Economic Benefits of Tourism and Safe and Secure Civil Aviation

1
Economic Benefits of Tourism and Safe and Secure
Civil Aviation

• Kenneth Button
• George Mason University

2
Dimensions of economic benefits

• Air transport and economic growth
• Factors driving air transport growth
• Regional effects
• Tourism
• Air cargo
• Foreign exchange

3
Dimensions of social benefits

• Social cohesion
• Retaining family/social ties (38 of US air
  trips)
  
• Cultural understanding
• Political integration

4
Some basic facts

• 1,600 million passengers a year
• 3.9 million jobs
• 260 billion turnover
• 18,000 aircraft
• 15 million kilometer network
• 10,000 airports
• 130 billion revenue ton kilometers
• 30 million tons of freight

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Missed in the numbers

• Large industry in its own right (1 of Western
  European GDP)
  
• Important for key modern industries (high-tech
  management flies 60 more than traditional
  industries)
  
• Important for long term economic/political
  integration
  
• Lubricant for the economic system

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Forecasts of annual revenue passenger kilometer
growth to 2022

• WORLD 5.1
• Europe 5.1
• North America 4.3
• Northeast Asia 5.8
• Southwest Asia 5.3
• Africa-Europe 5.1
• Middle East 5.7

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ICAO Scheduled Traffic Forecasts
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What drives air transport demand?

• GDP has risen over time and it and demand are
  highly correlated
  
• Technology and new institutions have reduced the
  cost of air transport
  
• People have more time for leisure
• Real fares have fallen
• BUT is this all?

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Air traffic and global GDP
10
Airline productivity in Europe
11
The decline in real airfares
12
Airports can benefit regional economies

• Primary effects. Building the airport
• Secondary effects. Running the airport
• Tertiary effects. Using the airport
• Perpetuity effects. Changing the economy

13
Some studies of airport impacts

• US MSAs - hub airport increases regions
  employment by 12000.
  
• Chicago OHare 50 increase in traffic will
  increase employment in the region by 185,000.
  
• Atlanta - 264 foreign-based firms, direct
  international services was 3rd most important
  thing in location
  
• 57 companies in Europe air transport network
  the 3rd most important factor in location.
  
• Zurich 34 of firms considered the airport as
  very important and 38 as important as
  location factor.
  
• Schiphol Airport (Netherlands) 85,000 jobs for
  the country.

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Jobs and income from having a local airport

• Jobs Economic Impact (millions)
• Direct Total Direct Total
• High 2000 8000 225 1600
• Medium 1500 6000 75 650
• Low 750 2500 35 130

15
Middle Easts passenger traffic and fleet

• Middle East ASK mix
• (2000)
• Europe 29
• Middle East 24
• Southwest Asia 15
• Southeast Asia 12
• Americas 10
• Africa 6

• Middle Easts fleet
• (786 aircraft in 2002)
• Small regional jets 5
• Single aisle 56
• Twin-aisle 36
• 747 3

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Tourism

• One of the Worlds largest industry
• Half of tourists outside of Europe travel by air
  
  
• Growing rapidly
• Main growth in longer haul traffic
• Large specialist air transport segment
  (charters/inclusive tours)
  
• Many countries trying to develop it.

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Influences on vacation travel

• More money
• More time
• More attractive destinations (travel not entirely
  demand driven)
  
• More adventure/interest
• Lower fares
• Different patterns of vacations (more short
  breaks)
  
• Dispersed families

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Forecasts of tourist growth (millions) by
destination

• 1995 2020 Annual Change
• Europe 338.4 717 3.0
• Americas 108.9 282 3.9
• East Asia/Pacific 81.4 397 6.5
• Africa 20.2 77 5.5
• Middle East 12.4 69 7.1
• South Asia 4.2 19 6.2
• Total Trips 565.4 1,561 4.1

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Demand for air freight

• 30-40 by value of manufactured trade goes by
  air
  
• New products (exotics)
• New markets (leisure and production)
• New management (just-in-time, global supply
  chains)
  
• New products (express services)
• Lower costs (deregulation)

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Middle Easts air trade partners(1.42 million
tonnes in 2001)
21
Middle Easts air trade with North America
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And safety and security?

• How many people would travel today with the
  safety records of 1936?
  
• How many companies would trust their goods to air
  cargo with the safety records of 1936?
  
• How many people would fly if the events of 2001
  are repeated?

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Position of US airlines (2002)

• Profit (Loss) Margins
• Jetblue 105 16.5
• Southwest 417 7.6
• Airtran 31 4.2
• Continental (312) -3.7
• Alaska (75) -4.1
• Northwest (846) -8.9
• Delta (1,309) -9.8
• America West (203)
  -10.1
  
• US Air (1,200) -18.2
• American (3,330) -19.2
• United (2,837) -19.9

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Airline operating margins
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International tourist arrivals

• 1998 628.9 million
• 1999 652.2 million
• 2000 696.7 million
• 2001 692.7 million

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Why an international approach?

• The economists answer
• Air transport is a network industry
• Safety/security is only as good as its weakest
  link
  
• Customers demand safety and security throughout a
  trip
  
• Standard procedures are simply more efficient

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In summary

• Air transport is important to national economic
  growth
  
• Airports can be major catalysts for regional
  economic development
  
• Air transport is vital to the development of many
  modern industries
  
• Safety and security is important if air
  transports full potential is to be realized.