The Importance of Improving the UKs Aviation Infrastructure

1
The Importance of Improving the UKs Aviation
Infrastructure

• Adrian Cooper
• Managing Director, Oxford Economics
• acooper_at_oxfordeconomics.com

2
The Economic Contribution of the Aviation
Industry in the UK

• This presentation draws on a detailed study
  undertaken by Oxford Economics on behalf of a
  consortium of airlines, airports, DfT,
  VisitBritain and the CBI. Our analysis
  highlights
• The importance of the aviation industry to the UK
  economy, both in its own right and as a
  facilitator of the performance of other sectors
• Tourism is clearly dependent on good air services
  but so too are a wide range of other sectors,
  particularly in the knowledge economy
• Congestion at airports is imposing a heavy cost
  on UK plc
• The governments proposals for new runway
  development would generate substantial increases
  in GDP, which are far larger than the
  environmental impacts

3
The size and scope of the aviation industry

• Aviation is a substantial UK industry in its own
  right
• The aviation industry contributed 11.4 billion
  (1.1) to GDP in 2004
• It directly employed 186,000 people (full-time
  equivalents) in 2004
• But the aviation industrys key contribution to
  the UK economy is in helping other sectors to
  operate more efficiently and to compete in the
  global economy

4
Aviation supports tourism

• Nearly three-quarters of international visitors
  to the UK arrive by air.
• Visitors arriving by air contribute over 12
  billion a year to the UK tourism industry
• Air services also allow UK tourists to enjoy a
  much wider range of overseas holidays than would
  otherwise be accessible
• Increased air services capacity is likely to be
  needed if the government is to achieve its
  objective for the tourism industry to grow by a
  third by 2010.

5
Aviation key to trade, investment and productivity

• Air services help to improve the competitiveness
  of almost all aspects of companies operations
• 55 by value of the UKs manufactured exports to
  countries outside the EU are transported by air
• By expanding the market in which firms operate,
  air services also act as a spur to innovation,
  increased sales and profits, and improved
  efficiency
• Nearly one in ten companies report that the
  absence of good air transport links has affected
  their organisations decisions to invest in the
  UK
• Of these, 30 chose not to make the investment in
  the UK

6
How companies would be affected by a
deterioration in air services
7
The costs of airport congestion

• Congestion costs have been rising over the past
  decade as passenger numbers have outpaced
  increases in capacity
• Costs to airlines and passengers from congestion
  are estimated to have been 1.7 billion in 2005
• Costs could exceed 5 billion a year in todays
  prices by 2015 if current trends continue
• And they could approach 20 billion a year by 2030

8
The benefits of the White Paper proposals

• Implementing the proposals in the governments
  airports White Paper would generate substantial
  wider economic benefits
• Full implementation of the White Paper runway
  proposals is estimated to generate additional GDP
  of over 13 billion a year in todays prices by
  2030
• The Net Present Value of full implementation is
  estimated to be 81 billion equivalent to over
  1,300 per head of the population

9
Conclusions

• Investment in the UKs aviation infrastructure is
  vital if the governments objectives for the
  growth of the UK tourism sector are to be
  achieved
• But improving air services will facilitate the
  competitiveness of other sectors in the UK
  economy, such as high-tech companies and
  financial business services
• Congestion at UK airports is already imposing a
  heavy cost on the economy
• By improving the infrastructure, the governments
  White Paper runway proposals would generate
  substantial economic benefits