Air Transportation And Economic Growth

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: You would be surprised to know the influence that the air transport sector has on the economy. Indeed, this industry affects almost all other sectors of the economy. To cite a few of those influenced by any good or bad movements in the air transport industry are surface transport, tourism, accommodation, catering, recreation, entertainment, financial services, information technology services and even retail trade.

A more in depth study of the industry reveals that this is truly a sector for the “many”, not just an elite few. No other industry can boast of a more direct or indirect influence on so many aspects of the economy as air transport does. One only has to visit smaller countries around the region such as Malaysia, Singapore or Thailand to witness the tremendous growth that has been achieved through a well developed and efficient air transport sector. All boast national carriers of world class standing and have made substantial investments in airport infrastructure that has attracted increased air transport traffic to their countries. But can air transport really help to accelerate economic development?

There is sufficient evidence to suggest a close relationship between airline activity and economic growth. It is said that growth in air transport drives economic progress and in turn benefits from it. A study by ICAO of Global GDP and air transport activity as measured by Revenue Passenger Kilometers over the 20-year period from 1975 to 1995 showed a positive correlation between this sector and global prosperity.

Again, in a paper on the effects of the 1995 US-Canada “Open Skies” agreement, it was reported that the bilateral agreement triggered traffic growth of a million passengers in the first year alone, a growth of 15%.

This was a five-fold increase over the historical annual growth rate of about 3 per cent. Increased air transportation between the two countries was expected to boost economic activity to the tune of US$ 15 billion and create thousands of jobs in both countries. Strong evidence indeed of synergy between air transport and economic growth. Such correlation can even lead one to conclude that the extent of increase in air transport activity can provide a useful indicator of the level of economic growth taking place in a country.