final report asia pacific commercial air transport ... · pdf fileasia pacific commercial air...

Asia Pacific Commercial Air Transport: Current and Future Economic Benefits

PREPARED FOR

International Air Transport Association

PREPARED BY

InterVISTAS Consulting Inc.

December 2015

FINAL REPORT

Asia Pacific Air Transport: Current & Future Economic Benefits ~ December 2015 i

Executive Summary

The Asia Pacific region is achieving an unprecedented growth rate in aviation. This high growth rate is expected to continue in the coming decades, an observation backed up by the large number of aircraft scheduled for future delivery to carriers in the region. By 2030, it is estimated that air travel in Asia will be greater than Europe and North America combined. This growth is generating large regional economic impacts from aviation. However, there is concern that the development of aviation infrastructure in the region is not keeping pace with growth in demand, putting some of the potential future economic benefits of aviation at risk.

This study, commissioned by the International Air Transport Association (IATA), estimates the economic contribution that air transport currently makes as a driver of economic activity in the Asia Pacific region, and highlights the importance of this industry to regional economies. The study also examines the potential contribution of aviation to future economic growth and the extent to which this contribution depends on timely airport capacity development.

Not only is the growth of Asia Pacific air transport a major economic generator in its own right, the resulting increase in connectivity to/from/within the region facilitates economic growth and development in a wide spectrum of industries. The spending of international tourists arriving by air is estimated to generate 9.1 million jobs and USD $142 billion in GDP. In addition, the wider economic benefits of aviation, related to increased productivity and trade, generate an estimated 18.6 million jobs and USD $347 billion in GDP. Overall, the wider economic benefits of aviation in Asia Pacific (both tourism and non-tourism impacts) facilitate 27.6 million jobs and USD $488 billion in GDP, equivalent to 2.0% of GDP in Asia Pacific.

Activities in the air transport sector, which include the airlines, the airport operator, air traffic control, general aviation, ground handlers, airport security, immigration and customs, aircraft maintenance,

Total Impacts (Direct, Indirect, Induced and Wider Economic Benefits): 33.7 million jobs and USD $705 billion in GDP.

Relative Scale of Impacts: The total employment impacts equate to roughly

1.4% of the total employment base in Asia Pacific and 3% of the region’s total GDP.

The Asia Pacific region is achieving unprecedented long term growth in commercial aviation. This is generating high economic impacts from aviation and also facilitating general growth in the Asia Pacific economies from the catalytic impact of increased global connectivity. Greater connectivity stimulates aviation dependent industries such as tourism, and also enhances the productivity of trade and many other sectors of the economy. The coming capacity increases in the region, as evidenced by a growing backlog of aircraft on order, will generate even larger economic impact. Some of this may be at risk, however, if aviation infrastructure capacity does not keep pace with growth in demand.

Asia Pacific Air Transport: Current & Future Economic Benefits ~ December 2015 ii

and other airport related activities, support almost 2.4 million direct jobs in the Asia Pacific region, supporting USD $113 billion in Gross Domestic Product (GDP). A further 1.9 million indirect jobs are generated in industries that supply and support the aviation industry (e.g., fuel refining, aircraft parts suppliers, and food wholesalers), contributing USD $64 billion in GDP. The induced impacts resulting from direct and indirect employees spending their wages in the general economy amount to 1.8 million induced jobs and USD $40 billion induced GDP.

Adding the activity directly related to the airlines and airports, to the indirect and induced impacts that flow from that, plus the impacts on other sectors of the economy facilitated by air connectivity, we obtain the total economic importance of commercial aviation in the Asia Pacific region as 33.7 million jobs supported (1.4% of total labour force in the region), and the USD $705 billion GDP contributed to the region (3% of the region’s total GDP), as shown in Figure ES-1. The total employment impacts by country are presented in Figure ES-2. Note that the GDP share of aviation in the region (3%) is higher than the employment impact (1.4%) because jobs in this sector are high wage and high value added.

It should be noted that these figures are not attempting to credit aviation alone with creating nearly 3% of the Asia Pacific economy. These economies are far more complex than that. It clearly takes a wide range of players acting together to generate economic growth – government, business, infrastructure providers, residents and others. For example, if no one had decided to build large amounts of hotels in many of these countries, tourism would also be substantially lower. What the estimates do show is that without the development of aviation connectivity, the economies of these countries would not be as large, affluent or diverse as they are today.

The connectivity provided by the aviation sector in Asia Pacific helps attract tourists, facilitates trade and investment, and contributes to the growth of national economies.

To illustrate the impact of aviation connectivity on economies, consider a country like Singapore. Adjusted for cost of living (purchasing power parity), the World Bank ranks Singapore fourth in the world in terms of per capita GDP while the IMF ranks it third. However, Singapore does not have large amounts of natural resources or a particularly large population base to rely upon. Its economic success is underpinned by the fact that it is an accessible and open country in which to do business. Trade is particularly important to the Singapore economy: the value of goods trade processed in Singapore in 2013 was over three times its annual GDP. By comparison, the same ratio for the United States was 0.25. A large number of factors have contributed to Singapore’s success as a trading centre and business hub: business regulations, government policy, taxation, the education and skillset of the local population, geographic location, historical legacy, etc. Nevertheless, the quality and range of air services available at the country’s main airport, Changi Airport, is a major, if not critical contributing factor. Singapore’s position as a global trading and business hub would not be possible without the high degree of air connectivity (passenger and cargo) provided by the airport. The air service at the airport transports high-value domestic exports around the world, and enables employees of multinational businesses to travel to clients, regional offices, and global headquarters. Many of the businesses with regional headquarters in Singapore would not be located there without the mobility that the country’s air services provide.

Asia Pacific Air Transport: Current & Future Economic Benefits ~ December 2015 iii

Figure ES-1: TODAY 2014 Economic Impact of Air Transport in Asia Pacific

Impact Jobs

(Millions) GDP

(USD Billions)

Asia Pacific Region

Direct 2.4 $113

Indirect 1.9 $64

Induced 1.8 $40

WEB: Tourism 9.1 $142

WEB: Productivity & Trade 18.6 $347

Total Wider Economic Benefits 27.6 $488

Total 33.7 $705

Numbers may not sum due to rounding.

Figure ES-2: Total Employment (Direct+Indirect+Induced+Wider Economic Benefits) by Country 2014

Asia Pacific Air Transport: Current & Future Economic Benefits ~ December 2015 iv

Aviation is expected to continue growing strongly over the next 20 years. Air passenger traffic in Asia Pacific is predicted to outpace that of both Europe and North America up to at least 2034, rising to a total of 4.3 billion passengers. As the aviation sector grows, its economic contribution is expected to grow as well. However, this growth is dependent on the ensuring that the aviation system is allowed and enabled to increase capacity to accommodate this future traffic growth. Should capacity be constrained, by inadequate airport development, inadequate airline financing for aircraft acquisition or inadequate air traffic control and other support services, then the potential benefits of aviation in the region will reduced, potentially severely.

Based on passenger traffic forecasts provided by IATA, the number of air passengers moving through the Asia Pacific region will increase from over 2.2 billion in 2014 to just under 4.4 billion in 2035. This increase in passenger traffic represents an average annual growth of 3.2%. Correspondingly, it is estimated that the number of direct, indirect, induced and wider economic benefit jobs will increase to over 72 million, and GDP is expected to reach over USD 1.3 trillion in 2035.

This assumes that none of the airports in the region experience any capacity constraints (i.e., terminal or runway constraints) and airline and support service capacity and investments are not constrained by policy or financing. Policy or financial constraints on development of aviation will reduce those economic benefits. IATA has identified airports in the region that will require additional airport investment in order for some of the forecast traffic to be accommodated. Based on this information, the economic impact associated with failure to make these investments has been estimated (i.e., the economic impact that will be foregone if capacity is not expanded and some traffic demand is unmet). The economic impact associated with such a constraint on capacity expansion is estimated to be foregoing 23.8 million jobs and USD $399 billion in GDP.

Figure ES-3 summarises the future economic impact of air transportation in the Asia Pacific region when traffic is unconstrained by capacity and the economic impact associated with future investment in airport capacity.

Future Impacts: By 2035, air transportation in Asia Pacific is expected to support nearly 72.3 million jobs and nearly USD$ 1.3 trillion in GDP if capacity in the region is not constrained, an increase of 215%.

Potential impact of expanding airport capacity: The value of future investment in airport capacity in the next 20 years is estimated to be 23.8 million jobs and USD $399 billion in GDP, 33% of the potential gain in terms of jobs.

Asia Pacific Air Transport: Current & Future Economic Benefits ~ December 2015 v

Figure ES-3: THE FUTURE 2035 Projected Impacts in Asia Pacific, Unconstrained & Constrained

Impact Unconstrained Without Capacity

Investment

Foregone Economic Benefits from failure to Invest in capacity*

Jobs (Millions)

Direct 4.6 3.2 1.4

Indirect 3.6 2.5 1.1

Induced 3.6 2.5 1.1

Wider Economic Benefits 60.4 40.3 20.1

Total 72.3 48.5 23.8

GDP (Billions USD)

Direct $208 $147 $61

Indirect $115 $82 $32

Induced $71 $52 $19

Wider Economic Benefits $947 $661 $286

Total $1,340 $942 $399

* Estimated impacts of future investment in airport capacity to meet demand in the next 20 years. Numbers may not sum due to rounding.

