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The Importance of Completeness and Clarity in Air Transport Contracts in Remote Regions in Europe and Australia

Rico Merkert and David A. Hensher
Transportation Journal
Vol. 52, No. 3 (Summer 2013), pp. 365-390
DOI: 10.5325/transportationj.52.3.0365
Stable URL: http://www.jstor.org/stable/10.5325/transportationj.52.3.0365
Page Count: 26
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The Importance of Completeness and Clarity in Air Transport Contracts in Remote Regions in Europe and Australia
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Abstract

This article compares the current experience of public service obligations carriers in Europe and Australia ex ante with regard to contract clarity, and then ex post regarding the completeness of their transport contracts. Particularly in times of government austerity, clear contracts are of immense importance to transport authorities in order to achieve value for money when procuring air-transport services. Weak contracts can result in uncertainties, transaction costs, and poor performance of regional airlines. Our results show differences across carriers that go beyond differences associated with geographic region, and highlight the importance of trust and good relationships between transport authorities and operators.

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