AVIATION BENEFITS BEYOND BORDERS - Powering global economic growth, employment, trade links, tourism and support for sustainable development ...
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Powering global economic growth,
employment, trade links, tourism
and support for sustainable
development through air transport
AVIATION
BENEFITS
BEYOND
BORDERS
April 2014
The air transport industry is the global network of commercial aircraft operators, airports, air navigation service providers and the manufacturers of aircraft and their components. It is responsible for connecting the global economy, providing millions of jobs and making modern quality of life possible. The Air Transport Action Group (ATAG), based in Geneva, Switzerland, represents the full spectrum of this global business. ATAG brings the industry together to form a strategic perspective on commercial aviation’s sustainable development and the role that air transport can play in supporting the sustainability of other sectors of the economy. ATAG’s Board of Directors includes: Airports Council International (ACI), Airbus, ATR, Boeing, Bombardier, Civil Air Navigation Services Organisation (CANSO), CFM International, Embraer, GE Aviation, Honeywell Aerospace, International Air Transport Association (IATA), Pratt & Whitney, Rolls-Royce and Safran. www.atag.org This publication is for information purposes only. Whilst every effort has been made to ensure the quality and accuracy of information in this publication, it is made available without any warranty of any kind. All currency is in United States Dollars at 2012 prices, unless otherwise stated. Forecasts and forward-looking statements in this publication are attributed to those organisations referenced, or the Air Transport Action Group.
01 Contents Introduction 02 Executive summary 03 A global industry: Aviation’s economic, social and environmental impacts in 2012 09 Essay: Love from above The soft power of aviation by Jonathan McClory 30 Regional and group analysis 33 Africa 34 Asia-Pacific 36 Europe 38 Latin America and the Caribbean 40 Middle East 42 North America 44 APEC economies 46 European Union 47 Small island states 48 Developing countries 49 OECD countries 50 Essay: Fostering growth in emerging markets The important role aviation plays in South-South trade by Ian Saxon 51 National analysis: A country-by-country look at aviation’s benefits 53 A growth industry: Commercial aviation’s first hundred years and a forecast of the next twenty years 57 Essay: Global travel for all Looking at the role aviation has played in developing social and cultural ties by Dr Marc Dierikx 64 References 66
02
Introduction
This year marks the centenary of the
commercial aviation industry. On 1 January
1914, when Abram C. Pheil, former mayor of
St. Petersburg, Florida became the world’s
first fare-paying airline passenger, little would Michael Gill
ATAG Executive Director
he know that 100 years and some 65 billion Geneva, April 2014
passengers later, air transport would play
a leading role in shaping the lives of people
all over the planet.
In 2014, over three billion passengers will airlines are of great importance for the jobs the incredibly sophisticated technology we use
board an aircraft somewhere on earth. Some they support globally. And nearly all of us and the collaboration that allows the industry
will be heading off on holiday, some will be have personal electronic devices that were to operate is all the more impressive.
travelling for business and others will be built using a global supply chain linked by And that’s just the day-to-day. At the Air
flying to see friends and relatives. However, air. Where would today’s internet retailers be Transport Action Group, our mission is to
every passenger we fly tells a much broader without the rapid delivery of their products bring the industry together to keep one eye
economic story. They will stay in hotels and to customers? on the future of aviation as well. Sustainability
rent cars, visit national parks and buy food This is a fitting moment to pay tribute to is all about protecting what we have for
from restaurants. all the men and women around the world generations to come. We can be proud that
Tourism is fast becoming the world’s who make aviation the industry what it is our industry has such a proactive future
number one industry and it is one that — from the flight crews who probably have vision. Whilst it has taken us 100 years to
aviation is proud to help facilitate. The the best view of any office in the world, serve 65 billion passengers, another 65 billion
growth in the middle classes in the emerging to the ground teams and the mechanics passengers will take flight in the next 15 years.
economies of the world is being met with a and engineers who build and maintain the That is a stunning amount of growth, not just
similar boom in air transport, most keenly marvels of technology which passengers take for the industry but for the economies
felt in the Asia-Pacific region. We urge for granted — air transport is a business that we support.
governments in these high growth economies really gets into the blood. The Air Transport Action Group’s
not only to create the environment for growth When you look behind the scenes of our members are working in partnership to
with liberalised traffic rules and by easing industry, the logistics and planning involved ensure that growth can take place efficiently,
travel restrictions, but also to be mindful of is mind-boggling. You only need to take a economically, environmentally and with as
the impact that a lack of planning can have for look at an airport baggage handling system, little congestion as possible. This will not be an
growth decades from now. or a ramp controller’s desk, or a cabin crew easy task, but you can rest assured that there
The role of air transport in world trade schedule to understand just how much of a are people already working on it.
is also momentous. The high value and multidimensional ballet plays out every day. Here’s to the next 100 years of flight!
perishable goods being transported by cargo Throw in adverse weather, political unrest and
03 Executive summary Key facts and figures from the world of air transport
04 / AVIATION BENEFITS BEYOND BORDERS
Executive summary
Key facts and figures from the world of air transport
58.1 $2.4
This report provides a global view of one of
the most global industries. Oxford Economics
analysed the economic and social benefits of
aviation at a national level in over 50 countries
and used the results of that assessment to
build the most comprehensive global picture
of air transport’s many benefits. Working
million trillion with partners across the industry, the Air
jobs supported by aviation worldwide1 Aviation’s global economic impact Transport Action Group (ATAG) has expanded
(including direct, indirect, induced the analysis to build a unique view of the air
Beyond the industry and tourism catalytic)8 transport system that provides jobs, trade,
3.4%
Aviation’s global employment and connectivity, tourism, vital lifelines to
GDP impact2 many remote communities and rapid
+ Other catalytic disaster response.
+ Tourism catalytic Every day…
»» 8.6 million passengers
+ Induced
»» 99,700 flights
+ Indirect
»» $17.5 billion worth of goods carried
of global GDP Air transport is a major contributor to global
Aviation
direct +
606 8.7 18.6 23.2 58.1 + economic prosperity.