Asia Pacific Air Transport: Current & Future Economic Benefits ~ December 2015 vi

Contents

Executive Summary ....................................................................................................... i

1 Introduction: Asia Pacific Aviation ...................................................................... 1

2 A Profile of Aviation and Airports in Asia Pacific ................................................ 3 2.1 Asia Pacific: Defining the Region ..................................................................................... 3 2.2 Airports in Asia Pacific ..................................................................................................... 3 2.3 Air Traffic in Asia Pacific .................................................................................................. 3

3 How Asia Pacific Airports Contribute to their Economies: Defining Economic Impacts ................................................................................................................... 8 3.1 What is Economic Impact ................................................................................................ 8 3.2 Categories of Economic Impact ....................................................................................... 8

4 Study Methodology .............................................................................................. 12 4.1 Estimating Direct Employment ....................................................................................... 13 4.2 The Indirect and Induced Impacts ................................................................................. 13 4.3 Wider Economic Benefits ............................................................................................... 15 4.4 Constrained Impacts ...................................................................................................... 15

5 The Direct Economic Impact of Air Transport in Asia Pacific .......................... 17 5.1 Direct Economic Impacts ............................................................................................... 17 5.2 Direct Economic Impact by Country .............................................................................. 17

6 Indirect and Induced Economic Impact .............................................................. 22 6.1 Indirect and Induced Economic Impacts in Total ........................................................... 22 6.2 Direct, Indirect and Induced Economic Impact by Country............................................ 23

7 Direct Benefits for Passengers: Case Studies .................................................. 26 7.1 Overall Asia Pacific ........................................................................................................ 26 7.2 Nonstop Services and Lower Fares in ASEAN ............................................................. 28 7.3 Travel Time Savings ...................................................................................................... 34 7.4 Value of Time ................................................................................................................. 36 7.5 Greater Connectivity ...................................................................................................... 39

8 Studies of the Wider Economic Benefits of Airports and Air Connectivity ..... 40 8.1 Introduction .................................................................................................................... 40 8.2 Trade .............................................................................................................................. 41 8.3 Tourism .......................................................................................................................... 42 8.4 Investment and Business Location ................................................................................ 43 8.5 Impact on Employment, Economic Growth and Productivity ......................................... 44 8.6 Conclusions ................................................................................................................... 45

9 Estimating the Wider Economic Benefits of Air Transport in Asia Pacific ...... 46 9.1 Tourism Impacts ............................................................................................................ 46 9.2 Air Connectivity and Economic Growth ......................................................................... 47 9.3 Wider Economic Benefits on Productivity, Trade and Investment ................................. 47 9.4 Wider Economic Benefits by Country ............................................................................ 50

10 Summary: Total Economic Impact Generated and Facilitated by Aviation in Asia Pacific ................................................................................................................... 53 10.1 Total Economic Impacts ................................................................................................ 53 10.2 Total Economic Impacts by Country .............................................................................. 55

11 Future Economic Impact in Asia Pacific: Unconstrained Projection for 2035 . 58 11.1 Forecast Scenario .......................................................................................................... 58 11.2 Total Future Contribution of Air Transport in Asia Pacific.............................................. 59 11.3 Asia Pacific Countries .................................................................................................... 59

12 The Benefit of Fully Enabled Air Transport Capacity Development ................. 62 12.1 Existing and Potential Air Transport Capacity Constraints in Asia Pacific .................... 62

Asia Pacific Air Transport: Current & Future Economic Benefits ~ December 2015 vii

12.2 Capacity Constrained Forecast Scenario ...................................................................... 63 12.3 Economic Contribution of Asia Pacific Region if Capacity is Constrained ................... 66 12.4 The Value of Unconstrained 20-Year Capacity Growth in Asia Pacific ......................... 67 12.5 2035 Constrained Economic Impacts, by Country ........................................................ 69

13 Impacts in the ASEAN Region ............................................................................. 71 13.1 Air Transport in ASEAN ................................................................................................. 71 13.2 Direct Impacts ................................................................................................................ 71 13.3 Direct, Indirect and Induced Economic Impacts ............................................................ 71 13.4 Wider Economic Benefits ............................................................................................... 72 13.5 Total Future Contribution of the ASEAN Region ........................................................... 72 13.6 Future Constrained Economic Contribution of the ASEAN Region ............................... 73 13.7 20-Year Capacity Constrained ASEAN Value of Capacity Expansion .......................... 75 13.8 Total Economic Impacts ................................................................................................ 76

14 Impacts by Country .............................................................................................. 77

Appendices ............................................................................................................... 114

Appendix A: Inferring Direct Employment .............................................................. 115

Appendix B: The IATA Air Connectivity Index ........................................................ 117

Appendix C: Discussion of the Relative Magnitudes of the Results on Wider Economic Benefits .............................................................................................................. 120

Appendix D: Additional Constrained Forecast Scenario ....................................... 122

Appendix E: Airport Constraint Details ................................................................... 125

Asia Pacific Air Transport: Current & Future Economic Benefits ~ December 2015 1

1 Introduction: Asia Pacific Aviation

As a result of high economic growth and a rising middle class, demand for air transportation continues to increase in the Asia Pacific region. According to the International Air Transport Association (IATA), Asia Pacific carriers experienced the highest growth rate in international passenger traffic in 2014 compared to European and North American airlines, with a 5.8% increase year-over-year.1 This is not merely a one time high growth rate, but rather a phenomenon that is now 20 years old. Air cargo has also been growing strongly with 2014 IATA Asia Pacific freight tonne-kilometres growing 5.4% with the highest regional freight load factor.

However, the role of aviation in Asia Pacific is not merely a service provider to other industries and members of the public, but also a key driver of economic growth and prosperity. The growth of aviation in the region has contributed to general economic growth and development. As documented in this report, while the aviation sector is a major industry and employer in its own right, its contribution to trade, tourism, investment and economic productivity is even more substantial.

Aviation is expected to continue growing strongly over the next 20 years. Air passenger traffic in Asia Pacific is predicted to outpace that of both Europe and North America up to at least 2034, rising to a total of 2.9 billion passengers.2 Asia Pacific air cargo is also projected to grow, with IATA predicting that the intra-Asian and international to Asia combined air cargo market share will exceed 50%. As the aviation sector grows, its economic contribution is expected to grow as well. However, this growth is dependent on the ensuring that the aviation system, and airports in particular, are allowed to increase capacity to accommodate this future traffic growth.

IATA commissioned InterVISTAS Consulting (InterVISTAS) to estimate the benefits of air transport in promoting the economic development and integration in Asia Pacific. The study also estimates the future economic contribution of aviation and the impact of not removing capacity constraints on this contribution. This report is the summery of that study, and is structured as follows:

Chapter 2 provides an overview of the aviation sector in Asia Pacific region;

Chapter 3 explains the economic concepts behind the study;

Chapter 4 outlines the methodology applied to estimate the value of air transport in the region;

Chapter 5 presents the direct employment and GDP impacts associated with the operation and management of activities in the aviation sector;

Chapter 6 documents the down-stream impacts to businesses that supply and support airport activities, and the impact of the spending of employees in the general economy;

Chapter 7 includes case studies that demonstrate some of these direct benefits for passengers, such as lower fares, time savings and greater connectivity;

Chapter 8 reviews related literature that has examined and quantified the contribution of air transport to trade, investment, tourism, productivity and ultimately, economic growth;

1 International Air Transport Association (2015). Strong Demand for Air Travel Rises in 2014. 2 International Air Transport Association (2015). New IATA Passenger Forecast Reveals Fast-Growing Markets of the Future.


Chapter 9 examines how air transportation in the Asia Pacific facilitates tourism, trade, investment and productivity in the wider economy, and estimates the jobs and GDP associated with this activity;

Chapter 10 forecasts the future economic impact of the aviation sector in the region over the next 20 years;

Chapter 11 summarises the overall value of air transport in the Asia Pacific region.

Chapter 12 focuses on the value of capacity expansion in terms of jobs and GDP. It does this by considering the economic impacts of reduced air travel and air connectivity if airports in the region are constrained by policy or financing from being able to invest and develop infrastructure to fully meet air travel demand;

Chapter 13 highlights the contribution of aviation to a subset of the economies in the Asia Pacific region: ASEAN, which has recently instituted new policies to better harmonise and facilitate the growth of air transport;

Finally, Chapter 14 provides country by country impacts.


2 A Profile of Aviation and Airports in Asia Pacific

This chapter provides background information about the aviation sector in Asia Pacific.

2.1 Asia Pacific: Defining the Region

This study defines the Asia Pacific to include 36 countries, which are illustrated in Figure 2-1.

Australia

Bangladesh

Brunei

Cambodia

China

Fiji

French Polynesia

Hong Kong

India

Indonesia

Japan

Laos

Macau

Malaysia

Maldives

Micronesia

Mongolia

Myanmar

Nepal

New Caledonia

New Zealand

North Korea

Pakistan

Papa New Guinea

Philippines

Singapore

Solomon Islands

South Korea

Sri Lanka

Taiwan

Thailand

Timor-Leste

Tonga

Vanuatu

Vietnam

Western Samoa


Figure 2-1: Study Asia Pacific Region Defined


2.2 Airports in Asia Pacific

The Asia Pacific region is home to a large number of airports, many of which are amongst the largest in the world in terms of passenger throughput. Beijing Capital International, the busiest airport of the region in terms of passenger traffic, handled over 86 million passengers in 2014, up 2.9% from the previous year. Two additional airports from the study region can be found in the top-10 list of the world’s busiest airports by passenger traffic, which is shown in Figure 2-2.

