4.5

4.5

8.5

Austria*

Mar 17, 1998

4

3.5

3.5

7.5

Armenia

Apr 04, 2002

4

3.5

3.5

7.5

India*

Sept 08, 1993

4

3.5

3.5

7.5

Kazakhstan

Feb 18, 1994

4

3.5

3.5

7.5

Mongolia

Dec 04, 1999

4

3.5

3.5

7.5

RussiaMar 28, 1996

4

3.5

3.5

7.5

4

3.5

3.5

7.5

3

4

5

6

UkraineFeb 23, 1993
1

2

Georgia*

April 22, 1997

4

3.5

3.5

7.5

China

July 04, 1996 (amended in Sep 22, 1999)

4

3.5

3.5

7.5

South Korea

July 11, 2006

4

3.5

3.5

7.5

BelarusFeb 02, 2000

0

0.0

0

0.0

Iran*

June 22, 1993

0

0.0

0

0.0

Pakistan*

Oct 14, 1993

0

0.0

0

0.0

7.9

7.58

7.4

10.41

ALI_st average*ALI calculated by WTO (QUASAR database on S/C/W/270/Add.1, 2006, p.II-10);**Distribution of ALI indexes by WTO (WTO, 2006a, p.I.39)..

Note: There is no any amendment to agreements calculated by WTO after 2008, except Turkey.
Source: The author’s calculation of ALI of BASAs, based on the analysis of Kyrgyzstan’s
BASAs on Centralized data bank of legal information of the Kyrgyz Republic (MOJ, 2020) fromhttp://cbd.minjust.gov.kg/ru-ru/mds/Search (Accessed 10 August 2020).

40

The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow

(A L I _ des). Each a lter nat ive i ndex , A L I _ 5t h , A L I _ ow n , a nd A L I _ des ,emphasizes one related specific feature of BASAs that is linked to geographicaland economical specific factors. For instance, those countries that faceddifficulties to provide direct air service to demanded markets should focus on
ALI_5th, in order to secure 5th freedom rights for national air carriers, since thisregime could provide alternative air traffic via a third state. However, thissection focuses on ALI_st, since this index indicates the overall degree of air
liberalization (WTO, 2006a, pp.II.649-II.668). The value of ALI ranges between
0 to 50, as shown in Table 3, where 0 is the most restrictive air service
agreement, and 50 is the most liberal. Indeed, the WTO generally evaluates theoverall degree of each state’s liberalization by the average ALI score. Dependingon the location of the average ALI_st, the WTO identifies each state’s regime
as traditional, semi-liberal (i.e. transitional), or full liberalization. 5
Table 4 above is the result of the application of the QUASAR methodologythat was shown in Table 3. Table 4 summarizes the results of analysis
conducted for all Kyrgyzstan’s BASAs, where related information on regimes(i.e. features) of specific agreements was extracted from the Centralized Data
B a n k of L eg a l I n for m at io n of Ky rg yz R epubl ic ( MOJ , 2 0 2 0 ) . Table 4
demonstrates individual ALI indexes for specific BASAs, where ALI_st score
ranges from low 0 to high 28 for Kyrgyzstan.
Table 4 illustrates that restrictive reg imes a re the most frequent inKyrgyzstan’s BASAs; among 30 BASAs, there are 25 traditional agreements(85%), 5 semi-liberal (15%), and no full liberalization agreements (0%). As shownin Table 4, Kyrgyzstan’s calculated average air liberalization index score isassessed as ALI_st=7.9, which is much lower than the score of ALI_st=15. Thisaverage score suggests that Kyrgyzstan’s air service regulation remains
restrictive.
In order to clarify the allocation of ALI’s indexes for the overall picture of
Kyrgyzstan’s agreements with all the countries in Table 4, Histogram A (Figure 3)
below was formulated. Histogram A illustrates that 85% of Kyrgyzstan’s BASAs
are concentrated among traditional agreements, while around 74% (HistogramB) of air service agreements worldwide are traditional. These results are similar
with the theory that restrictive regimes of air service liberalization are themost frequent worldwide (Piermartini et al., 2008, p.9; ICAO 2015).
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Figure 3. Histograms for Liberalization Degree of Kyrgyzstan’s Air Transport
Market and the World
Note: Histograms provide percentage of BASAs' number by ALI regimes.
Source:1）Histogram A: the author, based on the data in column 3 of Table 4 of this article.
2）Histogram B:“Liberalization of Air Transport Services and Passenger Traffic,”Piermartini
et al. (2008, p.10) from https://www.wto.org/english/res_e/reser_e/ersd200806_e.pdf(Accessed 10 August 2020).