Employment (millions)
is supported by aviation9
Aviation provides the only rapid worldwide
1,303
transportation network, which makes it
21st
1,627
essential for global business and tourism.
2,434 If aviation were a country, It plays a vital role in facilitating economic
+ it would rank 21st in size growth, particularly in developing countries.
GDP ($billion) by GDP11 Airlines transport over three billion
passengers annually with revenue passenger
Direct employment:
3.6x
kilometres (RPK) totalling nearly 5.5 trillion
Aviation jobs are, on in 2012.
470,000 average, 3.6 times more
productive than other jobs12. By opening
Nearly 50 million tonnes of freight were
carried by air in 2012, amounting to 185 billion
Airport operators3
(work for the airport operator) markets, enabling knowledge transfer and freight tonne kilometres (FTK).
other catalytic effects, aviation also makes Air transport facilitates world trade, helping
4,602,000 jobs in other sectors more productive. countries participate in the global economy by
Other on-airport4 increasing access to international markets and
(retail, car rental, government agencies such as customs
and immigration, freight forwarders and some catering) These figures represent the benefits that allowing globalisation of production. The total
aviation activities deliver to the global value of goods transported by air represents
2,272,000 economy. They do not include other 35% of all international trade.
Airline staff 5 economic benefits of aviation, such as Aviation is indispensable for tourism,
(flight and cabin crews, executives, ground services,
check-in, training, maintenance staff) the jobs or economic activity generated which is a major engine of economic growth,
when companies or whole industries exist particularly in developing economies.
1,203,000 because air travel makes them possible, Globally, 52% of international tourists travel
Civil aerospace staff 6 or the intrinsic values that the speed and by air.
(engineers and designers of civil aircraft, engines and
components) connectivity of air travel provides. Nor Connectivity contributes to improved
do they include domestic tourism and productivity by encouraging investment and
195,000 trade. Including these would increase the innovation; improving business operations
Air navigation service providers7 employment and global economic impact and efficiency; and allowing companies to
(air traffic controllers, executives)
numbers several-fold10. attract high quality employees.
All figures are for 2012, unless otherwise stated, to give a single set of data for one year. Where available, the latest figures are also noted.
EXECUTIVE SUMMARY AND KEY FACTS / 05
2.97
billion passengers
5.4
trillion kilometres
45
million hours
carried by airlines14 (in 2013, it was flown by passengers (in 2013, it was flown by IATA airlines in 201218
3.1 billion15) 5.7 trillion)17
37.4
Going places Asia-Pacific in front
Global passenger split, international / Regional passenger traffic split20
domestic, billions19
million
commercial flights worldwide16 (in 2013, 27.1%
2.3%
there were 36.4 million). Counting just 31.8%
1,159
scheduled airlines, there were 31 million
flights in 201235
4.8%
49,871
1,818
7.6%
26.2%
routes International
passengers
Domestic
passengers
Africa
Asia-Pacific
Latin America & Caribbean
Middle East
served globally13 Europe North America
Aviation’s global economic impact (direct, Air transport is a major Air transport invests substantially
indirect, induced and tourism catalytic) is global employer in vital infrastructure
estimated at $2.4 trillion, equivalent to 3.4% The air transport industry generates a total Unlike other transport modes, the air
of world gross domestic product (GDP). of 58.1 million jobs globally. transport industry pays for a vast majority
These figures do not include other It provides 8.7 million direct jobs: of its own infrastructure costs (runways,
economic benefits of aviation, such as the airlines, air navigation service providers airport terminals, air traffic control), rather
jobs or economic activity that occur when and airports directly employ nearly three than being financed through taxation and
companies or industries exist because air million people and the civil aerospace public investment or subsidy (as is typically
travel makes them possible, or the intrinsic sector (manufacture of aircraft systems, the case for road and railways).
value that the speed and connectivity of frames and engines) employs 1.2 million In 2012, airports invested $19.3 billion
air travel provides. Nor do they include people. A further 4.6 million work in other in construction projects, creating jobs and
domestic tourism and trade. Including these on-airport positions. building new infrastructure.
would increase the employment and global There are 9.8 million indirect jobs The benefits to society of research and
economic impact numbers several-fold. generated through purchases of goods and development spending by the aerospace
Nearly 1,400 airlines operate a total fleet services from companies in its supply chain. industry are estimated to be much higher
of over 25,000 aircraft. They serve almost Industry employees support 4.6 million than in manufacturing as a whole — every
4,000 airports through a route network of induced jobs through spending. $100 million of spending on research
several million kilometres managed by 173 Aviation-enabled tourism generates eventually generates additional GDP
air navigation service providers. around 35 million jobs globally. benefits of $70 million year after year.
06 / AVIATION BENEFITS BEYOND BORDERS
Executive summary
1,397
Air transport provides significant By 2050, the industry has committed to
social benefits reduce its net carbon footprint to 50% below
Air transport contributes to sustainable what it was in 2005.
development. By facilitating tourism and Companies across the sector are
trade, it generates economic growth, provides collaborating to reduce emissions using a four-
Commercial airlines21 jobs, improves living standards, alleviates pillar strategy of new technology, efficient
poverty and increases revenues from taxes. operations, improved infrastructure and
3,864
Increasing cross-border travel is a reflection market-based measures to fill the remaining
of the closer relationships developing between emissions gap.
countries, both from an individual perspective Modern jet aircraft are 75% quieter than
and at a country level. In the same way, the first models that entered into service and
eased restrictions on the movement of goods each new generation of aircraft continues this
Airports with scheduled commercial flights22 and people across borders facilitates the downward trend.
(there are 41,821 airfields in the world, development of social and economic Over 1,500 passenger flights operating
including military and general aviation23) networks that will have long-lasting effects. partially on sustainable biofuels have taken
This improved flow of people and goods place so far. It is expected that carbon
173
benefits both the host and the originating reduction from moving to alternative fuels
countries, encouraging increased social and could be up to 80% compared with traditional
economic integration. jet fuel.
