The Whys and Hows of Air Service and Economic Development in Atlantic Canada

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The Whys and Hows of Air Service and Economic
Development in Atlantic Canada

• DEBRA WARD APT Forum March 2006

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WHY Air Service is So Important

• Economic Opportunities in
• Tourism
• International Trade
• Foreign Inward Investment
• Please note Most of the statistics used in
  this presentation were originally used in a
  report prepared for ACOA, which generously
  allowed their reproduction here.

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Tourism

• Contributes 5 to AC GDP (compared with 2.5
  Canada-wide)
• 3.16 billion in export revenues (i.e. foreign
  tourism)
• Air travellers spend 900 per trip on average,
  car travellers, 387
• Transportation eats 40 of entire trips cost

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International Trade

• International trade in goods grew by 87 between
  1989 and 1999.
• In services, international demand grew by 222.
• Recent estimates peg total exports at 19 billion

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International Trade

• New value-added industries of global scope, e.g.
• Aerospace,
• Biotech (agriculture),
• Value-added wood products,
• Aquaculture and high-end fish products
• Knowledge-based industries

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International Trade

• Plus some oldies, but goodies reaching new
  marketse.g.
• Energy
• Fisheries
• Forest products

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Foreign Inward Investment

• According to APEC, in 2003, foreign firms in
  Atlantic Canada
• Employed 54,000 people, or six per cent of the
  workforce
• Accounted for 25 of APECs Major Projects
  Inventory (5M in PEI, 10M in other three
  provinces)
• Particularly important to the call centre
  industry, manufacturing, retail and off-shore
  energy sector

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Foreign Inward Investment

• According to the Conference Board of Canada
• Fewer trade and investment barriers global
  rationalization of production
• Firms using global supply chains to minimize
  costs and generate maximum revenues
• Supply chains built by foreign direct investment
  in both directions
• Result? rising foreign content of exports,
  greater sales from foreign affiliates, esp.
  services

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Atlantic Canadas Air Sector

• In 2003, passenger air service to Atlantic Region
  was provided by
• 27 airports
• eight Canadian airlines operating scheduled
  domestic service,
• four international airlines providing scheduled
  international service,
• four charter carriers

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Atlantic Canadas Air Sector

• In 2004, there were 344,674 aircraft movements at
  Atlantic airports

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How Does Air Service Matter?

• International studies found
• Availability of direct international services was
  the third most important factor in locations
  decisions of firms locating to Atlanta, GA.
• An Ernst and Young study of 57 companies in
  Europe found that the air transportation network
  was the third most important factor in a location
  decision process.
• The Amsterdam Chamber of Commerce found that the
  availability of an airport is on of five key
  factors in business relocation.

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How Does Air Service Matter?

• A survey of firms around Zurich found that 72 of
  businesses found the airport either important
  or very important as a location factor.
• A study of small export businesses in the
  Washington area claimed that the availability of
  easy access to international air transportation
  was one of the six most important factors in
  their success

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How Does Air Service Matter?

• Businesses want
• International flights
• Direct flights
• Non-stop flights
• Speed
• Reliability
• Cost effectiveness
• But, except for major gateways, few airports can
  deliver ALL attributes.

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Can We Use Air Service as a Lever?

• Transportation infrastructure investment acts
  as a complement to other more important
  underlying conditions which must be met if
  further economic development is to take place
  transportation is a necessary, but not sufficient
  condition for economic growth (Banister and
  Berechman, 2000)

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Air Service Alone Cant Do the Job

• Air service has to connect real goods and
  services with real markets, efficiently
• Airport proximity only matters if it enhances
  speed and reliability
• Poor connectivity is likely worse than none at
  all

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BUT, it can certainly help

• Build a virtuous cycle e.g. Fredericton Travel
  Bank
• Attract industrial clusters and multi-modal
  transport nodes around airport
• Be a central strategy in multi-disciplined
  transportation initiatives, e.g.
• PACIFIC GATEWAYand perhaps,
• Halifax Gateway (evolving to Atlantic
• Canada Gateway for all of eastern NA?)

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BUT, it can certainly help

• Attract/retain mobile, educated labour force
• Promote access to greenfield, brownfield or
  resource-based industries in outlying regions

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How Do We Get There?

• Set outcomes based on what customers and
  businesses are demanding, not what communities
  hope for
• Include non-air strategies multimodal
  transport, business development, quality of life
  factors to attract/retain labour force

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How Do We Get There?

• Advocate for government policies to liberalize
  air service opportunities (e.g. Open Skies,
  international cargo, AND to create attractive
  opportunities for business AS PART OF ONE
  INCLUSIVE STRATEGY
• No one government department or level has enough
  answers. Demand multi-partied strategies that
  include the private sector in all decisions.