Figure 2-2: Top-10 Busiest Airports by Passenger Traffic (2014)

Rank Airport Country Code Passengers

1 Hartsfield–Jackson Atlanta International Airport

United States ATL 96,178,899

2 Beijing Capital International Airport China PEK 86,128,270

3 London Heathrow Airport United Kingdom LHR 73,408,489

4 Tokyo Haneda Airport Japan HND 72,826,565

5 Los Angeles International Airport United States LAX 70,663,265

6 Dubai International Airport U.A.E. DXB 70,475,636

7 O'Hare International Airport United States ORD 69,999,010

8 Paris-Charles de Gaulle Airport France CDG 63,813,756

9 Dallas/Fort Worth International Airport United States DFW 63,554,402

10 Hong Kong International Airport China HKG 63,121,786

Source: ACI Annual Worldwide Airport Traffic Report

Asia Pacific airports account for a third of the traffic in the table above, which highlights the importance of understanding the benefits of air transport in promoting economic development and integration in Asia Pacific. Further, severe airport capacity constraints at many airports in the region, including #2 airport PEK, means that the traffic levels of a number of Asia Pacific airports would have been even higher if growth was unconstrained.

2.3 Air Traffic in Asia Pacific

Outbound Nonstop Passenger Flights and Seat Capacity

With a growing middle class and low cost carriers fighting for market share, it is no surprise that outbound passenger flights and capacity continue to rise. In 2015, airlines in the Asia Pacific region are scheduled to fly over 10 million direct outbound flights, with an associated capacity of over 1.6


billion seats. This represents a doubling of both flights and capacity over the last 11 years, and an average annual growth of 7.2% and 6.8%, respectively, as illustrated in Figure 2-3.

Figure 2-3: Direct Outbound Passenger Flights & Capacity from Asia Pacific Region (2004-2015)

Source: Innovata Schedules via Diio

In 2014, the total outbound seat capacity for nonstop flights in Asia Pacific was equivalent to 1.5 billion seats, as shown in Figures 2-4 and 2-5. With more than 530 million seats and a growth rate of 10.6% annually on average, China recorded the largest seat capacity for outbound nonstop flights (domestic and international) in 2014, comprising approximately 35% of the region’s capacity. In the same year, Japan had the second highest capacity of 201 million seats, accounting for 13% of the total and growing at an average of 1.7% per annum. India and Indonesia each make up 8% of total capacity, with each country providing capacity of approximately 126 million seats and an average yearly growth rate of 11.9% and 15.2%, respectively.

Australia is the fifth largest market with a 101 million seat capacity in 2014 (7% of total capacity), and a growth rate of 4.7% annually on average over the last 10 years. Altogether, the top five countries, based on 2014 outbound seat capacity, comprise 71% of the total outbound seat capacity for nonstop flights in Asia Pacific. Of the 36 countries in the region, 21 countries had a seat capacity less than 10 million in 2014, accounting for less than 3% of total seat capacity.

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Figure 2-4: Total Outbound Nonstop Seat Capacity by Country in Asia Pacific, 2014

Country Total Outbound Seat Capacity

(Millions)

CAGR (2004-2014)

% Share of Total

China 531 10.6% 34.5%

Japan 201 1.7% 13.1%

India 126 11.9% 8.2%

Indonesia 126 15.2% 8.2%

Australia 101 4.7% 6.6%

Thailand 69 7.0% 4.5%

South Korea 62 3.1% 4.0%

Malaysia 60 7.8% 3.9%

Philippines 45 9.7% 2.9%

Hong Kong 41 4.2% 2.6%

Singapore 36 5.2% 2.4%

Vietnam 33 14.7% 2.1%

Taiwan 31 0.02% 2.0%

New Zealand 21 1.3% 1.3%

Pakistan 11 2.7% 0.7%

Myanmar 6 11.0% 0.4%

Sri Lanka 5 5.1% 0.4%

Bangladesh 5 4.8% 0.3%

Cambodia 4 8.5% 0.3%

Macau 4 3.7% 0.3%

Nepal 4 12.6% 0.3%

Maldives 3 10.4% 0.2%

Papua New Guinea 3 6.5% 0.2%

Laos 2 10.4% 0.1%

Fiji 1 -0.8% 0.1%

French Polynesia 1 -1.2% 0.1%

Brunei Darussalam 1 1.3% 0.1%

Mongolia 1 11.4% 0.1%

New Caledonia 1 1.2% 0.05%

Vanuatu 0.5 4.6% 0.03%

Western Samoa 0.2 -0.3% 0.02%

Solomon Islands 0.2 2.4% 0.01%

Micronesia 0.2 -2.6% 0.01%

Tonga 0.1 -5.8% 0.01%

East Timor 0.1 7.0% 0.01%

North Korea 0.1 30.4% 0.01%

Total 1,538 7.2% 100% Source: Innovata Schedules via Diio Numbers may not add up due to rounding.


Figure 2-5: Seat Capacity by Country in Asia Pacific, 2014



Air Cargo

In addition to passengers, a tremendous amount of cargo moves through airports in the Asia Pacific region, driven largely by demand for foreign goods and the availability of affordable labor. Hong Kong International airport alone handled over 4.1 million tonnes of cargo in 2014, up 6% from the volume handled the previous year. This trend is mirrored by many of the other cargo hubs located in the region. Figure 2-6 lists Asia Pacific’s top cargo hubs by weight, and indicates their year-over-year growth (2014 vs. 2013).

Figure 2-6: Top-10 Airports in Asia Pacific, by Cargo Tonnage

Rank Airport Country Code Cargo

(2014, tonnes)

2014 vs.

2013

1 Hong Kong International Airport Hong Kong HKG 4,415,983 +6.0%

2 Pudong International Airport China PVG 4,258,531 +8.6%

3 Incheon International Airport South Korea ICN 3,181,654 +3.8%

4 Narita International Airport Japan NRT 2,557,681 +5.6%

5 Taiwan Taoyuan International Airport Taiwan TPE 2,492,754 +6.2%

6 Singapore Changi Airport Singapore SIN 2,367,574 +0.4%

7 Beijing Capital International Airport China PEK 2,293,231 +0.2%

8 Guangzhou Bai Yun International Airport

China CAN 2,133,542 +11.0%

9 Suvarnabhumi International Airport Thailand BKK 2,131,976 -0.2%

10 Tokyo International (Haneda) Airport Japan HND 2,088,727 +15.1%

Source: ACI Annual Worldwide Airport Traffic Report

The outlook remains positive as economies within the region are expected to enjoy the largest global growth rates over the next five years, at least.3

3 Scotiabank Global Economics Asia Pacific Regional Outlook Autumn 2015.


3 How Asia Pacific Airports Contribute to their Economies: Defining Economic Impacts

3.1 What is Economic Impact

Economic impact is a measure of the employment, spending and economic activity associated with a sector of the economy, a specific project (such as the construction of new infrastructure), or a change in government policy or regulation. In this case, economic impact refers to the economic contribution associated with the on-going activities with the air transport industry within Asia Pacific.

As the economic impact results from the end-product supplied, which is created by partners in the supply chain, all figures in this study therefore refer to the economic impact of airlines, airports, ground handlers, airport air traffic control and other industry participants.

In this study, economic impact in this study is measured in two ways:

Employment: The number of people employed by businesses directly or indirectly linked to air transportation activities in Asia Pacific.

Gross Domestic Product (GDP): A measure of the money value of final goods and services produced by or associated with aviation activities. It includes operating surplus of businesses, employee remuneration and capital consumption.4

It should be borne in mind that these measures attempt to assess the gross level of activity or expenditure associated with aviation in Asia Pacific. As such, they are not “net” measures that weigh benefits against costs, but nevertheless these measures can be useful in demonstrating the economic contribution of the air transportation industry in the region.

3.2 Categories of Economic Impact

There are four distinct types or categories of economic impact associated with aviation, as described in the sections below.

3.2.1 Direct Economic Impact

This is the employment and GDP associated with the operation and management of activities in the aviation sector. This includes activities by the airlines, the airport operators, air traffic control, general aviation, ground handlers, airport security, immigration and customs authorities, aircraft maintenance companies, and other entities. Note that, in this study, the direct impacts do not include aircraft manufacturing.

3.2.2 Indirect Economic Impact

The employment and GDP generated by down-stream industries that supply and support the activities in the aviation sector. For example, these could include: wholesalers providing food for inflight

4 The GDP contribution of an individual business or industry is sometimes referred to as Gross Value Added (GVA). GVA is broadly equivalent to GDP, whereby national GDP is the sum of the GVA of all industries plus taxes less subsidies on production. In this report, the term GDP is used to refer the contribution to GDP provided by the air transportation industry.


catering, oil refining activities for jet fuel, companies providing accounting and legal services to airlines, travel agents booking flights, etc.

3.2.3 Induced Economic Impact

This captures the economic activity generated by the employees of firms directly or indirectly connected to the aviation sector spending their income in the national economy. For example, an airline employee might spend his/her income on groceries, restaurants, child care, dental services, home renovations and other items which, in turn, generate employment in a wide range of sectors of the general economy.

3.2.4 Wider Economic Benefits (Catalytic Impacts)

While the economic impact described above can be seen as down-stream impacts resulting from activities in aviation, wider economic benefits (also known as catalytic impacts) capture the way in which aviation facilitates the business of other sectors of the economy. As such, air transportation facilitates employment and economic development in the national economy through a number of mechanisms:

Trade in Goods and Services. Although air cargo accounts for 0.5% of the volume of global trade shipments, it accounts for almost 35% by value, meaning that air cargo is high value, often times perishable or time-sensitive.5 Both the trade of goods and the trade of services are facilitated by passenger air services. Face-to-face meetings play a crucial role in making sales and delivering services and support. The ability to be at a client’s side rapidly and cost-effectively is important to many industries. Much of the time, these functions cannot be adequately replaced by teleconferencing or other forms of communication. Air transport connects businesses to a wide range of global markets, providing a significantly larger customer base for their products than would be accessible otherwise. It is particularly important for high-tech and knowledge-based sectors, and suppliers of time-sensitive goods.