Air transport offers a vital lifeline to
communities that lack adequate road or rail Air transport will continue to
networks. In many remote communities and provide jobs
Air navigation service providers24
small islands, access to the rest of the world — Forecasts suggest that, in 2032, there will be
25,332
and to essential services such as health care — over 6.5 billion passengers and aviation will
is often only possible by air. support 103 million jobs and $5.8 trillion in
Aviation’s speed and reliability are economic activity.
perhaps most immediately apparent in the However, if growth were to slow by just
delivery of urgently needed assistance during 1%, the total number of jobs supported by the
emergencies caused by natural disaster, air transport sector (including air transport
Number of commercial aircraft in service25
famine and war. Air services are particularly supported tourism) would be over 12.4
important in situations where physical access million lower than the base forecasts and the
Jetting off is problematic. contribution of the air transport sector to
Aircraft in commercial service, world GDP would be $661 billion (2012 prices)
by type 201226 Air transport is working to mitigate lower, with an additional $352 billion lost
its environmental impact through lower tourism activity.
Airline operations produced 689 million
tonnes of carbon dioxide (CO2) in 2012 (and
5,231
705 million tonnes in 2013), just under 2% of
the total human carbon emissions of over 36
billion tonnes.
The aviation industry agreed in 2008 to
the world’s first set of sector-specific climate
change targets. The industry is already
delivering on the first target — to continue to
20,101
improve fleet fuel efficiency by 1.5% per year
until 2020. From 2020, aviation will cap its net
Jets Turboprops
carbon emissions while continuing to grow to
meet the needs of passengers and economies.
EXECUTIVE SUMMARY AND KEY FACTS / 07
273
688,739,000
tonnes of carbon dioxide (CO2)
emitted by airlines (in 2013, it was 705 million tonnes)29. This is 2% of the global human emissions
billion litres of 36 billion tonnes. Around 80% of aviation CO2 is emitted from flights over 1,500 kilometres in
length, for which there is no practical alternative form of transport
of jet fuel used by commercial operators.
This equates to 72.2 billion gallons, or
around 220 million tonnes of Jet A-127
$210
Climate Environmental
targets progress
Improve 1.5% The air transport industry has made
billion Aviation will improve its fleet fuel efficiency significant progress in reducing its
Amount the world’s airlines paid for fuel by an average of 1.5% per annum between environmental impact:
(in 2013, it was $211 billion)28 2009 and 2020.
CO2 emissions per seat kilometre
Stabilise
79%
From 2020, net carbon emissions from 70%+ since first jet aircraft.
aviation will be capped through carbon-
Perceived noise
neutral growth.
Reduce 50% 75%+ since first jets.
By 2050, net aviation carbon emissions will »» Over five billion tonnes of CO2 avoided
Average aircraft occupancy (in 2013, be half of what they were in 2005. since 1990 through airlines spending $3
it was 80%)30, much higher than other
trillion on 25,000 new aircraft.
forms of transport
»» The industry has invested in new
technology, better operations and
High occupancy
infrastructure improvements.
Airlines utilise more of their seats than
other modes31 »» Civil aerospace spends $20 billion per
year on R&D, 70% for fuel reduction
80 79% technology.
70
6.1
»» Sustainable aviation fuels could reduce
60%
60 CO2 footprint by 80%, over 1,500
5.0
50 commercial flights have taken place
40%
40 so far.
30%
30
»» Air traffic management modernisation
20 could save millions of tonnes of CO2.
10
0
t
n
h
r
f
Ca
ai
ac
ra
Tr
Co
rc
Ai
08 / AVIATION BENEFITS BEYOND BORDERS
Executive summary
35% 49.2 $6.4
Air transport carries around 35% of world
trade by value and only 0.5% by volume32
million tonnes
of freight handled by air in 2012 (in 2013,
trillion
Value of cargo handled by air in 201236
49.8 million tonnes were handled)34
185 52%
High value, time sensitive
Proportion of global trade transported
by air33
34.6% billion of international tourists travel by air37
Scheduled freight tonne kilometres35
By value
Landing zone
Top 10 airports by passenger movements, millions, 201238
Rank Airport Passengers Change
1 Hartsfield-Jackson Atlanta International Airport 95.5 3.4%
2 Beijing Capital International Airport 81.9 4.1%
0.5%
3 Heathrow Airport 70.0 0.9%
By volume 4 Tokyo International (Haneda) Airport 66.8 6.7%
5 O'Hare International Airport 66.6 -0.1%
6 Los Angeles International Airport 63.7 3.0%
7 Charles de Gaulle 61.6 1.1%
8 Dallas Fort Worth International Airport 58.6 1.4%
9 Soekarno-Hatta (Jakarta) International Airport 57.8 12.9%
10 Dubai International Airport 57.7 13.2%09 A global industry Aviation’s global economic, social and environmental profile in 2012
10 / AVIATION BENEFITS BEYOND BORDERS
A global industry
Aviation’s global economic, social
and environmental profile in 2012
An economic engine food and beverage ($984 billion) sectors40.
What we do
In fact, if air transport were a country, its GDP
Aviation is a vital part of the increasingly Direct employment by air transport
would rank it 21st in the world, roughly equal
globalised world economy, facilitating the by segment, 201241
to that of Switzerland and more than twice as
growth of international trade, tourism and
large as Chile or Singapore.
international investment, and connecting
The air transport industry worldwide 5%
people across continents.
directly generated an estimated 8.7 million 14%
jobs in 2012. 2%
Direct impacts
»» 2.3 million of those people (26% of the
The aviation industry itself is a major direct
total) were in jobs for airlines or handling
generator of employment and economic
agents (for example, flight crew, check-in
activity — in airline and airport operations, 26%
staff, maintenance crew, reservations and
aircraft maintenance, air traffic management, 53%
head office staff ).
head offices and activities directly serving
»» Another 470,000 people (5% of the
air passengers, such as check-in, baggage
total) worked for airport operators
handling, on-site retail, cargo and catering
(for example, in airport management,
facilities. Direct impacts also include the Airports Civil aerospace
maintenance and operations).
activities of civil aerospace manufacturers Other on-airport Air navigation
»» 4.6 million jobs (53%) were on-site in
selling aircraft and components to airlines and Airlines service providers
airports, at retail outlets, restaurants,
related businesses.
hotels, government agencies, etc.
