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Liberalization of Transportation Services in the EU: the Polish Perspective

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Edited By Andrzej Cieślik and Jan Jakub Michałek

Poland’s accession to the EU in 2004 created new challenges and opportunities for its transport service firms operating within the framework of the EU Single Market. This book evaluates the market structure in the Polish road, maritime, rail and air transport sectors and compares them to other EU countries, using both sectorial and firm-level data. Despite infrastructural underinvestment in most transport sectors, Poland enjoys a strong competitive position in supplying international road and rail cargo services, but the modernization of transport infrastructure remains a major challenge.
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7 The Regulatory Framework and the State of Competition in Air Transport Services

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The provision of air transport services involves the transportation of passengers and freight from one point to another by aircraft, as well as ancillary services such as air traffic control services, airport services, aircraft repair, computer reservation systems, ground handling, and aircraft repair and maintenance services.1 In order to understand the complexity of the network of interrelated air transport services, it is helpful to discuss the key features of the market structure and competition in this industry.2 For a long time, economists believed that, in a similar way to the railway sector, the airline sector was also imperfectly competitive and associated with increasing returns to scale and network externalities. As a result, the sector was heavily regulated and protected from “excessive” competition. The regulation and international coordination of schedules and fares resulted in a lack of real competition between national flag carriers and led to inefficiency, low traffic and high fares.

However, several empirical studies revealed that economies of scale in the airline sector were not as strong as initially expected.3 Moreover, the literature often refers to the so-called economies of density, reflecting the diminishing costs of additional seats, passengers, freight and flights on individual routes. These economies are exhausted at relatively low levels of output.4 Also, at about the same time, the theory of contestable markets was developed.5 According to this theory, market segments that appear to have elements of natural monopoly could be unbundled ← 187 | 188 → from direct regulation because entry (threat or actual)...

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