Investment. Air connectivity is important in attracting international business headquarters and foreign investment into a country. A key factor many companies take into account when making decisions about the location of offices, manufacturing plants or warehouses, is proximity of an international airport.

5 Source: Air Transport Action Group: http://www.atag.org/.

http://www.atag.org/


Tourism. One particular sector for which air transport connectivity is an essential driver of the level of economic activity is tourism. Air service facilitates the arrival of larger numbers of tourists to a region or country. This includes business as well as leisure tourists. The spending of these tourists can support a wide range of tourism-related businesses: hotels, restaurants, entertainment and recreation, car rentals, and others. Of course, air service also facilitates outbound tourism, which can be viewed as reducing the amount of money spent in an economy. However, even outbound tourism involves spending in the home economy, on airlines based in the country, travel agents, taxis to the airport, etc. Also, it is not necessarily the case that money spent by tourists flying abroad would be spent on tourism at home if there were no air service. In any case, the net contribution of tourism is positive, even if the distribution of this impact varies.

Productivity Air transportation offers access to new markets, which in turn enable businesses to achieve greater economies of scale. Examples of productivity increases associated with aviation include the emergence of global supply chains for example, ensuring each part of the production process is performed as efficiently as possible. Foreign direct investment can equip workers with tools they would not otherwise have access to, allowing them to produce more. It also allows workers to improve their own prospects, either via access to more training and education opportunities, or simply by giving them more freedom to travel to those areas where their particular skills are most in demand.

The overall effect of all these mechanisms is an increase in employment and GDP. Without effective air transportation links, it is much harder for economies to attract tourists, to conduct trade and attract investment from other countries. As a result, the country’s economy and employment potential would suffer.

To illustrate the impact of aviation connectivity on economies, consider a country like Singapore. Adjusted for cost of living (purchasing power parity), the World Bank ranks Singapore fourth in the world in terms of per capita GDP while the IMF ranks it third.6

However, Singapore does not have large amounts of natural resources or a particularly large population base to rely upon. Its economic success is underpinned by the fact that it is an accessible and open country in which to do business. Trade is particularly important to the Singapore economy: the value of goods trade processed in Singapore in 2013 was over three times its annual GDP.7 By comparison, the same ratio for the United States was 0.25.8

A large number of factors have contributed to Singapore’s success as a trading centre and business hub: business regulations, government policy, taxation, the education and skillset of the local population, geographic location, historical legacy, etc. Nevertheless, the quality and range of air services available at the country’s main airport, Changi Airport, is a contributing factor. Singapore’s position as a global trading and business hub would not be possible without the high degree of air connectivity provided by the airport. The air service at the airport transports high-value domestic exports around the world, and enables employees of multinational businesses to travel to clients, regional offices, and global headquarters. Many of the businesses with regional headquarters in Singapore would not be located there without the mobility that the country’s air services provide.

Wider economic benefits are not a simple matter of the airport generating employment and economic activity in the same way that direct, indirect and induced impacts arise. National economies are far more complex than that. It clearly takes a wide range of players acting together to generate economic growth – government, business, infrastructure providers, residents and others. For example, if no one had decided to build hotels in a country, tourism would also be substantially lower. However, what the

6 Source: World Development Indicators, World Bank, 2014; World Economic Outlook Database, IMF, 2014. 7 Source: Singapore Department of Statistics, External Trade Yearbook. 8 Source: World Bank.


wider economic benefits do show is that without these airports and the air services they support, the economy would not be as large or affluent. Thus, wider economic benefits are about the economic value and employment that airports facilitate, rather than directly generate. The connectivity enabled by airports is not sufficient on its own to fully support economic activity, but it is a necessary element of economic growth and development. Wider economic benefits are discussed in greater detail in Chapter 8 and Chapter 9.

3.2.5 Total Economic Impacts

These four categories of impacts are summarised in Figure 3-1.

Figure 3-1: Categories of Economic Impact Generated and Facilitated by Aviation


4 Study Methodology

A data-driven methodology was applied to evaluate the economic impact of aviation in Asia Pacific. Reliable and recognised data sources were used as the basis of the analysis, and established quantitative techniques were used to validate, process and analyse the data. The study methodology comprised of a number of work elements, as summarised in Figure 4-1. Each of the major elements is described in the following sections.

Figure 4-1: Study Methodology


4.1 Estimating Direct Employment

Our estimates for the direct the economic impact of nations in the Asia Pacific region is based on and existing studies containing information on airport and other aviation employment levels in recent years. This included airport economic impact studies, and information in airport master plans and aviation industry annual reports.

For those airports where no employment or economic impact information could be found, econometric analysis was conducted using information from the airports from which data was collected to analyse the relationship between direct employment and characteristics of the airport.9 Unsurprisingly, there was a strong relationship between the volumes of traffic at the airport and its direct employment. The analysis quantified the relationship between work load units10 and employment, and to examine the impact of other possible variables. These other variables included proportion of passengers connecting at the airport and additional variables to examine whether the relationship between traffic units and employment varied with airport size.

The inferred direct employment was combined with the actual employment data gathered from airport economic impact studies, master plans, and aviation industry annual reports.

4.2 The Indirect and Induced Impacts

Indirect and induced effects were estimated using economic multipliers, as is common practice for economic impact studies. In addition, the direct GDP contribution impacts were also estimated using economic multipliers.

These multipliers were based on Input-Output models of the national economy in each Asia Pacific country. An Input-Output (I-O) model is a representation of the flows of economic activity within a region or country. The model captures what each business or sector must purchase from every other sector in order to produce a dollar’s worth of goods or services. Using such a model, flows of economic activity associated with any change in spending may be traced either forwards (spending generating income which induces further spending) or backwards (visitor purchases of meals leads restaurants to purchase additional inputs - groceries, utilities, etc.). By tracing these linkages between sectors, I-O models can estimate indirect and induced impacts. These indirect and induced impacts are represented by economic multipliers, normally expressed as a ratio of total impacts (i.e. direct plus indirect plus induced) to direct impacts. Using the I-O model, multipliers can be produced for employment and GDP contribution, normally expressed in terms of a unit of direct impact (e.g. per direct job).

The size of these economic multipliers is a function of a number of factors:

The nature of the industry or economic sector under consideration. Multipliers vary across different industries within the economy based on the mix of labour and other inputs, and the propensity of each industry to buy goods and services from within the economy. Some industries require large amounts of goods and services from other sectors of the economy, and therefore, have large multiplier impacts. Other sectors are more labour intensive and require fewer inputs from other sectors of the economy, resulting in smaller multiplier impacts.11

9 The approach used to estimate inferred employment is described in more detail in Appendix A. 10 Work Load Units are a commonly-used standardised measure of traffic at airports, which combines passenger and cargo traffic. One (1) traffic unit equals one passenger or 100kgs of cargo. 11 In such a case, the indirect impacts may be smaller than the induced impacts, as induced impacts are based on the spending of labour income.


The amount of imports needed as an input to production. Industries or economic sectors that require large amount of imports have lower multiplier impacts as this part of the spending goes outside of the national economy (in essence, this part of the multiplier impact is occurring in another country).

Propensity to consume domestic goods. The spending patterns of consumers in the national economy will affect the induced impacts. The greater the propensity to consume domestically produced goods and services, the greater is the multiplier effect. Similarly, higher spending on imports or higher savings rates will dampen the induced multiplier.12

Government taxation and spending has a complex influence on the size of the multiplier impacts. Higher taxation rates can dampen multiplier impacts, although this can be offset by how the government chooses to spend these tax revenues.

The multipliers used in this study were based on a number of sources:

For Australia, the I-O tables were sourced from Australia Bureau of Statistics.13

New Zealand I-O tables were sourced from Statistics New Zealand.14

Singapore I-O data was taken from the Department of Statistics Singapore.15

For the Republic of Korea, I-O tables were sourced from the OECD, National Institute of Statistics.16

For many of the study countries in the Asia Pacific, I-O tables were sourced from the Asian Development Bank.17

The most current I-O tables available at the time of the study were used. The economic multipliers developed from the I-O tables have been updated to reflect 2014 price levels. It was not possible to obtain I-O tables for all countries in the study. For those countries, multipliers were used from the country that most closely matched the GDP per capita of the country with missing data.

As with any model of a complex economy, I-O models have their limitations. Nevertheless, I-O models are the most widely accepted and well-established means for estimating indirect and induced impacts, and are based on real data unparalleled in its detail and breadth.

Furthermore, as tourism related industries are also suppliers of aviation, the indirect impacts of aviation were adjusted to remove tourism from aviation and avoid double counting from the wider economic benefits discussed below.

12 In the case of savings, this is a function of the time period examined. The multiplier impacts capture the economic impact occurring in a particular year. Savings represent deferred spending that will occur at some time in the future. However, there is no reliable technique for estimating these longer term multiplier impacts. 13 http://www.abs.gov.au/AusStats/[email protected]/MF/5209.0.55.001. 14 http://www.stats.govt.nz/browse_for_stats/economic_indicators/NationalAccounts/input-output%20tables.aspx 15 http://www.singstat.gov.sg/statistics/browse-by-theme/national-accounts 16 http://www.oecd.org/sti/ind/input-outputtablesedition2002accesstodata.htm 17 https://sdbs.adb.org/sdbs/jsp/ICP/IOTDownload.jsp


4.3 Wider Economic Benefits

Wider economic benefits (or catalytic impacts) are not generally reflected in Input-Output (I-O) models of the economy described above. The I-O models reflect the purchasing decisions of the businesses within the economy.