The world’s airlines carry over three billion
»» A further 1.2 million jobs (14%) were Where we work
passengers a year and 50 million tonnes of
employed in the manufacture of civil Direct employment by air transport
freight. Providing these services generates
aircraft (including airframes, engines, by region, millions, 201242
8.7 million direct jobs within the air transport
systems and components).
industry and contributes $606 billion to
»» Air navigation service providers
global GDP39. 0.4
employed an additional 195,000
Compared with the GDP contribution of
people (2%). 1.8
other sectors, the global air transport industry 2.7
Air transport also has important ‘multiplier’
is larger than the pharmaceuticals ($451
effects, which mean that its overall
billion), textiles ($223 billion) or automotive
contribution to global employment and GDP is
industries ($555 billion) and around half as
much larger than its direct impact alone.
big as the global chemicals ($1,282 billion) and 0.4
Indirect impacts 0.8 2.6
These include employment and activities of
suppliers to the air transport industry —
The global air for example, aviation fuel suppliers; Africa Latin America and Caribbean
construction companies that build airport Asia-Pacific Middle East
transport industry facilities; suppliers of sub-components used Europe North America
in aircraft; manufacturers of goods sold in
supports 58.1 million airport retail outlets; and a wide variety of Induced impacts
activities in the business services sector (such The spending of those directly or indirectly
jobs worldwide as call centres, information technology and employed in the air transport sector supports
accountancy). Over 9.8 million indirect jobs jobs in industries such as retail outlets,
and contributes globally are supported through the purchase companies producing consumer goods and a
of goods and services by companies in the range of service industries (such as banks and
$2.4 trillion (3.4%) air transport industry. These indirect jobs restaurants). Worldwide, nearly 4.6 million
contributed approximately $697 billion to induced jobs globally are supported through
to global GDP global GDP in 2012. employees in the air transport industryA GLOBAL INDUSTRY / 11
INVESTMENT
»» Air transport plays an especially pivotal
Beyond the industry
Aviation’s global employment and
role in just-in-time global manufacturing Global aircraft
GDP impact2
production and in speeding fresh programmes boost
produce from agricultural communities in
+ Other catalytic
developing economies to markets in the
Asian high-tech
+ Tourism catalytic
industrialised world. industries
+ Induced These wider catalytic impacts are not included Today’s commercial aircraft are a vital
+ Indirect
in this fairly conservative analysis, due to the catalyst to high-tech skills development
difficulty of extracting the figures related to throughout the world. The Asia-Pacific
Aviation
direct + aviation from those relating to other sectors. region, which leads global air traffic
606 8.7 18.6 23.2 58.1 + growth, has also been particularly
Employment (millions)
The exception is the tourism industry, where
boosted by investment from major aircraft
1,303 reliable data exist on the flow-on impacts and manufacturers.
1,627
these are explored below. However, there Boeing’s industrial footprint spans
are a range of businesses outside of tourism major Asia-Pacific economies and is
2,434
whose economic models rely on the speed expanding to meet increases in the
+ company’s commercial production.
GDP ($billion)
and reliability of air transport — Amazon.com
More than 65 Japanese companies
and other e-commerce websites rely on the support Boeing programmes, accounting
express delivery services made possible by for more than 40% — about 22,000 direct
aviation. Further examples are explored in and indirect jobs — of Japan’s aerospace
(whether direct or indirect) using their income this report. employment. Japan builds 35% of the 787
Dreamliner airframe and more than 20% of
to purchase goods and services for their own
the 777. Boeing collaborates with Japanese
consumption. The induced contribution to Air transport stimulates tourism industry and universities to develop
global GDP is estimated at $324 billion in 2012. Tourism makes a major contribution to the advanced manufacturing technologies and
global economy. It directly contributed other innovations that will benefit Japan’s
It’s not just who’s on board $2 trillion to world GDP in 2012 and provided current and future workforce.
Chinese companies supply every Boeing
Air transport’s most far-reaching economic over 101 million jobs globally — 3.4% of total
commercial programme, from the vertical
contribution is via its contribution to the employment43. By 2024, the World Travel & fin and horizontal stabiliser for Boeing’s
performance of other industries and as a Tourism Council expects direct employment Next-Generation 737 and 747-8 to the
facilitator of their growth. These ‘catalytic’ in the tourism industry to be more than rudder, wing-to-body fairing panels and
or ‘spin-off’ benefits of aviation affect 126 million people globally44. When looking other components for the 787. Meanwhile,
the aircraft maker has trained more than
industries across the whole spectrum of at the jobs and GDP supported through the
50,000 pilots, technicians, factory workers
economic activity. indirect and induced impacts of tourism, the and other professionals in China’s fast-
»» Air transport is indispensable for figures are a magnitude higher at 261 million growing aviation industry.
tourism, which is a major engine of jobs (8.7% of employment) and $6.6 trillion, The US manufacturer continues to
economic growth globally, particularly in or 9.3% of the global economy45. By 2024, expand its South-east Asia supply chain.
