Wednesday, 12 October 2011

Air Travel Crucial for Irish Economic Recovery ©

Air Travel will play a crucial role in the recovery of the Irish economy playing a valuable role to drive inward Foreign Direct Investment, and enabling Irish companies to grow export markets, with the economic expected to grow by 1.8% in 2012 (Irish Central Bank) .

It was citied in the research of Ishutkina that between 1985 and 2005 the average growth rate of the airline sector in Ireland was 17.1% ,almost triple the GDP rate of 6.1%, as a result of EU liberalization packages opening up the market.

Therefore the key to unlocking the growth of the aviation sector will be further liberalization of the market by creating a competitive cost environment with airport infrastructure, and expanding open skies agreements.

The air transport sector is a key connectivity tool enabling movement of capital, knowledge, opportunity, people, resources and skills; it impacts on the economy directing creating jobs and indirectly i.e. for every 1 million passengers through airport 1,000 jobs are created in the economy (ACI).

Ireland must create new traffic flows for labour, investment and tourism, as the industry makes a significant contribution to the economy through wages, profits, tax and Vat receipts and supports further jobs through the valued added supply chain.

One enduring industry ‘fact’ is that traffic grows twice as fast as GDP

Recent research has shown that there is a significant link between air connectivity and business productivity and long-term GDP growth, the key drivers of international air travel are costs i.e fuel, GDP growth, the political environment, trade growth and service quality changes, a 10% increase in business travel has been found to increase productivity and GDP by roughly 1% in the long run (Oxford Economics).

It is clear that air travel demand is driven by economic growth and that it is highly leveraged to the economic cycle, expanding and contracting at roughly twice the rate of the overall economy (IATA).

This fact has been bourne out with the Dublin Airport Authority stating Dublin Airport traffic was up 4% in the first nine months to August, with economic growth of 1.6% expected for 2011, the traffic growth bears out the GDP/Traffic relationship.

The Minister of Transport Leo Varadkar is to due to make a decision of the future of the Dublin Airport Authority by the end of the year (Cork Independent), in early September he stated the ownership of Cork, Dublin and Shannon under the Dublin Airport Authority was "not tenable" (Irish Times), recognizing airport costs are key part of recovery strategy to restore competitiveness to stimulate the tourism industry, the review of the €3 air travel tax next spring is to be welcomed.

Interestingly Aer Lingus and Ryanair account for a combined market share of 78% at Dublin Airport (DAA Annual Report 2010), at Cork Airport they account for 77% (DAA Annual Report 2010) and Shannon Airport 64% (DAA Annual Report 2010).

The Air Travel industry can make a significant contribution to the economic recovery, once competitiveness in airport infrastructure is restored to pre 2008 levels, according to research 73% of tourists travel by air (GoIreland), the average Tourist spend is €502 (FailteIreland) and Business Tourist spend is €980 (FailteIreland).

It was citied by the World Travel and Tourism Council tourism in Ireland makes a contribution of 6% of GDP €1.9 Billion to exchequer supporting 106,000 jobs.

On Friday 14th of October it was announced that Tourism Ireland is to collobrate with an number of airlines including Aer Arann, Aer Lingus, Etithad Airways, Emirates Airlines and US Airways to stimulate the inbound tourism market using a portion of revenue from the Air Travel Tax for joint marketing promotions.

The indications for 2012 are bright with Emirates Airlines to launch a new daily service from Dubai to Dublin commencing on the 9th of January 2012 enabling access to Emirates Airlines growing route network, and Lufthansa is to commence a weekly service from Dusseldorf to Ireland West Knock Airport for the summer season, and Ryanair has announced that it will launch three new routes into Ireland West Knock Airport for summer 2012.

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Irish Aviation Research Institute © 12th October 2011 All Rights Reserved.

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