Economic Impacts of Aviation: Catalytic Impacts Dr. Michael W Tretheway Chief Economist, InterVISTAS Consulting Group ACED Conference

Transcription

1 strategic transportation & tourism solutions Economic Impacts of Aviation: Catalytic Impacts Dr. Michael W Tretheway Chief Economist, InterVISTAS Consulting Group ACED Conference 20 September 2010

2 InterVISTAS Consulting Group Washington DC, Vancouver, London, the Hague 80 employees 8 offices in US, Canada, Europe, Caribbean Specialities Air Service Development Forecasting, Economic and Regulatory Analysis Privatisation & Finance Security and Borders Facilitation Climate Change Strategy and Inventories 1

3 World GDP versus Air Traffic 7 Index (1970=1) World GDP Passengers Cargo Tonnes Source International Monetary Fund and International Civil Aviation Organization.

4 World GDP versus Air Traffic 12 Index (1970=1) World GDP Revenue Passenger Kilometres Revenue Tonne Kilometres Source International Monetary Fund and International Civil Aviation Organization.

5 Economic Impacts of Aviation Direct A strong economic sector in its own right Indirect Contributor to tourism ($700b industry) Contributor to logistics industry 35% of trade value moves by air Catalytic improved aviation connectivity increases national productivity 4

6 Aviation Enhances Productivity Ultimately, aviation enhances productivity of economies by providing better access to markets enhancing communications and interactions between and within business providing access to a larger labour pool 5

7 Methodology Methodology developed for Measuring impact of information & communications technology investment on national productivity and economic growth ICT accounts for 5.4% of global economy ICT contributes 25% of productivity growth Analysis Substantial academic literature Data: cross section of national productivity With ICT investment Model considers capital deepening 6

8 Methodology for ICT Studies Analysis Substantial academic literature Data: cross section of national productivity Labour productivity Capital deepening ICT Investment is a factor in capital deepening Labour quality TFP growth Also analyse TFP growth and output growth Test for causality (Granger type tests) 7

9 Methodology for Aviation Study Statistical regression analysis 48 countries 9 years Dependent variable (GDP per labour hour) Labour productivity is ultimately the source of standards of living Independent variables Aviation connectivity index (supplied by IATA) R&D spending as % GDP Education spending as %GDP Gross Fixed Capital Formation per worker National fixed effect 8

10 Labour Productivity vs. Connectivity 60 North America and Western Europe Emerging Europe Labour Productivity - GDP/Hour Developed Asia Transitioning Asia and South America Developing Asia and Africa 10 Malta, Cyprus, Hong Kong, Singapore Connectivity per $Billion of GDP 9

11 60 50 Labour Productivity vs. Connectivity Excludes Malta, Cyprus, Singapore, Hong Kong North America and Western Europe Emerging Europe Developed Asia Transitioning Asia and South America Developing Asia and Africa Labour Productivity - GDP/Hour Connectivity per $Billion of GDP 10

12 Key Result 10% increase in aviation connectivity per $GDP increases labour productivity by 0.07% Statistically significant Context for the small number Poland Connectivity index increased 27% E.g., Flights to UK increased from 58/week to 250 Seats from 7,000 to 40,000 Cumulative increase in productivity: 0.19% (us$600mn) Impact on UK was $45mn 11

13 Key Results Aviation Impact is smaller than ICT ICT investment is one of the largest drivers of economic growth and productivity But aviation impact is still strong and cumulative Sustained improved aviation connectivity drives Higher exports Higher tourism (and the cash from tourism) Anecdotal evidence suggests it drives higher export prices Higher shipment reliability or faster delivery time increases logistics value 12

14 Causality Does aviation enable productivity and economic growth? Or is aviation driven by productivity and economic growth? ICT Sector Unambiguous causality: ICT investment drives growth Aviation Some authors find causality of aviation to growth/prod We obtained inconclusive results Cannot establish that av connectivity causes productivity But cannot establish the opposite 13

15 Causality Does aviation enable productivity and economic growth? Aviation Some authors find causality of aviation to growth/prod We obtained inconclusive results Cannot establish that aviation connectivity causes productivity But cannot establish the opposite (growth drives aviation) We find the ambiguity plausible Aviation clearly responds to economic growth But improved connectivity enhances productivity and enables market access and growth 14

16 Economic Rate of Return Vancouver (YVR) example Airport investment: $ 506mn Aircraft capacity investment: $1,280mn Air navigation investment: $ 19mn Total investment: $1,805mn YVR Connectivity increased 25% Note that pax increased 34% RoR: 19.3% 15

17 Other RoR Examples 16

18 Copy of Study IATA.org Economics Aviation Economic benefits 17

19 strategic transportation & tourism solutions Thank You