In 2013, Boeing and Hexcel Corporation
developing economies. tourism could support some 347 million jobs
expanded their joint venture Aerospace
»» Air transport facilitates world trade, and $11 trillion in GDP46. Composites Malaysia (ACM) by 40%. ACM,
helping countries participate in the Aviation plays a central role in supporting which makes flight surfaces for Boeing
global market by increasing access to tourism. Over 52% of international tourists commercial aircraft, is expected to
international markets and allowing now travel by air. Tourism is particularly grow its workforce beyond the current
950 employees.
globalisation of production. important in many developing countries,
Boeing has a global logistics hub in
»» Air transport increases a country’s where it is a key part of economic Singapore for spares distribution, and
connectivity which can help raise development strategies. In Africa, for supply chain management and technical
productivity, by encouraging investment example, the jobs of an estimated 2.5 million support teams throughout South-east
and innovation; improving business people directly employed in tourism are Asia. The plane maker also partners with
Indonesia on commercial aviation safety,
operations and efficiency; and supported by overseas visitors arriving by
efficiency and industry development.
allowing companies to attract high- air, representing 30% of all tourism jobs in
quality employees. Africa47. In some island states, tourism can12 / AVIATION BENEFITS BEYOND BORDERS
A global industry
Mobile parts
Apple’s global supply chain for the iPhone is made possible by air transport52
1 Memory, Portland
2 Camera and compass, Santa Clara
3 GPS, WiFi and Bluetooth, Irvine
7
1 6
4 Audio codec, Austin and
2 5 touch screen, Dallas
3 4 8 9
5 Radio frequency, Woburn
10
11 6 Accelerometer, Geneva
7 Power management, Naburn and
radio frequencey, Neubiberg
8 Display, Seoul
9 Radio modules, Kyoto
10 Assembly of screen and other
components, Chinese Taipei
11 Final assembly, Shenzhen
Global distribution
from Hong Kong
$6.4 trillion of goods »» Indirect: A further 13.4 million indirect
jobs in industries supplying the tourism
rate of global GDP growth, with China, India
and other emerging markets leading the way.
were transported industry are supported by visitors
arriving by air.
Compared to other modes of transport,
air freight is fast and reliable over great
internationally by air »» Induced: These direct and indirect
tourism jobs supported by air transport
distances. However, these benefits come
at a cost. Consequently, air freight is mostly
in 2012. generate a further 6.9 million jobs in
other parts of the economy, through
used to deliver goods that are light, compact,
perishable and have a high unit value.
have an overwhelming influence on the employees spending their earnings on Today, air transport is a vital component
national economy. St Kitts and Nevis, for other goods and services. of many industries’ global supply chains,
example, relies on the industry for 25.9% of Including direct, indirect, and induced effects, used primarily for the transfer of time-
the economy and a quarter of its jobs. In some air transport supports 35 million jobs within sensitive goods. Rapid delivery is particularly
Caribbean countries, tourism provides one of tourism, contributing around $807 billion a important to businesses whose customers are
the few means of economic growth48. year to world GDP. running streamlined production processes
The contribution of air transport to tourism or who need urgent delivery of spare
employment and GDP: Contribution to world trade parts for machinery and equipment. High-
»» Direct: 14.6 million direct jobs in tourism As an important facilitator of international value, lightweight and sensitive electrical
globally are estimated to be supported by trade, aviation promotes global economic components are transported by air from
the spending of foreign visitors arriving growth and development. Forecasts suggest manufacturing facilities all over the world to
by air. This includes jobs in industries that the world’s economies will become even be assembled.
such as hotels, restaurants, visitor more dependent on international trade over Exporters of perishable products such as
attractions, local transport and car rental, the next decade. World trade is expected to food and flowers (many of whom are located
but it excludes air transport industry jobs. nearly double, rising at more than twice the in developing countries) can only reach exportA GLOBAL INDUSTRY / 13
INVESTMENT
Emerging fast
Projected annual growth rate for international traffic by region, 2012 – 203255
8
7 6.3
6 5.5 5.4 5.4 5.2
5.1
5
4.2
4.7 New aircraft: more
4
3.8
3.0
3.8 3.7 jobs and cleaner
3 production
2 Every time a new aircraft programme is
1 announced, the economic and industrial
ripples spread throughout the world.
0
As production ramps up for the latest
a
e
st
a
EC
n
De tes d
tr ing
CD
ld
c
b &
ric
ic
op
St slan
io
aircraft from Airbus, the A350 XWB which
ifi
Ea
or
M ean
s
rib ca
AP
er
OE
Un
un op
ie
ac
ur
Af
W
e
Am
i
a
Co el
lI
Ca er
first flew in June 2013, the number of
E
-P
dl
n
v
al
ea
Am
id
ia
th
Sm
people joining the programme worldwide as
As
p
or
ro
tin
N
Eu
direct and indirect suppliers grows almost
La
daily. When it reaches its full production
rate, this single aircraft will account globally
for 34,000 direct and 68,000 indirect jobs, or
102,000 in total.
markets by air, providing steady employment relationships. More than half (52%) said that At the start of 2014, 12,000 people
and economic growth to regions that benefit restrictions on the numbers of flights they were already working full-time on the
project even though the first deliveries
from such trade. For example, it is estimated take for work would hurt their business.
are not scheduled until the end of 2014.
that 1.5 million livelihoods in Africa depend In other recent surveys, corporate Around 1,500 will be employed on the final
on such exports to the UK market alone49. executives estimated that 28% of current assembly line in Toulouse once production
In Kenya, 90,000 jobs (and 500,000 business would be lost without in-person reaches peak levels. But this is the final
livelihoods) depend on the cut flower industry, meetings. Further, they estimate that roughly stage in a vast production chain which
stretches around the world. The aircraft,
which supports 1.6% of the national economy, 40% of prospective customers are converted
like all modern planes, is a truly global
generating around $1 billion in foreign to new customers with an in-person meeting product — so even though the company
exchange each year50. The pharmaceutical compared to 16% without54. is headquartered in France for example,
industry also relies on air transport for 40% of Airbus procurement spending
delivery of time-sensitive medical supplies, Paying our way on components and materials for all
programmes goes to companies in the USA.