Obviously, policy implementation is not a one-time measure, but a long-term
ongoing process which could take from a few months to decades (InterVISTASga, 2006, p.62; Schlumberger et al., 2014, p.171). To shed a light on this, theliberalization index progress is also analyzed in this section by using data in
Table 4, column 1, 2, and 3.
Table 5 below illustrates air liberalization index changes over time. Table 5shows that during the first five years of Kyrgyzstan’s independence, it became
party to very restrictive BASAs. Although Kyrgyzstan is not in a permanentstate of air transport market stagnation, there are very few changes in market
access. The ALI score increased only by 2.6 points over the last three decades,from ALI_st=5.3 in 1991-1996 to ALI_st=7.9 in 2020. As stated previously,
Kyrgyzstan’s score for air service liberalization, namely 7.9 during the period of
2015-20, falls within the traditional domain.
In conclusion, this section provided evidence that the air transport market of
Kyrgyzstan remains traditional. This means that Kyrgyzstan so far could not
make much progress regarding liberalization. To analyze the reasons for this42

The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow

Table 5. ALI Progress for Kyrgyzstan 1991-2020
Regime1991-1996 (12BASAs)

1997-2002 (22BASAs)

2003-2008 (26BASAs)

2009-2014 (28BASAs)

2015-2020 (30BASAs)

ALI_st, average

5.3

5.8

5.9

6.8

7.9

Source: The author, based on data in column 1, 2, and 3 of Table 4.

goes beyond the scope of this article and should be analyzed in a future study.
The next section examines the objective of this article and illustrates how
traditional air service regimes impact passenger traffic, and projects theopportunity for Kyrgyzstan to attain further liberalization of international air
service.

IV. Modeling the Impact of Air Service Liberalization toPassenger Traffic Flow
Kyrgyzstan has developed its air transport and integrated it into global airtransport for almost three decades. However, as seen from the previous section,
the government has not implemented policies to significantly bring progress in
a context of relaxing the air transport market. Therefore, the question is what
potential Kyrgyzstan has for better connectivity if air service liberalization is
implemented more in the future. This section develops a quantitative model toexamine the current and projected impact of air service regimes to air
passenger traffic. This will show that the theory, developed by Priermartini etal. (2008), is also applicable to small-sized landlocked economies.
Specifically, to estimate the correlation between the air service liberalizationindex and air traffic change, the Gravity Model equation proposed by Airport
Council International (ACI) is applied in this analysis (ACI, 2016, p.11). The ACI
in the Guide to World Airport Traffic Forecasts emphasizes this method as analternative tool of analyzing medium- or long-term traffic trends. Also, thistechnique, being a classic tool for analyzing and forecasting a trend, can be
performed automatically by using Microsoft Excel software (Crymble, 2019).
The formula for a simple logarithmic regression is:(1) ln(PassengerGrowth) = α× ln(ALI_st) + b(ACI, 2016, p.12; Crymble, 2019)

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where PassengerGrowth is the passenger traffic change between BASA
signatories, α is constant slope/coefficient of regression, and b is a constantchosen to minimize selection errors.
The calculation is based on data taken for countries which have point-to-point
f lights with Kyrg yzsta n, namely the UA E , Kuwait , Turkey, Tajikista n,
Uzbekistan, India, Kazakhstan, Mongolia, Russia, and China. The data on air
passenger traffic used for the analysis is indicated in Table 2 (column 6), andTable 4 (column 3). The average annual data on passenger traffic changes foreach operational air service and the corresponding specific ALI indexes areapplied in the Gravity Model (1) to create a trend of market direction. The
period of 2015-2019 is selected for this study, due to the fact that most liberal
BASAs were introduced during this period, and this period is more relevant tothe current economic trends of Kyrgyzstan.
Figure 4 shows the results of analysis of the Gravity Model (1), where thepassenger traffic trendline in the graph determines the current and projected
direction in the market based on the estimation of air passenger statistics andrelated ALIs for a specific BASA. In particular, the traffic trendline of Figure 4
demonstrates a positive effect of air service liberalization in passenger traffic
growth in Kyrgyzstan, meaning that further liberalization brings an increase ofannual passenger growth. The coefficient of determination, or R 2 , of Figure 4
equals 0.54, which indicates a moderate positive relationship between ALI andtraffic growth (i.e. 54% of the variabilities follow the trend).
Particularly, the trendline shows that liberalization of Kyrgyzstan’s BASAs to
ALI_st=34 could bring an increase of passenger flow by about 32.4 percent

Annual traffic change, %60(2) y = 16.372ln(x) ‐ 25.247
R² = 0.5446

40

20

0

‐20

0

10

20

30

40

ALI_st50

Traffic Trend
TUR
RUS
UAE
KAZ
MGL
UZB
TJK
IND
KWT
CHN
KGZAverage
WTO Research
対数 (Traffic Trend)

Figure 4. Correlation Between Air Liberalization and Traffic Growth in Kyrgyzstan
Source: The author, based on data in Table 2 (column 6), and Table 4 (column 3) of this article.

