There is no such thing as a free open sky : Financial markets and the struggle over european competences in international air transport

Aviation is a prime example of a policy area where the clash over supranational regulatory responsibilities had pronounced economic repercussions. In this article, we examine the economic effects of the European Commission's struggle to obtain competences in international air transport. Stock market reactions to key events in the political conflict between 1995 and 2004 unravel whether investor beliefs about the distribution of power in the EU follow the basic conjectures of neofunctionalism, intergovernmentalism or institutionalism. The event studies show that particularly judicial proceedings and the involvement of the ECJ send credible integration signals to financial markets. This supports the hypothesis that investors consider the subtleties of the EU's decision-making apparatus carefully and only react to developments that definitively alter the political regime and thus also the market situation. These findings are in line with an institutionalist interpretation of a reform that has radically changed the international aviation regime.