particularly vaccines51. Unlike other transport modes, the air
As well as adding jobs, skills and
These key characteristics of air freight transport industry pays a vast majority of its investments, the new aircraft will also boost
are most apparent in the data on the modes own infrastructure costs (runways, airport cleaner production methods. Environmental
of transport used in world trade. While terminals and air traffic control), rather than criteria are important elements when
accounting for less than 0.5% of the tonnage of these being financed through taxation and selecting suppliers and environmental
requirements are introduced in contractual
global trade, air freight makes up over a third public investment or subsidies (as is typically
agreements. This means more composite
of the value of international trade. the case for road and railways). In addition, and fewer aluminium structures —
companies in the air transport industry advanced materials account for 53% of the
Passenger air services’ role make significant tax payments to national aircraft — new paint with fewer solvents
in international trade treasuries. Aviation infrastructure costs are and more energy-efficient manufacturing
processes. At the A350 XWB final assembly,
Passenger air services are also vital for funded through user charges (passengers and
22,000m2 of solar panels will produce the
international trade development. While airlines) and airport commercial revenue. equivalent of 55% of the total energy needs
technologies such as videoconferencing User charges, which totalled $92.3 billion in to power the production processes.
can be very helpful, many companies still 201156, are generally included in the price of
consider face-to-face meetings essential for the airline ticket or paid by passengers.
winning new business and developing client User charges are designed and applied
relationships. A recent survey53 of over 2,200 specifically to recover the costs of providing
business people found that 87% rate face-to- facilities and services for civil aviation57. These
face meetings as essential for ‘sealing the deal,’ include the costs of providing airports and air
and nearly all (95%) agreed that such meetings navigation services, including appropriate
are key to success in building long-term amounts for cost of capital and depreciation14 / AVIATION BENEFITS BEYOND BORDERS
A global industry
Working connections
Connectivity and labour productivity65
60
50
Labour productivity — GDP/hour
40
30
20
Developed Asia
North America and Western Europe
10
Developing Asia and Africa
Emerging Europe
0 Transitioning Asia and South America
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
Connectivity per $billion of GDP
of assets, as well as the costs of maintenance, million for aviation (funds used in most cases to foreign markets and increased foreign
operation, management and administration. for commercially unviable services to remote competition in the home market; and through
In some cases, airport user charges are communities)60. The cost of rail infrastructure the freer movement of investment capital and
offset by airport commercial revenues that is also state funded. For example, the latest workers between countries.
result from the provision of airport facilities. high speed rail line in the UK is expected to Improved connectivity:
In 2012, airports worldwide spent around cost taxpayers some $67 billion when fully »» opens up new markets, boosts exports
$19.3 billion on capital expenditure on new completed61. and at the same time increases
infrastructure58, building new capacity to Whilst high-speed rail provides a very competition and choice in the home
meet demand growth, improving existing efficient replacement for air services between market from foreign-based producers,
facilities to increase efficiency and building heavily populated cities within four hours encouraging firms to specialise in areas
energy-efficient terminals. For example, travel time, the need to connect mid-sized where they possess a comparative
the Port Authority of New York and cities that cannot support high-cost high- advantage;
New Jersey has announced infrastructure speed rail infrastructure will mean air »» can drive down costs and prices for firms
works at two of its airports, La Guardia and transport always has a role to play. Highly that have a comparative advantage (such
Newark, which between them will generate efficient turboprop aircraft can be ideal for as innovative products and services),
2,000 construction jobs and over $500 such scenarios and in fact, 83% of turboprop benefiting domestic consumers in
million in regional economic activity in the flights are between destinations less than 500 the process;
16-month projects59. kilometres apart62. Of course, for distances »» opens domestic markets to foreign
In contrast, while road users pay fuel over 1,500 kilometres, air travel becomes a competitors, which can also be an
duties and vehicle excise taxes, most vital link. important driver for reducing unit
governments invest in new highways and in production costs, either by forcing
road maintenance. While some countries Stimulus for greater productivity domestic firms to adopt best international
have different approaches, user charges are Arguably, the largest economic benefit of practices in production and management
typically not applied except in the form of a increased connectivity comes through its methods or by encouraging innovation;
toll charge on some highways. impact on the long-term performance of the »» can benefit domestic customers through
In many parts of the world, rail services are wider economy through enhancing the overall competition by reducing the mark-up
also heavily subsidised by national, regional or level of productivity. A rise in productivity over cost that firms charge their
local governments. Between 2007 and 2009 in firms outside the aviation sector comes customers, especially where domestic
in Europe, state aid for rail services amounted through two main channels: through the firms have hitherto enjoyed some shelter
to nearly $58 billion a year, compared to $440 effects on domestic firms of increased access from competition.A GLOBAL INDUSTRY / 15
SKILLS DEVELOPMENT
Who’s on board?
Propensity to travel, 201270
10
Cyprus
New Zealand Singapore
Belize
Seychelles
Barbados
Bahrain
Spain
Hong Kong
United Kingdom
Canada United States
GE makes major
skills investment
Portugal France
1 Malaysia Italy Austria
Germany
in India
Thailand Saudi Arabia Netherlands
Russia Israel Kuwait
Finland
Trips per capita
Indonesia China
Brazil
Developing ever-more fuel-efficient aircraft
Estonia
0.1 is one of the most competitive technical
Slovenia challenges in today’s aerospace world.
India
World average Companies are searching the globe for
the most talented engineers and research
scientists to give them that vital competitive
0.01
edge which will translate into billions of
dollars of new orders.
Niger
Some are doing more than searching.