44

The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow

[32.4=16.372*In(34) - 25.247].6 Thus, the result of this analysis confirms that theestimation of Priermartini et al. (2008), is also valid for Kyrgyzstan. Meanwhile,
the result suggests that the current average va lue of A LI _ st = 7.9 for
Kyrgyzstan correlates with the annual passenger traffic growth of about 8
percent.
The results of this study (Figure 4) suggest that Kyrgyzstan has significant
room for greater passenger traffic growth throughout further air service
liberalization. In other words, if Kyrgyzstan creates a semi-liberal air transport
market with an average ALI_st=28 (as with UAE), it could expect annual
passenger growth by 29 percent. In that case, if Kyrgyzstan successfully
implemented a full liberalization regime with a score of ALI=40, it could expect
annual passenger growth by 35 percent.

V. Conclusion
International air passenger transport is a vital mode of transportation thatfacilitates development of tourism, creates jobs, and sets up and maintains
businesses and trade relationships between markets that are essential fordeveloping and landlocked economies which face connectivity challenges, aswith Kyrgyzstan and other small landlocked economies in the CIS (ATAG, 2018,p.16). Indeed, liberalization of air service makes a notable contribution in theprocess of economic development and integration into well-developed markets(ICAO, 2016).
This study reviewed the current degree of air service liberalization in
Kyrgyzstan to define the impact of liberalization on air passenger traffic flow.
The results of this study suggest that the government of Kyrgyzstan has notmade significant policy changes to liberalize the regulatory structure of airservices. Moreover, this study provides robust evidence that despite slightsteady passenger traffic growth, the air transport market has not beenliberalized in Kyrgyzstan, and in general it remains restrictive; the air
liberalization index for Kyrgyzstan is ALI_st=7.9.
The other finding of this study suggests that Kyrgyzstan is not realizing its
full potential of air transportation. By having a restrictive air service regime,
the volume of air passenger traffic in Kyrgyzstan rises only 8 percent annually.
However, the Gravity analysis provides evidence that further liberalization of
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air service could bring a greater positive effect to passenger traffic flow, and forthe country’s air connectivity, too. Particularly, successfully implementing asemi-liberal regime could bring passenger growth by 29 percent and a full
liberalization regime by 35 percent.
The importance of this study is that the theoretical model of Piermartini etal. (2008) could also be applicable in landlocked transitional economies, such as
Moldova, Tajikistan, and Uzbekistan. Even those countries could experience amuch better effect of liberalization than Kyrgyzstan due to the obvious
advantages they have. To sum up, this article emphasizes the importance of airservice liberalization as a policy tool for developing landlocked states, andliberalization could facilitate air connectivity, tourism and trade, and substantial
economic growth.

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The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow

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Note
Endnotes
1

2

3

4

The traditional approach refers to restrictive regimes of air service regulation regimes:
the transitional one includes semi-liberal provisions. A full liberalization approach refers
to entire market access regimes of air service agreements (ICAO, 2018, pp.A1-2 - A1118).
An open skies air service agreement creates a very liberal market between the two
signatory nations. It allows any number of airlines from either government unlimited
rights to fly between any city-pair involving the two countries without significant
restrictions on capacity, frequency, or price. It generally also includes the right tooperate 5th and 6th freedom. (InterVISTAS-EU, 2009a, p.viii)
1st freedom - the right of a carrier from one state to fly across another state without
landing; 2 nd freedom - the right of a carrier from one state to land in another state
without picking-up or dropping off traffic; 3rd freedom - the right of a carrier to carrytraffic from its home state to another state; 4th freedom - the right of a carrier to carrytraffic to its home state from another state; 5th freedom - the right of a carrier from one
state to operate a flight to or from two other states and pick-up or drop -off traffic
between those last two states; 6th freedom - the right of a carrier to carry traffic
between two foreign states via its home state; 7th freedom - the right of a carrier fromone state to carry traffic between two other states on a flight that has no point in the
carrier's home state; 8th freedom - the right of a carrier from one state to carry traffic
between two points in another state on a flight between both states; 9th freedom - theright of a carrier from one state to carry traffic between two points in another state ona flight taking place entirely in that State; Cabotage - the right by a carrier from one
country to carry passenger and/or freight traffic exclusively between two points inanother country. (OECD-ITF, 2019, pp.40, 214).
Grant of rights defines the rights to provide air service between two states. Indeed, theWTO highlights the 5th and 7th freedom and cabotage. Basically, traditional agreements
include the rights of 3rd and 4th freedom of air. More liberal agreements also include
5th freedom rights. Few agreements contain 7th freedom and cabotage, which belong to
the high level of liberalization approach; Capacity clause defines the approach todetermine the capacity (volume of traffic, frequency of service and/or aircraft type(s) ofan agreed service. The most restrictive agreements include predetermination of
capacity, which requires that capacity is agreed prior to the service commencement.
Bermuda-I is a semi-liberal regime which gives limited rights to set capacities to thecarriers without a prior approval by governments. Finally, free determination excludes
capacity determination from regulatory control; Tariff approval refers to the air services
pricing regime. Dual approval of air service tariffs is the most restrictive approach,where both BASA signatories must approve the tariff before it can be applied. Free
pricing regime is the most liberal regime, when tariffs are not obligatory to the approvalparties. The three types of semi-liberal regimes, which are country of origin disapproval(tariffs may be disapproved only by the country of origin), dual disapproval (tariffs haveto be disapproved by both countries to make them ineffective), and zone pricing(signatories agree to approve tariffs that falling within a specific range and meetingcertain characteristics may); Withholding or ownership defines the conditions required
for the designated air carrier of the other state to operate in the home country.
Restrictive agreements require that designated carrier must be substantially owned andeffectively controlled by nationals, where designated carrier is the “flag carrier” of a

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6

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signatory state. More liberal agreements include the regimes of community of interestsand principal place of business, meaning that the foreign carrier can be also designatedby the foreign country; Designation defines the rights to designate one (single
designation), which is a restrictive regime or more liberal approach that allows for thedesignation of more than one (multiple designation) carriers to operate an air service
between two signatory countries; Statistics defines the rules which regulate exchangeof carriers’ performance statistics between countries or their carriers. Restrictive
regime requires statistics exchange, and a more liberal approach excludes exchange ofcarriers’ statistics; Cooperative arrangements define the rights for the designatedcarriers to enter into code sharing agreements or alliances. Restrictive agreements do
not allow this type of agreement. In contrast, cooperative arrangements are allowed in
more liberal agreements (Piermartini et al., 2008, p.5).
The ranging scale proposed by WTO: ALI_st in the range 0-15 refers to traditional
BASAs, ALI_st in range 15-40 belongs to semi-liberal, and ALI_st between 40-45
introduces full liberalization BASAs (Piermartini et al., 2008, p.9; WTO, 2006a, p.I.39).
Formula (2) in Figure 4.

The Analysis of Air Service Liberalization in Kyrgyzstan: Measuring the Degree of Liberalization and Impact to Passenger Traffic Flow

Abstract

The Analysis of Air Service Liberalizationin Kyrgyzstan:
Measuring the Degree of Liberalization
and Impact to Passenger Traffic Flow
Beishenaliev Kanatbek

Many scholars have pointed out that air service liberalization policy improves
air connectivity and contributes in the process of economic development andintegration into the well-developed markets (Arvis et al., 2011). Therefore, airservice liberalization has become extremely important for developing landlocked
economies, which faced the challenges with low air connectivity, such as
Kyrgyzstan and other small-sized economies in CIS. On the other hand,
Piermartini et al. (2008) estimated that liberalization leads to notable air
passenger traffic growth. Thus, in theory, Kyrgyzstan could also receive
benefits of liberalization, that leading to liberalized air transport market andimproved connectivity. In Kyrgyzstan’s case, this study attempts to test the
hypothesis that semi-liberal air service regime leads to air passenger traffic byaround 30 percent. The air service liberalization refers to the process ofderegulation the air service agreements in terms of air market access between
contracting states.
The author employs a quantitative analysis of Kyrgyzstan’s bilateral air service
agreements and statistics of passenger flow. In this study author applied two
approaches. First, the QUASAR methodology to measure the degree ofliberalization of air service agreements. Second, the Gravity Model is employed
to examine the impact of liberalization to air passenger traffic flow. This study
also investigates whether the model of Priermartini et al. (2008) could also be
applied to other small landlocked economies in CIS.
One of the findings showed the air transport market has not liberalized in
Kyrgyzstan, and in general it remains restrictive. However, this study foundthat Kyrgyzstan is not realizing its full potential of air transportation, in
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particular, a semi-liberal regime could bring passenger growth by 29 percent
and a full liberalization regime by 35 percent. Other findings also suggest that
other small landlocked economies in CIS could have much better effect ofliberalization than Kyrgyzstan.

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