AviaDev Europe’s managing director, Juraj Toth, discusses the economics of route development and the global value of aviation.
In the past few months, the aviation industry has become an easy target in the global fight against climate change.
People all around the world, but especially in Europe, have been pointing fingers at air transport as a source of evil that just damages the planet, without acknowledging the immeasurable benefits that aviation has delivered, and continues to deliver for humankind.
IATA CEO, Alexandre de Juniac, always says that with flying, we are in the business of freedom and peace. And he is right! Countries that have direct air links with each other cannot be at war.
Global travel which, by and large is facilitated by aviation, has been bringing nations, cultures, economies and families together for over a century, and this is something that must not be forgotten.
At the same time, all the industry players are well aware of the carbon footprint of flying with aviation estimated to account for 2.1% of global CO2 emissions, and there have been extensive measures and strategies implemented to reduce this footprint.
But we won’t talk about that in this article. Today, we’ll take a closer look at the more tangible part of the equation. We will illustrate how massive aviation’s contribution is to the global economy, by using a couple of real examples.
As ICAO states in their Aviation Benefits Report, the aviation industry supports more than 65 million jobs around the world, and it covers 3.6 % of global GDP. The economic impact generated by the industry is calculated to $2.7 trillion (that is 12 zeros).
Let’s narrow it down a little bit using IATA’s materials published in June 2019 referring to the importance of air transport to individual countries. And let’s take Croatia as an example.
A relatively small state with a population of four million, it is famous for its beautiful Adriatic Sea coast, numerous natural reserves and fantastic cuisine. Naturally, it depends very much on tourism, which has rapidly developed over the last two decades and currently accounts for up to 20% of Croatian GDP.
Aviation plays a vital role in the success story of Croatia. According to IATA’s paper it supports 35,000 jobs and the gross value added contribution to GDP is calculated to be $1.4 billion. Passengers-wise most of the traffic comes from Europe (4.3 million), followed by North America (230,000) and the Asia-Pacific (188,000).
National flag carrier, Croatia Airlines, definitely plays its part in supporting the national economy. However, it’s been struggling with profitability for some time now and currently is also looking for investors. Therefore, most of the growth has been recently delivered by the low cost carriers, including the largest European airline, Ryanair.
In December 2019, Ryanair announced eleven new routes to Zadar Airport to be operated in summer 2020. One of them is to Liverpool in the UK, so let’s take this route as an example.
It will be operated on a twice weekly basis with an Airbus A320 with 180 seats (as Summer 2020 schedule will be operated by a new Lauda base). Both Ryanair and Lauda reported 95% load factors and in total 50 flights will be operated next summer.
That accounts for 8,550 arriving guests to Zadar. According to the findings of the 2017 survey by the Zagreb based Institute of Tourism, British tourists spend on average €140 a day in Croatia. Their average length of stay according to the Croatian bureau of statistics was 5.1 nights.
To sum it up, after putting all the numbers together: The air service between Liverpool and Zadar operated by Lauda just twice per week for 25 weeks of this summer in total will add €6.1 million to the Croatian economy. And that’s just one route!
In summer 2020, Lauda will operate 31 routes in total to Zadar, expecting to bring 336,000 tourists to the Dalmatian Coast city.
According to the survey already mentioned, average spend of all tourists in Croatia in 2017 was €79 per day. Average length of stay was the same 5.1 days as for British tourists, so, in total, Lauda’s 2020 summer schedule at Zadar Airport will very likely bring more than €135 million to the Croatian economy!
And that’s just for the regional airport of Zadar, which is the fourth busiest airport in Croatia, the three other major ones being Zagreb, Split and Dubrovnik.
Let’s fly to Kenya for another interesting example of how aviation, almost literally, puts bread on the table.
In Kenya, more than 100,000 jobs depend on the cut flower industry, which impacts on over million livelihoods. The cut flower industry supports approximately 1.06% of the national economy, generating around $700 million in foreign exchange each year.
Flower exports have grown significantly from 10,946 tons in 1988 and 86,480 tons in 2006 to 159,961 tons in 2017. Over 90 % of fresh horticultural products are transported by air freight.
An estimated 70% of the flowers are grown at the rim of Lake Naivasha, northwest of Nairobi. There are good road network connections between the Lake Naivasha growing area and Nairobi’s Jomo Kenyatta International Airport, a distance of about 80 to 100 kilometres.
Flowers picked in the morning reach markets in Amsterdam by evening. The Netherlands is the leading destination for Kenyan flowers, commanding 48% of the export volume, followed by the United Kingdom at 16%. About 38% of all cut flower imports into the European Union come from Kenya.
At AviaDev Europe we are focused on creating opportunities for European regional airports to meet airlines together with their tourism partners in a joint effort to increase the connectivity of their destinations. Our first two events took place in Valencia.
In September 2019, SAS announced 14 new routes for summer 2020 and one of them will be connecting Valencia with Oslo. The discussions regarding the route viability were accelerated during the one-to-one meeting sessions at the AviaDev Europe event in Valencia in December 2018 where SAS network planners had the chance to understand the dynamics of this fabulous destination.
In summer 2020 they plan to operate just 12 flights, with Boeing 737-700 with capacity of 141 seats. Average load factor of SAS in 2019 was 75.2% so that would bring 1,272 Norwegian tourists to Valencia.
According to the National Institute for Statistics in Spain, Scandinavian tourists on average spend €1,264 per stay. To sum things up, this tiny little short summer route is expected to bring more than €1.6 million. Not bad, is it?
Aviation is not just a beautiful and very addictive industry to work in, it is also the key enabler for globalisation, freedom and peace.
Since its inception, it has been driving, spreading and facilitating economic development all around the world. It is through aviation that even people living in the poorest countries on the planet can have a fighting chance for a better life. Let’s not forget that.