The John F. Welch Technology Center
0.001 in Bangalore, India, is aircraft engine
0 10,000 20,000 30,000 40,000 50,000
manufacturer GE’s first and largest
GDP per capita (US$) integrated, multidisciplinary research and
development centre outside the United
States. Over 4,500 scientists, researchers
and engineers are working there on
Improved connectivity can further enhance an costs, while in 23% of cases no investment developing a range of new concepts within
economy’s performance by making it easier was made63. the aviation, energy and related businesses.
for firms to invest outside their home country, GE opened the $175 million research
which is known as foreign direct investment Measuring the impact on productivity centre in 2000. Since then, the centre’s
research scientists have produced a
(FDI). FDI necessarily entails some movement A number of recent studies have attempted to
number of vital technology breakthroughs.
of staff: whether for technical know-how, quantify the long-term impact on a country’s They have made a major contribution to
management oversight, or servicing and GDP that results from an improvement in developing an advanced combustor system
meeting customers. Increased connectivity connectivity. This is not straightforward. Given which reduces emissions of oxides of
also allows firms to exploit the speed and that the supply-side benefits of connectivity nitrogen and improves fuel burn efficiency
by 20% over legacy designs. The new
reliability of air transport to ship components come through promoting international
combustor features in the GEnx engine,
between plants in distant locations, without trade and inward investment, any impact is which powers the new Boeing 787.
the need to hold expensive stocks of inventory likely to manifest itself gradually over time. The centre has benefitted greatly from
as a buffer. This protracted adjustment makes it very local access to India’s huge resource of
Less tangibly, but just as important, challenging to disentangle the contribution highly-trained personnel and now has over
1,000 patent applications to its credit. The
improved connectivity increases passenger that improved connectivity has had on long-
centre works closely with the four other GE
traffic and trade. This, in turn, can lead to term growth from the many other factors facilities that form the GE Global Research
a more favourable environment for foreign that affect an economy’s performance. This network, comprising facilities in the US,
firms to operate in — greater links to the issue is reflected, however, in the wide range Germany, China and Brazil. In addition,
outside world often drive a more conducive of estimates that studies have reached for GE is also investing in a $200 million
manufacturing plant due to be opened
global business environment. In a survey of connectivity’s impact on long-term growth.
at Chakan, near Pune, in 2014 to build a
625 businesses in five countries, respondents Based on a conservative estimate64, a 10% range of aviation and turbo machinery
considered the absence of good air transport improvement in global connectivity (relative components for the global market.
links to be one of the major determining to GDP) would see a 0.07% per annum
factors in not making an investment. On increase in long-run GDP. Given the increase
average, 18% of firms reported that the lack in global connectivity due to air transport over
of good air transport links had affected their the last couple of decades, Oxford Economics
past investment decisions. Of the investments estimates this impact to be worth over $200
that were affected, 59% were made in other billion to global GDP.
locations with better air services, 18% went Analysis shows a strong positive
ahead anyway, but with significantly higher relationship between higher connectivity16 / AVIATION BENEFITS BEYOND BORDERS
A global industry
Peanuts for peanuts
World airfare in real terms, 1970 — 201270
3.0
2.5
$ per tonne kilometres
2.0
1.5
1.0
0.5
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Real price of air transport
to the global network — as a proportion of of science, technology, engineering and of a return flight from Boston to Los Angeles
GDP — and labour productivity. Developing mathematics graduates entering the labour fell by 89% between 1941 and 2012, whilst
and transitional economies typically have pool. This is prompting resources to be the flight time is nine hours (and 11 stops)
low connectivity relative to their GDP and focused on encouraging the next generation shorter67.
also relatively low labour productivity. At the of engineers.
top right of the chart on the previous page Research conducted for the Aerospace
Supporting social
are the developed Asian, North American Industries Association (AIA) suggests that
development
and European economies with high levels of aerospace contributes almost $100 billion in
connectivity and labour productivity65. export sales to the USA’s economy and every People and businesses use air transport
dollar invested in aerospace yields an extra for many reasons. Individuals rely on it for
Innovation $1.50 to $3 in economic activity. The influence holidays and visiting friends and family; while
Air transport is a technology-advanced that aerospace has on the rest of the USA’s businesses use air transport for meeting clients
industry heavily involved in the production high-tech economy is also considerable. and for the speedy and reliable delivery of
of high-specification products which drives This explains why organisations such as mail and goods, often over great distances.
research and development in a number of AIA actively highlight initiatives to recruit and One of the most important economic
areas. This focus on research and innovation retain high quality workers, both to create benefits generated by air transport is the
across the sector not only leads to more new aerospace-centric jobs and maintain the intrinsic value generated for its consumers,
efficient aircraft technology and operational current levels of activity. passengers and shippers. With its speed,
practices — with associated environmental reliability and reach, there is no close
benefits — but also helps build research The cost of air travel alternative to air transport for many of its
capacity at universities and skills across A key driver in the growth of passenger traffic customers. This means that many are likely to
society. The benefits to society of research has been the steady decrease in the real cost value air services more highly than simply the
and development spending by the aerospace of air travel. Since 1970, the real cost of air price they are willing to pay for the ticket. But
industry are estimated to be much higher than travel has been reduced by over 60%, through this added value will vary from flight to flight
in manufacturing as a whole — every $100 deregulation of the aviation market in the and from consumer to consumer, making it
million of investment into research eventually 1980s, the development of more fuel-efficient difficult to measure69.
generates additional $70 million in GDP year aerospace technologies and the introduction A conservative estimate from Oxford
after year66. of low cost carriers. It is now more affordable Economics shows this additional benefit to be
There is concern from aerospace industry for more of the population to travel by air. about a third of a passenger’s typical airfare.
leaders about the future threat of a lack In the United States, for example, the cost The additional benefits are even higher forA GLOBAL INDUSTRY / 17
TOURISM
Sustainable
tourism revitalises
Cape Verde
economy
For many years, life for the 500,000
inhabitants of Cape Verde, a chain of 15
volcanic islands situated in the Atlantic
Ocean 460 kilometres west of Senegal,
was tough. Droughts, soil erosion, poor
agricultural conditions and a lack of
drinking water forced many inhabitants
to earn their living abroad. Even today,
more than 80% of the country’s food has
to be imported.