Wider economic benefits capture a different relationship between businesses. For example, hotels, restaurants and entertainment places do not purchase services from airlines to any great extent but they can benefit from the large number of tourists arriving by air that spend money in their businesses.18 Similarly, a multinational company’s decision to locate an office or facility in a country partially on the basis of air connectivity is not reflected in an I-O model.

Similarly, measuring wider economic benefits by surveys is also extremely difficult. To do so in detail would require a massive survey covering the majority of businesses in a country. Even with such a survey, some aspects of the wider economic benefits would be difficult to ascertain. While measuring the trade transported by air cargo might be fairly easy, it is far more difficult to determine and value the presence of an airport as a factor affecting business location decisions, investment and expansion decisions, facilitating corporate mobility, and attracting international talent.

A more effective approach is to use generalised parameters drawn from statistical analysis of historical data. This analysis seeks to determine the contribution of air transport to economic growth by examining the relationship between these factors over time or compared between different countries (or both). The analysis attempts to control for other factors that also contribute to economic growth (education spending, government policies, investment, research and development spending, etc.), in order to isolate the impact of air transport.

The wider economic benefits of aviation in Asia Pacific on trade, investment and productivity were estimated in this way, using an analysis of air connectivity and GDP per capita, while the impacts on tourism attributable to tourists arriving by air were estimated using tourism expenditure data, to which economic multipliers were applied. By applying economic multipliers, it was then possible to estimate the direct employment and GDP generated by this tourist spending. The full details of this analysis and the resulting economic impact estimates are provided in Chapter 9.

4.4 Constrained Impacts

IATA provided InterVISTAS with two datasets that were critical inputs in the model used to derive the constrained impacts: 1) study country forecast passenger growths and, 2) expected terminal or runway constraints of airports in study countries throughout the next 20 years.

The first step InterVISTAS took was to examine the list of airports provided by IATA that are set to face potential runway or terminal constraints over the next 20 years. For each country, the amount of traffic handled at future constrained airports was calculated and adjusted to grow at a slower pace than the unconstrained traffic located at other airports. All of the traffic located at airports unaffected by constraint issues grew at the rate of IATA forecast growth (with productivity adjustments applied). Should future plans exist to relieve capacity constraints for any given airport, this was also taken into consideration and passenger growth would resume at the airport level until the end of the study period, or until another constraint was hit.

18 These businesses may purchase air services to support their business activities (e.g. visits to headquarters) but not for the larger number of tourists that benefit their business.


Our first scenario presented in Section 11 considers both terminal and runway constraints. An alternate scenario, which includes only runway constraints, is presented separately in Appendix C.


5 The Direct Economic Impact of Air Transport in Asia Pacific

Summary

In terms of direct aviation activity, aviation in Asia Pacific generates almost 2.4 million jobs, and contribute USD $113.2 billion to Gross Domestic Product, or approximately 0.5% of the total GDP of Asia Pacific.

5.1 Direct Economic Impacts

Based on the methodology described in Chapter 4, aviation in Asia Pacific directly accounts for a total of almost 2.4 million jobs, as shown in Figure 5-1.

In addition to jobs, aviation directly contributed a total of USD $113.2 billion to regional GDP. This is approximately 0.5% of the total GDP of Asia Pacific in 2014.19 The GDP figures are not adjusted for cost of living in each country (i.e. they are not at purchasing power parity). The estimates of GDP were based on multipliers derived from I-O tables as described in Chapter 4.

Figure 5-1: Direct Jobs and GDP (2014)

Impact Jobs GDP

(USD Billions) % of

National GDP

Asia Pacific Region

Direct 2,379,500 $113.2 0.5%

5.2 Direct Economic Impact by Country

A breakdown by country of direct jobs and GDP is provided in Figure 5-2, while a map of the direct employment is provided in Figure 5-3 and Figure 5-4.

Air transport activities in China comprise over one-third of direct employment in the region, amounting to 882,300 jobs. Japan had the second largest direct jobs in 2014, with 284,400 employees (equivalent to 12.0%of total direct jobs). India supported 171,900 direct employees in the country’s aviation sector, while Indonesia supported 160,900 direct jobs. Australia, Thailand and South Korea generated 129,100, 110,700, and 110,600 direct employees in the air transportation industry, respectively. Altogether, the top seven countries accounted for over three quarters (78%) of the direct

19 Based on World Bank World Development Indicators, International Financial Statistics of the IMF and IHS Global Insight, the total GDP of the Asia Pacific countries was estimated to be USD 24,500 billion in 2014.


employment. Of the remaining 29 countries, seven have a direct employment base between 25,000 and 100,000, while 22 have less than 25,000 employees directly related to aviation.

The direct employment in each country is fairly closely linked to volume of air traffic and associated air connectivity in that country. For example, due to the volume of its passenger and cargo traffic, China has the largest direct employment impact. However, the economic impacts in each country may also be influenced by other factors such as:

The number of airports in the country. Due to geography and traffic requirements, some countries may have greater number of airports per head of population than other countries. Therefore, countries with traffic dispersed over more airports, due to geography and traffic requirements, may have larger direct employment impact than those with traffic concentrated at fewer airports.

The traffic and airline mix. Countries that have higher proportions of long haul passengers and services may have larger direct employment in aviation (all else being equal) due to additional requirements for long haul traffic (immigration services, inflight services, business class facilities, etc.).

The network and base structure of the airlines based in the country. The presence of a large home carrier, particularly a hub carrier, may affect overall direct employment in the country.

Figure 5-3: Direct Employment Impacts by Country, 2014


Figure 5-2: Direct Jobs and GDP by Country (2014)

Country Direct Jobs Direct GDP

(USD Billions)

% of National GDP

China 882,300 $31.2 0.30%

Japan 284,400 $14.8 0.32%

India 171,900 $2.9 0.14%

Indonesia 160,900 $5.8 0.65%

Australia 129,100 $13.7 0.95%

Thailand 110,700 $3.4 0.83%

South Korea 110,600 $14.1 1.00%

Malaysia 96,100 $1.5 0.43%

Singapore 83,500 $9.2 2.99%

Hong Kong 74,300 $5.8 2.00%

Philippines 69,800 $1.0 0.36%

Taiwan 55,000 $2.9 0.55%

Vietnam 47,800 $0.7 0.38%

New Zealand 31,300 $3.6 1.85%

Pakistan 16,300 $0.2 0.09%

Sri Lanka 7,400 $0.3 0.44%

Bangladesh 6,800 $0.1 0.03%

Cambodia 5,900 $0.04 0.25%

Macau 5,300 $0.9 1.70%

Nepal 5,000 $0.02 0.12%

Myanmar 4,600 $0.04 0.06%

Maldives 4,000 $0.2 7.33%

French Polynesia 2,800 $0.2 2.53%

Fiji 2,500 $0.1 2.10%

Laos 2,400 $0.03 0.25%

Brunei 2,400 $0.3 1.59%

Papua New Guinea 1,800 $0.02 0.11%

New Caledonia 1,200 $0.1 0.66%

Mongolia 1,100 $0.1 0.42%

North Korea 500 $0.002 0.01%

Vanuatu 400 $0.01 0.88%

Solomon Islands 400 $0.01 0.55%

Western Samoa 400 $0.01 1.68%

Tonga 300 $0.01 1.50%

Timor-Leste 100 $0.01 0.12%

Micronesia 100 $0.002 0.60%

Total 2,379,500 $113.2 0.47%

Numbers may not add up due to rounding.


Figure 5-4: Map of Direct Employment by Country

On a per capita basis, the direct employment impacts are quite different as shown in Figure 5-5. Countries such as South Korea, Malaysia, Mongolia, Hong Kong and French Polynesia had the highest concentration of employment in 2014, while India, China and Japan were lower (reflecting the latter countries’ large population levels). The lowest concentration of direct employment was in the smaller Pacific countries, reflecting the relatively low levels of air traffic in those countries.


Figure 5-5: Direct Employment Impact per Capita


6 Indirect and Induced Economic Impact

Summary

Indirect and induced impacts (suppliers and spending in the wider economy) generate an additional 3.7 million jobs in the Asia Pacific region, and an additional USD $104 billion in Gross Domestic Product.

As noted previously, the economic impact of aviation does not end with the direct impacts. Other sectors of the economy benefit from air transportation activities. As described in Chapter 3.2, this includes indirect impacts in businesses that supply the goods and services to the direct activities linked to the aviation, and induced impacts resulting from direct and indirect employees spending their wages in the general economy. The indirect and induced impacts were estimated using economic multipliers derived from government data, as detailed in Chapter 4.3.

6.1 Indirect and Induced Economic Impacts in Total

Figure 6-1 summarises the indirect and induced employment and GDP attributable to ongoing aviation activities in Asia Pacific in 2014.20

Figure 6-1: Indirect and Induced Economic Impacts, 2014

Impact Jobs GDP

(USD Billions) % of

National GDP

Asia Pacific Region

Indirect 1,852,500 $63.6 0.3%

Induced 1,806,300 $40.2 0.2%

Total Multiplier Impacts 3,658,800 $103.9 0.4%


Based on the application of economic multipliers, it was estimated that 1,852,500 indirect jobs are related to Asia Pacific aviation. In other words, 1,852,500 jobs are generated in industries that supply the businesses directly related to the aviation sector. The indirect GDP contribution is estimated at USD $63.6 billion per annum.

