The Economic Catalytic Effects of Air Transport in Europe

The aim of this study is to develop a robust methodology for measuring the so-called economic catalytic impacts of air transport. These are defined as the net economic effects (e.g. on employment, incomes, government finances etc) resulting from the contribution of air transport to tourism and trade (demand-side effects) and the contribution to GDP of growth in air transport usage (the supply-side performance of the economy). The practicality of the methodology for quantifying the economic catalytic impacts of air transport was verified by analysing the economic contribution of two European airports - Brussels International, a large European airport, and a regional airport, Belfast International. An indicative estimate of the importance of the economic catalytic impacts of air transport for the EU as a whole was made. It was found that EU residents travelling by air spend more as tourists outside the EU than visitors arriving into the EU by air, by around 0.3% of GDP (31 billion euros in 2002) for the EU as a whole. There are several reasons why greater international tourism can be beneficial even if it has a negative impact on demand in the economy for example, through improving living standards of residents by widening their choices, or through increasing understanding of different cultures and nationalities, as well as by the direct and indirect impact of airport-related activities on jobs and value added in the country / region concerned. The value of exports transported by air is the same of the value of imports for the EU as a whole. For Europe as a whole we therefore find that the overall demand-side economic catalytic impact of air transport has been to reduce net demand by 0.3% of GDP, as EU residents take advantage of the opportunities provided for foreign travel. Air transport has significant impacts on the supply-side performance of the European economy, with long-run implications for productivity and living standards. The relatively fast growth of air transport usage has boosted business investment by around 0.7% per year in the EU over the last decade - equivalent to just under one third of the growth in European business investment over this period. Total factor productivity is a measure of the efficiency with which labour and capital are combined to produce output. The increase in air transport usage over the last decade has facilitated an increase in total factor productivity of 0.1% a year across the EU, as it has, for example, allowed firms access to bigger markets and exploit economies of scale, stimulated competition and increased international networking. This implies that increased air transport usage has raised the level of EU GDP by 1.3% over the last 10 years. For the covering abstract please see ITRD E135207.