But thanks to the efforts of the hotel
and aviation industries, Cape Verde’s
economy has been turned around in the
last few years. The islands have invested in
air freight shippers, reflecting the lack of established new social (or family) networks sustainable tourism projects and this has
alternatives to the speed and reliability of in their country of stay, which will be more revitalised the previously fragile economy.
According to an African Development
air transport. easily maintained via air travel. Diasporas
Bank report in 2013, tourism and ancillary
can be an important source of trade, capital, activities remained the driving force of the
Visiting friends and relatives technology, and knowledge for countries economy in 2012, accounting for around
A measured rise in the number of travellers of origin and destination. According to the 30% of GDP and 90% of total exports.
visiting friends and relatives reflects modern United Nations, more than 230 million people Tourism, the main driver for economic
growth, has successfully tapped into natural
family demographics (with families spread live outside their country of birth71.
resources such as biodiversity, landscape
over the world) and an increasingly globalised One specific way in which air travel and the environment. The growth continues:
workforce. It further indicates stronger benefits economies is by strengthening in 2013 tourism revenues were up 27% over
cross-border ties at both the individual and the contact between migrants and their the previous year.
country level. country of origin. Labour mobility is likely Major enhancements to Sal and Praia
Airports on the largest islands, plus new
This is particularly visible within the to encourage migrants to send money home
airports in Boa Vista and Sao Vicente, have
European Union, where the free movement of and even to use trips home as an opportunity helped make the islands an exciting new
goods and people between its member states to take money across borders. For some tourist destination for visitors from America
has developed social and economic networks countries, particularly in the developing and Europe; and have allowed thousands
that have long-lasting effects. It also brings world, these so-called ‘remittances’ are an of Cape Verdeans to stay on the islands to
earn a decent wage, rather than having to
benefits to both the host and originating important source of revenue.
travel overseas.
countries in the form of increased social and Although remittances are sometimes The islands have also become some
economic integration. The free movement interpreted as a sign of large emigration from of the global leaders in renewable energy,
of goods and people has also helped provide a country, with possible negative effects such working towards generating at least 50% of
the cohesion and links needed to develop a as a ‘brain drain’, studies that attempt to electricity from renewable sources by 2020.
regional identity and ensure the continued look at the overall effects of remittances find
development of the European Union. that they significantly benefit the recipient
Labour mobility, which is a key contributor economies:
to long-term economic performance, is »» According to the World Bank, in 2012
enhanced by air travel as it allows migrants to official remittances were up to three
return home more often and allows friends times the level of official development
and family to visit them in their new home. assistance flows to developing countries72,
Also, once migrants return home, they have reaching an estimated $401 billion73.18 / AVIATION BENEFITS BEYOND BORDERS
A global industry
Thanks, Western Union Reliant on family Sign up
Top 10 countries by total Top 10 countries by remittances Pilot and technician requirements,
remittances, 201275 as a % of GDP, 201277 20-year forecast80
80
50 48% Region Pilots Technicians
70 69%
Africa 16,500 15,900
60%
60 40
Asia-Pacific 192,300 215,300
50 31% Europe 99,700 108,200
30
40 25% 25%
24% Latin America 48,600 47,600
21% 21% 21% 20%
30 20 17%
Middle East 40,000 53,100
24% 23%
21% 21% North America 85,700 97,900
20
14% 14% 10
10% CIS81 15,200 18,000
10 7%
World 498,000 556,000
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»» There is evidence that remittances rise »» logistics for airlines and airports; countries that have not normally been
during crises, natural disasters and »» complex information technology systems associated with aircraft manufacturing.
conflicts, thereby contributing to the on board aircraft and in areas such as Such investment by companies across the
stability of the home economy. For baggage handling systems design; world is vital to help grow the industry, as
instance, remittances to Indonesia rose »» service industry support jobs such as well as for customer service. For example,
during the 1997 Asian financial crisis74. chefs in catering companies; aircraft engine maker CFM International
»» International remittances reduce the »» creative positions in design and must support an ever-growing fleet that today
level and depth of poverty. According marketing; includes more than 26,000 engines delivered
to World Bank research, a 10% increase »» customer services occupations in airline to airlines and the company has invested
in international remittances from each ticketing, check-in, cabin crew and retail; in training locations around the world. Just
individual migrant will lead to a 3.5% »» manual labour on airfields; in China, the Aircraft Engine Maintenance
decline in the share of people living »» air traffic controllers and pilots; Training Center, Guanghan City, has trained
in poverty75. »» emergency response personnel at more than 10,000 mechanics since it opened
»» Each dollar of remittances generates airports; and in 1996. Through this school, CFM not only
$3 or more additional economic »» leadership, management and supports a highly skilled Chinese workforce
activity as money is spent to build or executive roles. enhancing the country’s aviation safety, but
improve housing, on locally produced As this list indicates, many roles in the air also demonstrates that sustainability goes
goods or invested in equipment and transport sector require a highly qualified beyond just products and technology.
small businesses76. workforce and a significant amount of CFM also provides a showcase with Sichuan
training. Value-added per employee in the Services Aero Engines Maintenance Company
Highly skilled workforce air transport sector (direct employees, (based in Chengdu, China) a world-class
Jobs in air transport cover a wide range of excluding non-airside activity at airports) engine overhaul facility, in partnership with
activities and skills. These include: generates 3.6 times as much value-added Air China, on how an aircraft engine business
»» skilled work by technicians building and per employee than the economy as a whole — can be a catalyst for global growth. In addition
maintaining aircraft; indicating a more productive workforce. to a highly skilled 300-person workforce, the
»» a diversity of technical engineering This is particularly true for the large facility also supports a network of Chinese
jobs from aircraft and engine design to populations of Asia-Pacific, Africa and sub-contractors.
component production; Latin America. In addition, growth in the With the projected growth in air traffic
»» air traffic control and airspace aerospace sector is helping to drive and in order to replace industry professionals
design planning; innovation and skills development in retiring over the next decades, there will beYou can also read