20 Indirect and induced impacts were not estimated for North Korea due to lack of credible data.


The induced employment is the result of demand for goods and services generated by income earnings of those directly or indirectly linked to aviation. The induced employment attributable to Asian Pacific aviation in 2014 is estimated at 1,806,300 jobs, with a contribution of USD $40.2 billion per annum to GDP.

6.2 Direct, Indirect and Induced Economic Impact by Country

Figure 6-2 shows the total (sum of direct, indirect, and induced) jobs and GDP generated on a country level in 2014. A map of the combined direct, indirect and induced jobs by country is provided in Figure 6-3.

Comprising 42% of the total jobs in the region, China had the most total jobs in 2014, reaching 2,519,800. Japan was the second largest contributor to total employment in the region with 581,200 total jobs (10% of the total), followed by India with 443,600 total jobs (7% of the total). Together, the top three countries based on total direct, indirect and induced jobs generated 59% of the total employment impact in Asia Pacific. As with the direct impacts, the size of the total employment impact is closely related to traffic volumes in the country. However, it is also impacted by the structure and development of the national economy which is captured in the indirect and induced multipliers.

The total GDP contribution as percentage of total national GDP (shown in the last column of Figure 6-2) varied between 0.05% (Bangladesh) and 10.49% (Maldives). The percentage contribution to national GDP is a function of number of factors, including:

The relative development of the airports and aviation section. Where countries have a small volume of air traffic at its airports, the economic contribution of this sector is necessarily going to be smaller. Countries such as Bangladesh, Myanmar and Pakistan have relatively small contributions (0.05%, 0.09% and 0.15% respectively) from the airport and aviation sector, as this sector of the economy is fairly small. Conversely, nations with relatively large aviation sectors, due to geography, history or for business reasons, will see a larger economic contribution.

The size and diversity of the national economy. In most large, highly diversified economies, the contribution of aviation is affected by the scale of activity in other sectors of the economy. For example, while China and Japan have the largest air markets in Asia Pacific, the contribution to national GDP is below or close to the Asia Pacific average (0.6% and 0.7% respectively).


Figure 6-2: The Total of Direct, Indirect and Induced Economic Impacts by Country, 2014

Country Total Jobs Total GDP

(USD Billions) % of

National GDP

China 2,519,800 $59.6 0.6%

Japan 581,200 $32.7 0.7%

India 443,600 $4.5 0.2%

Indonesia 401,000 $8.5 1.0%

Thailand 309,500 $5.9 1.5%

Australia 275,400 $28.4 2.0%

Malaysia 229,700 $3.7 1.1%

South Korea 208,100 $20.6 1.5%

Philippines 202,800 $1.9 0.7%

Singapore 171,500 $17.1 5.6%

Hong Kong 152,400 $11.3 3.9%

Taiwan 136,500 $6.2 1.2%

New Zealand 126,700 $11.1 5.6%

Vietnam 111,600 $1.0 0.5%

Pakistan 42,200 $0.4 0.1%

Sri Lanka 16,200 $0.5 0.6%

Bangladesh 15,500 $0.1 0.0%

Nepal 13,400 $0.0 0.2%

Cambodia 13,100 $0.1 0.4%

Macau 11,000 $1.8 3.2%

Myanmar 10,100 $0.1 0.1%

Fiji 7,900 $0.2 3.9%

Maldives 7,400 $0.3 10.3%


Laos 5,600 $0.0 0.3%


Brunei 4,100 $0.4 2.4%

Mongolia 2,800 $0.1 0.6%


Vanuatu 1,400 $0.01 1.7%

Western Samoa 1,100 $0.03 3.2%

Solomon Islands 900 $0.01 0.7%

Tonga 800 $0.01 3.1%

North Korea 500 $0.002 0.0%

Timor-Leste 500 $0.01 0.2%

Micronesia 400 $0.004 1.2%

Total 6,038,200 $217.1 0.9%

Numbers may not add up due to rounding. * Indirect and induced impacts were not estimated for North Korea due to lack of available data. Figures represent direct impacts only.


Figure 6-3: Direct, Indirect and Induced Employment Impacts by Country, 2014

Numbers may not add up due to rounding. * Indirect and induced impacts were not estimated for North Korea due to lack of credible data.


7 Direct Benefits for Passengers: Case Studies

The continuous investment in the air transport industry has allowed airlines, airports and manufacturers to improve their performance and services to stimulate demand for air transport. Passengers have benefited from improved service through increased connectivity, lower fares, shorter travel times, reduced delays, as well as increased mobility brought about by a greater choice of destinations and flight frequencies.

The following case studies demonstrate some of these direct benefits for passengers in more detail.

7.1 Overall Asia Pacific

The Asia Pacific region has become one of the biggest air traffic markets in the world. Connectivity, frequencies, seat capacities, and number of destinations have increased significantly in Asia Pacific countries, while fares have mostly decreased through the market entries of low cost carriers (LCCs) over the last decade; in turn, greatly improving direct benefits for passengers.

Over the last decade, the number of Asian airlines operating jet fleets has grown from 150 in 2004 to 225 in 2014. The total jet fleet of all Asian airlines combined has almost doubled from 2,900 in 2004 to 5,850 in 2014, and is projected to reach about 16,180 in 2034. The LCC market has proven to be very successful, especially in the Asia Pacific region. From 2004 to 2014, LCCs in Asia increased significantly with an average annual growth rate of almost 25% (Southeast Asia has seen the greatest growth in LCCs).21 However, China seems to be an exception to this trend. LCCs in China only account for a market share of about 10% intra-regionally, and less than 5% on a domestic level. Airbus sees an opportunity for further development of LCC services to/from/within China, which would increase the connectivity between growing cities within China and the rest of the region.22

Nonstop routes involving Asia have increased by 57% over the last 10 years, from 2,200 to 3,800, as illustrated in Figure 7-1.23 In the 1980s, for example, majority of flights from Northeast Asia had to make a connection through North America’s west coast to get to the east coast of the continent, often through Anchorage. Today, a lot of routes are now served nonstop, benefiting the passenger with great time savings (a few specific examples are provided in Chapter 7.3). A total of 4.9 million nonstop flights, with a seat capacity of 766 million, were offered at Asia Pacific airports in 2004. This increased to 9.4 million nonstop flights (an increase of 92% or 6.7% on average per year) and 1.5 billion seats (an increase of 101% or 7.2% on average per year) in 2014.24

Overall, 55% of Asia Pacific’s total air traffic in 2014 was intra-Asia Pacific (i.e., from one Asia Pacific country to another). It is predicted that intra-regional traffic will gain further importance in the next 20 years, reaching a level of about 60% by 2034. Historically, developed countries in Asia Pacific (e.g. Australia, New Zealand, and Japan) accounted for about 39% of the total traffic to/from/within Asia Pacific in 2004. Ten years later, by 2014, those countries only accounted for 28% of the region’s total traffic. More specifically, China’s market share of total traffic to/from/within Asia Pacific increased from 23% to 31% from 2004 to 2014.25

21 Source: Boeing Current Market Outlook, 2015-2034 22 Source: Airbus Global Market Forecast, 2015-2034 23 Innovata Schedules via Diio 24 Numbers based on Innovata Schedules via Diio 25 Source: Airbus Global Market Forecast, 2015-2034


Figure 7-1: Growth in Nonstop Routes, Frequencies and Seat Capacities, 2004 versus 2014

Source: Boeing Current Market Outlook, 2015-203; Innovata Schedules via Diio.

On a country level, Figure 7-2 illustrates the growth in outbound nonstop seat capacity of the top 10 markets in the region (by seat capacity in 2014) over the last 10 years. For example, China’s seat capacity (to, from and within China) increased by a total of 173% (or by an average annual growth rate of 10.6%) from 2004 to 2014. Over the same time period, Indonesia experienced a greater rise in seat capacity by 313% (or by 15.2% on average per year).


Figure 7-2: Seat Capacity of Asia Pacific’s Top 10 Markets, 2004-2014


7.2 Nonstop Services and Lower Fares in ASEAN

Traffic growth in the ASEAN region has been among the fastest in the world for years. In particular, the number of nonstop services has increased significantly over the last couple of years. Figure 7-3 shows the number of nonstop services by country of origin for 2004 versus 2014. A total of 1009 nonstop services were served in 2004 from ASEAN countries, which increased to 1,683 nonstop services in 2014 – an increase of 674 markets (or 67%) over 2004.26 Most of this increase is due to the expansion of LCC service. In fact, the market share of total seats served by LCCs increased from 19% in 2004 to 44% in 2014.27

26 Numbers indicate the total number of unique airport pairs served nonstop by carrier type from each country. 27 Numbers based on Innovata Schedules via Diio


Figure 7-3: ASEAN Nonstop Services by Country, 2004 vs. 2014

Source: Innovata Schedules via Diio Numbers indicate the total number of unique airport pairs served nonstop by carrier type from each country. It also include unique domestic nonstop routes within ASEAN countries as well as international routes.

