Transcript Study Summary and Findings(2006/TPT-WG-28 - Asia

2006/TPT-WG-28/AEG-SRV_004_v2
28th APEC Transportation Working Group Meeting
Vancouver, Canada
5-8 September 2006
Study of the Impacts of Air Transport Liberalization: Study Summary and Findings
Purpose: Information
Submitted by: Michael Tretheway, Executive Vice President, InterVISTAS Consulting Inc.
STUDY SUMMARY & FINDINGS
JUNE 2006
STUDY SUMMARY & FINDINGS
JUNE 2006
2006_TPT-WG-28_AEG-SRV_004_v2
Background
• Commercial aviation is governed today
by a myriad of arcane rules and regulations
that defy logic and the principles of free trade.
• Most airlines are trying to become more competitive
and responsive to consumer demand for lower fares.
• Despite the efforts of the U.S. Government, and
selected others, some governments and airlines
want the protection of today’s regulatory regime.
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Background (cont’d)
• Conventional wisdom is that:
– Liberal air service agreements
promote economic growth and jobs.
– Airlines, freed of economic regulation,
will produce more efficiently,
and that will translate into lower fares.
However:
– There has been no vehicle for measuring
the potential impacts of liberal agreements
until after they have been implemented for a number of years.
– There has been inadequate information available
relative to the benefits of free trade in aviation.
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Study Objectives
• Examine air service liberalization
and identify the impacts on air travel and economic growth.
• Develop an analytical model that will measure
the benefits of liberalization -- prospectively.
• Provide the means to validate liberalization assumptions
through case studies.
• Promote a better informed debate
on the historical and potential benefits of liberalization.
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The Scope and Scale of the Industry
• World airlines annually transport roughly 2 billion passengers
per annum and carried almost 40% of world trade by value.
• “Air transport is a major contributor to job creation and
economic growth.”
– 8% of world GDP
– 5 million direct jobs,
and an additional 8.5 million indirect and induced jobs
– 15.5 million additional direct and indirect jobs
resulting from air transport’s impact on tourism.
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Modeling Liberalization
•
•
•
•
Isolate Liberalization Traffic Growth link
Determine Increased Traffic
Drive Demand Against Baseline Economic Data
Generate
– Increased GDP, Employment, Tourism/Business
and Catalytic Benefits
Liberalization  Traffic growth  Economic Growth  Jobs
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The Impact of Liberalization:
A Cross-Sectional Approach
Liberal 3 +
+ Liberal 4
Liberal Bilaterals
+ Liberal 5
Liberal 1 +
TRAFFIC
Liberal 2 +
* Restrictive 4
* Restrictive 2 * Restrictive 3
Restrictive 5 *
Restrictive Bilaterals
* Restrictive 1
GDP x GDP
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Selected Findings-#1
Test the model’s “What If” capability
• Examine 320 arbitrary country pairs
• Determine economic impact if all were liberalized
RESULT
• Liberalizing the 320 ASAs
would generate 24.1 million jobs
and generate an incremental $490 billion GDP.
– This approximates the GDP of Brazil.
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Selected Findings-#2
• Examined EU Single Aviation Market (1992 Package)
• Traffic growth tracked EU GDP 1990-1994
– 1995 & beyond traffic growth rate well above GDP
• Traffic growth rate 1995-2004 was double
the pre-1994 rate of growth.
• Low Cost Carrier (LCC) market share expanded
from 1.4% in 1996 to 20.2% in 2003.
RESULT
• Incremental GDP $85 billion; new jobs -- 1.4 million.
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Selected Findings-#3
• U.S.-UK agreement was significantly liberalized in mid-1990’s.
All markets opened between U.S. and UK,
except Heathrow and Gatwick.
• A U.S.-EU Air Transport Agreement would completely
liberalize the U.S.-UK market.
RESULT
Traffic between the U.S. & UK would expand by 29%.
GDP would expand by $7.8 billion
-- 117,000 new jobs would be created.
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Case Studies: US-UK 1994
10 City-Pairs
62 Weekly Flights
Nonstop US-UK Routes (Excluding Heathrow & Gatwick)
Source: May 1994 Official Airline Guide, US/UK Designated Carriers Only
Boston
Chicago O’Hare
New York JFK
Glasgow
Washington Dulles
Belfast
Los Angeles
Atlanta
Manchester
Birmingham
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Case Studies: US-UK 2006
17 City-Pairs
144 Weekly Flights
Nonstop US-UK Routes (Excluding Heathrow & Gatwick)
Source: May 2006 Official Airline Guide, US/UK Designated Carriers Only
Boston
Chicago O’Hare
Newark New York JFK
Philadelphia
Washington Dulles
Glasgow
Edinburgh
Las Vegas
Belfast
Atlanta
Manchester
Birmingham
Orlando (MCO)
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London
Bristol Stansted
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Selected Findings-#4
• Partial liberalization of Malaysia - Thailand agreement
• achieved via MoU to allow increase
in capacity, frequency and routes.
RESULT
• Traffic between Malaysia and Thailand
grew by 370,000 passengers per annum (37%).
• Identical impacts on both countries.
– GDP would expanded by $114 million each
– 4,300 new jobs created.
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Chiang Mai
Malaysia - Thailand
Nonstop Services
April 1996
Bangkok
Phuket
Hat Yai
Penang
Kuala Lumpur (Subang)
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Chiang Mai
Malaysia - Thailand
Nonstop Services
April 2006
Bangkok
Koh Samui
Phuket
Hat Yai
Kota Kinabalu
Penang
Kuala Lumpur (Subang)
Kuala Lumpur (KLIA)
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Total Monthly Roundtrip Seat Capacity
Malaysia - Thailand Nonstop Scheduled Services
140
Total Monthly Roundtrip Seats
(000s)
120
100
80
60
AirAsia begins
Service between
Malaysia and
Thailand
40
20
0
Feb- May- Aug- Nov- Feb- May- Aug- Nov- Feb- May- Aug- Nov- Feb- May- Aug- Nov- Feb- May- Aug- Nov- Feb- May01
01
01
01
02
02
02
02
03
03
03
03
04
04
04
04
05
05
05
05
06
06
Source: OAG Schedules – February 2001 – May 2006
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Summary of Case Studies: Job Creation
• Intra Community
- 1.4 million jobs
• U.S.-UK
- 117,000 jobs
• UAE to Germany and UK
- 26,000 jobs
• Australia-New Zealand
- 40,000 jobs
• Malaysia-Thailand
- 8,600 jobs
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Summary Findings
• Open Skies between U.S. & EU
would benefit the U.S. and UK markets
by adding 117,000 jobs and $7.8 billion in GDP.
• Liberalizing a sampling of 320 ASAs
would generate 24.1 million jobs
and generate an incremental $490 billion GDP.
• Case studies uniformly support model results
and “conventional wisdom.”
– Intra-EU Open Skies produced doubling
of growth rate of traffic for the 1995-2004 period
versus pre-1994 regulated environment.
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Conclusions
• World economies are heavily dependent on air transport.
• We now have a model
that will test the impact of liberalization
on a prospective basis.
– This model documents the economic and job creating benefits
of liberalizing air service agreements.
– This study found that if countries
want to increase jobs and economic growth,
liberalizing their air services will help do this.
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STUDY SUMMARY & FINDINGS
Copy of full study available at www.InterVISTAS.com
2006_TPT-WG-28_AEG-SRV_004_v2