The country with the highest LCC penetration rate is the Philippines. In 2004, LCCs operated in 46% of nonstop routes. In addition, LCCs operated in 14-32% of routes in Cambodia, Indonesia, Malaysia and Thailand in the same year. In Laos, Brunei, Singapore, and Vietnam less than 10% of all nonstop routes were served by LCCs back in 2004. By 2014, LCCs increasingly competed in those markets. LCCs operated in 79% of nonstop routes from the Philippines. In Malaysia and Singapore, LCCs operated in at least 50% of nonstop routes, and over 25% of routes in Indonesia, Thailand and Vietnam. In addition, LCC penetration rates were between 7% and 18% in Cambodia, Brunei, Myanmar and Laos. Of all nonstop routes served in the ASEAN, LCCs operated in 44% of the total nonstop markets, as shown in Figure 7-4.28

28 Numbers based on Innovata Schedules via Diio


Figure 7-4: ASEAN Percentage of LCCs (All Nonstop Routes), 2004 vs. 2014


LCCs in the ASEAN market continue to order aircraft, add new markets and launch affiliates, which will continue to increase traffic and lower fares. The market’s two largest LCCs, Lion Air and Air Asia, which account for 41% of total nonstop routes operated by LCCs in ASEAN, have ordered more aircraft than any other Asia Pacific carriers as illustrated in Figure 7-5. Lion Air currently has a total of 452 aircraft on order, while Air Asia has a total of 341. As the ASEAN market continues to move towards a unified and single aviation market, opportunities for new LCC service still exist in this large and growing air service market, especially in medium/longer-haul routes. Countries with lower penetration rates by LCCs, such as Brunei, Cambodia, Myanmar and Laos, present particular opportunities.


Figure 7-5: Lion Air and Air Asia Aircraft Orders (as of October 2015)29

Source: Lion Air Fleet Details and History and AirAsia Fleet Details

From a passenger perspective, the growth in nonstop services in the ASEAN market increases passengers’ mobility by not only increasing their choice of destinations and increasing frequencies, but also by reducing their travel times. The increase in competition through LCCs also decreases average fares, again benefiting passengers.

7.2.1 Malaysia-Thailand

Looking at Malaysia and Thailand in more detail, both countries sit at a crossroads of global travel, i.e. both countries are signatories to the successive air service agreements made to encourage liberalized air service among the ASEAN countries. Both signed the 2009 Multilateral Agreement on Air Services (MAAS) which incorporates two “protocols” that removed restrictions on third, fourth and fifth freedom access, respectively, among the ASEAN capital cities. Both countries also signed the Multilateral Agreement on Full Liberalization of Passenger Air Services (MAFLPAS), which eliminated restrictions on third, fourth, and fifth freedom access to all cities in signatory countries. This allowed

29 Aircraft orders do not include any subsidiary aircraft orders (e.g. Air Asia X, Thai Lion Air etc.)


both countries to promote travel to secondary international destinations for tourism (Thailand: Phuket, Chiang Mai; Malaysia: Langkawi).

As a result of these agreements, air service in both countries has improved significantly over the decade. Figure 7-6 shows service in the Malaysia-Thailand market in 2003 (before the LCCs AirAsia/Thai AirAsia began scheduled service) versus 2014. In 2003, most of the routes and capacity remained concentrated around Bangkok and Kuala Lumpur; in fact, 75% of seats were operated between the two hubs. The Full Service Carriers (FSCs) also operated a few routes to tourist destinations on both sides of the border. This service was dominated by Malaysia Airlines and Thai Airways. In total, five nonstop routes, with a total seat capacity of 723,300, were offered between Thailand and Malaysia in 2003. Of these five nonstop routes, two routes were offered by more than one carrier.

In 2014, 17 nonstop routes, with a seat capacity of 2,685,600 (a total increase of 271% compared to 2003 or an increase of 12.7% on average per annum), were offered in the Malaysia-Thailand market, greatly increasing passengers benefits not only by offering more destination choices and higher frequencies, but also by decreasing travel times. In 2014, the market is currently dominated by LCCs. In total, 55% of services offered between Malaysia and Thailand are operated by low-cost carriers; Air Asia being the top LCC for the region. Of the 17 routes, five routes were offered by multiple carriers. However, these five multiple carrier routes accounted for 83% of total seat capacities in 2014.

For the five existing routes in 2005, frequencies have increased dramatically. For example, for the route between Kuala Lumpur to Phuket, weekly frequencies reached up to 18 (or about 3 daily) in 2003, and 60 (or about 8 to 9 daily) in 2014, on average. For the route between Kuala Lumpur to Bangkok, weekly frequencies increased from 53 (or about 7 to 8 daily) in 2004 to 69 (or about 10 daily) in 2014, on average.

As a result, passengers do not only benefit from increased connectivity and better choice of destinations, as well as reduced travel times due to more nonstop services, but also benefit from a decrease in fares due to higher competition (increased number of LCCs and multiple carriers on route).

Figure 7-6: Nonstop Services Malaysia-Thailand, 2003 vs. 2014



7.2.2 Domestic China

The domestic China market accounted for approximately one third of all seats to/from/within Asia Pacific in 2014. Overall, seat capacity increased from 168 million to 467 million from 2004 to 2014.30 Boeing estimates total Revenue Passenger Kilometres (RPKs) for domestic China will increased by an average of 6.4% per annum up to 2034.31

Looking at direct services within China over the last 10 years, nonstop services within the country have increased from 840 in 2004 to 1,930 in 2014, as illustrated in Figure 7-7. This growth is equivalent to an increase of 130%, or an average annual growth rate of 8.7%, which has increased passenger’s choices of destinations and reduces travel times for many.

Figure 7-7: Airlines, Nonstop Routes, Seat Capacity for Domestic China, 2004 vs. 2014


For example, about 88 direct domestic routes were offered at Beijing Capital International Airport (PEK) in 2004, and increased to 124 in 2014. To name a few other examples, PEK to Daqing Sartu Airport (DQA) had no direct service in 2004; however, in 2014, about 30 weekly flights were offered.

30 Numbers based on Innovata Schedules via Diio. 31 Source: Boeing Current Market Outlook, 2015-2034


Additionally, while there were no direct flights from PEK to WUX (Sunan Shuofang International Airport) in 2004, about 27 weekly direct flights are offered in 2014. There were also no direct services between Guangzhou Baiyun International Airport (CAN) to Sunan Shuofang International Airport (WUX) in 2004; but, there are now about 50 weekly flights 10 years later.

Looking at airlines, in 2004, 12 airlines offered direct domestic services within China. Ten years later, 31 airlines offered services within China in 2014, which increases passenger choice and the potential for greater competition. For instance, while only Air China and Hainan Airlines operated direct service between PEK and Hulunbuir Hailar Dongshan Airport (HLD) in 2004, five airlines offered direct service on that route in 2014: Air China, Grand China Air, Beijing Capital Airlines, Xiamen airlines and China Eastern Airlines.

7.3 Travel Time Savings

Improved connectivity can offer considerable time savings and convenience for passengers. The following section illustrates with some specific examples.

Before 2011, there was no direct service between Sri Lanka and Italy. The most convenient routings available were via Paris or Istanbul, as illustrated in Figure 7-8. The minimum journey time for the routing via Paris was 14.5 hours and for the routing via Istanbul is 17.5 hours depending on connecting times (other routings will even take longer). In 2014, a direct flight from Colombo to Rome was introduced offered reducing the travel time to approximately 10 hours.

Figure 7-8: Flying Colombo (Sri Lanka) to Rome (Italy)


In late 2013, direct service from Sydney in Australia to Delhi in India leading to travel savings times for the passengers, as illustrated in Figure 7-9. Before 2013, passengers had to connect at least one


time via Taipei, Singapore or Abu Dhabi to reach Delhi from Sydney resulting in travel times of up to 29 hours. A direct flight now takes 12 hours and 20 minutes. A similar service from Melbourne to Delhi was also introduced in 2013, leading to similar saving times. In 2014, these were the two direct services between Australia and India. With a market size of approximately 453,000 O/D passengers between Australia and India, more direct services between these two countries could develop, subject to air service agreements and airport capacity.

Figure 7-9: Flying Sydney (Australia) to Delhi (India)



South Korea was China’s greatest destination market in 2014 (not considering domestic China) with a market size of about 6.8 million O/D passengers. In 2009, a direct service between Seoul (ICN) and Chengdu (CTU) started. The direct service takes slightly under four hours. Before a direct service was introduced in 2009, passengers had to fly for example via Shanghai, resulting in flight times of between seven to 20 hours, depending on the connections. Thus, the direct service saves passengers between three to 16 hours as shown in Figure 7-10.

Figure 7-10: Flying Seoul (South Korea) to Chengdu (China)


7.4 Value of Time

Figure 7-12 shows the top 20 routes to/from/within Asia Pacific in terms of O/D passengers without direct service in 2014.32 If those 20 routes would have direct services, a total of 2.7 million passengers per year would benefit from substantial time savings. Assuming an hourly value of travel time savings for air travellers of USD 49,33 the total value of time benefit would add up to almost USD 2.2 billion per year.

For example, there was no direct service between Delhi and Vancouver in 2014. A connecting flight, e.g. via Hong Kong, Amsterdam, or London Heathrow, takes anywhere between a minimum of 21.5hours and 51 hours (on average about 36 hours) and has impacted about 147,000 O/D passengerstravelling that route in 2014. Flight time of a direct service between Delhi and Vancouver would be

32 Routes where a direct flight would have been impossible due to distance (e.g. SYD-LHR) have been eliminated 33 The value of time is the amount that a passenger would be willing to pay in order to save a unit of travel time (or the amount which the passenger would accept as compensation for lost time). The estimate is based on an average of hourly value of travel time savings for leisure and business air travellers published by 2011 U.S. DOT updated guidelines on VTTS (Value has been in 2009US$ and has been inflation adjusted to 2014 $US).


about 13.5 hours, and hence, lead to an average estimated time saving of about 23 hours. At USD 49 an hour value of travel time savings for air travellers and impacting about 147,000 passengers annually, the total value of time benefit for this particular route would add up to about USD 164 million.

Figure 7-11: Example of Time Savings

Route

Travel Time

Before

Nonstop Service

Travel Time

After

Nonstop Service

Time Saving

Beijing (China) - Boston (United States)

16 -17 Hours 1-Stop

e.g. via Washington

13 Hours Direct

3-4 Hours

Sydney (Australia) - Vancouver (Canada)

17-18 Hours 1-Stop

e.g. via Honolulu

14 Hours Direct

3-4 Hours

Tiruchchirappalli (India) - Singapore (Singapore)

6 -7 Hours 1-Stop

e.g. via Chennai

4 Hours Direct

2-3 Hours

Nadi (Fiji) - Labasa (Fiji)

2 Hours 1-Stop

e.g. via Nausori

1 Hour Direct

1 Hour

Hong Kong (Hong Kong) - Helsinki (Finland)

14-15 Hours 1-Stop

e.g. via Bangkok

11 Hours Direct

3-4 Hours

Guangzhou (China) - Yinchuan (China)

5-7 Hours 1-Stop

e.g. via Zhengzhou

3 Hours Direct

2-5 Hours

Sydney (Australia) - Delhi (India)

17-29 Hours 1-stop

e.g. via Taipei or Abu Dhabi

12 Hours Direct

5-17 Hours

Colombo (Sri Lanka) - Rome (Italy)

14-29 Hours 1-Stop

e.g. via Paris or Istanbul

10 Hours Direct

4-19 Hours

Seoul (South Korea) - Chengdu (China)

7-20 Hours 1-Stop

e.g. via Shanghai

4 Hours Direct

3-16 Hours



Figure 7-12: Value of Time Savings, Top 20 Connecting Routes34 in 2014

Route

Avg. Time Saving

Direct vs.

Connecting Flight

2014 O/D

Passengers35

(Thousands)

Value of Time

Benefit

(USD Million)

Delhi (DEL) – Toronto (YYZ) 21 177 $185

Harbin (HRB) – Kunming (KMG) 6 175 $54

Changchun (CGQ) – Sanya (SYX) 7 172 $61

Delhi (DEL) – San Francisco (SFO) 16 167 $131

Dhaka (DAC) – New York (JFK) 20 158 $155

Fuzhou (FOC) – New York (JFK) 19 154 $140

Delhi (DEL) – Vancouver (YVR) 23 147 $164

Bangkok (BKK) – Manchester (MAN) 20 137 $133

Seoul (ICN) – Barcelona (BCN) 21 136 $140

Kunming (KMG) – Wuxi (WUX) 14 130 $86

Sapporo (CTS) – Kagoshima (KOJ) 10 127 $62

Mumbai (BOM) – New York (JFK) 24 127 $148

Shanghai (PVG) – Madrid (MAD) 21 117 $119

Ho Chi Minh (SGN) – San Francisco (SFO)

15 117 $86

Beijing (PEK) – Melbourne (MEL) 20 110 $107

Amritsar (ATQ) – London (LHR) 15 109 $80

Urumqi (URC) – Kunming (KMG) 13 108 $71

Denpasar (DPS) – Medan (KNO) 9 108 $45

Nanning (NNG) – Qingdao (TAO) 13 106 $69

Shanghai (PVG) – Barcelona (BCN) 24 104 $124

Total 2,684 $2,161


34 No direct service in 2014; note that a few routes now have direct services, implemented in 2015, e.g. PEK-MEL 35 Both directions


7.5 Greater Connectivity

Connectivity is about access to markets and regions. A region that has continental and intercontinental linkages only to a limited number of destinations will be a less desirable place to do business. Travel costs for staff and for goods will be higher due to the need to purchase multiple flight legs to move people and goods. On the other hand, a community with direct access to a broad range of markets, especially the fastest growing markets, will be a lower cost place to do business. It will also enhance customer servicing and goods and support staff can easily and quickly get to a range of destinations.

Greater connectivity also increases passengers’ mobility, choice of destination and reduces travel time by improving connections.

Many airports in Asia Pacific have seen significant increases in connectivity. For example, as shown in Figure 7-13, back in 2004, Beijing Capital International Airport (PEK) had service to 141 destinations with approximately 552,000 weekly seat capacities reaching a connectivity index of 92.5. Ten years later in 2014, PEK had services to 236 destinations with about 1,058,000 weekly seats reaching a connectivity level of 302.6. Thus, over the last 10 years, the connectivity level at PEK tripled, greatly increasing passengers’ choice of destinations and frequencies at PEK. The figure also shows other airport examples where the connectivity greatly increased over the last 10 years.

Figure 7-13: Destinations, Seat Capacity and Connectivity, 2004 vs. 2014

Airport # of Destinations Weekly Seats Connectivity Index

2004 2014 2004 2014 2004 2014

Beijing Capital

International Airport (PEK) 141 236 552,000 1,058,000 92.5 302.6

Hong Kong International

Airport (HKG) 107 153 519,000 782,000 138.1 342.0

Sydney Airport

(SYD) 90 93 354,000 495,000 81.0 135.9

Haneda Airport

(HND) 50 80 814,000 1,075,000 70.3 178.1

Guangzhou Baiyun

International Airport (CAN) 87 174 306,000 648,000 40.4 192.4

Source: Innovata Schedules via Diio Note: weekly seats are outbound seats only To determine the connectivity indices, InterVISTAS used IATA’s measure of air service connectivity. The IATA index measures the number and economic importance of destinations served, as well as the frequency of service to each destination and the number of onward connections available from those destinations.


8 Studies of the Wider Economic Benefits of Airports and Air Connectivity

Summary

A body of research has developed over the last 15 years or so which has examined and quantified the contribution of air transport to trade, investment, tourism, productivity and ultimately, economic growth. Through the use of different empirical methods and data sets, this research has consistently found a significant and positive relationship between aviation connectivity and economic growth. Furthermore, much of the research has established that air transport growth has been a cause of economic growth, rather than simply economic growth leading to increased air transport levels.

8.1 Introduction

As discussed in Chapter 3, wider economic benefits (or catalytic impacts) capture the way in which air transportation facilitates the business of other sectors of the economy. This includes:

Tourism – air service facilitates the arrival of larger numbers of tourists to a country. This includes business passengers as well as leisure tourists. The spending of these tourists can support a wide range of tourism-related businesses: hotels, restaurants, entertainment and recreation, car rentals, and others.

Trade – air transport provides connections to export markets for both goods and services.

Investment – a key factor companies take into account when making decisions about the location of offices, manufacturing plants or warehouses in and around an international airport.

Productivity – air transportation offers access to new markets which in turn enables businesses to achieve greater economies of scale. Air access also enables companies to attract and retain high quality employees.

This chapter examines the empirical evidence and research, from academic and industry studies, around the wider economic benefits of airports and aviation, while the subsequent chapter summarises analysis conducted by InterVISTAS to quantify the wider economic benefits of air transportation in the Asia Pacific region.

A number of studies have demonstrated that air transportation plays an important role in trade, tourism, investment and business location decisions, while additional studies have uncovered empirical evidence demonstrating a strong linkage between air service and employment and economic growth. These studies are summarised in the following sections.


8.2 Trade

A number of research papers have produced evidence that aviation positively contributes to the trade of both goods and services.

Paper Methodology Key Findings

Cech (2004)36 Used a cross-section statistical comparison method to investigate how air cargo services affect the economies of 125 U.S. counties.

Higher levels of air cargo services contribute to increased earnings and increased employment.

EUROCONTROL (2005)37

The study estimated the net contribution of air transportation to trade (i.e., export minus imports).

Net contribution of air transportation to trade was €55.7 billion in 2003 across the 25 current EU members.

UK Institute of Directors (2008)38

Surveyed 500 UK businesses about their use and the importance of air transportation.

The use of air travel strongly linked to business trade and sales. Almost three quarters of businesses using passenger air services said that their business would be adversely affected if the amount of air travel they could undertake was significantly curtailed.

Poole (2010)39 Econometric analysis of U.S. trade and travel data from 1993 to 2013.

A 10% increase in business travel to the U.S. by non-residents led to a 1.2% increase in the volume of exports from the U.S. and 0.3% increase in export margins. The effect was strongest for travel from non-English speaking countries, suggesting that business travel help overcome language barriers in trade relationships.

PWC (2013)40 Examined the relationship between the UK’s international air seat capacity and international trade, controlling for other factors affecting trade.

A 10% increase in seat capacity increased goods exports by 3.3% and goods imports by 1.7%.

36 Cech P. (2004), “The Catalytic Effect of the Accessibility to Air Cargo Services”, TIACA Graduate Research Paper Competition. 37 Cooper, A. and Smith, P. (2005), “The Economic Catalytic Effects of Air Transport in Europe,” Commissioned by EUROCONTROL. EUROCONTROL is a civil and military organisation established in 1963 to facilitate a safe, seamless pan-European Air Traffic Management (ATM) system. 38 UK Institute of Directors (2008), “High Fliers: Business Leaders’ View on Air Travel”, http://www.iod.com/MainWebSite/Resources/Document/policy_paper_high_fliers.pdf 39 Poole, J. (2010), “Business Travel as an Input to International Trade”, http://www.scu.edu/business/economics/upload/Poole.pdf 40 PWC (2013), “Econometric Analysis to Develop Evidence on the Links Between Aviation and the Economy”, Report for the UK Airports Commission, December 2013.

http://www.iod.com/MainWebSite/Resources/Document/policy_paper_high_fliers.pdf

http://www.scu.edu/business/economics/upload/Poole.pdf



Oum (2015)41 Considered the effects of air transport liberalisation on foreign visitor inflow and international services trade in Canada.

Canada’s Open Sky’s Agreements have significant positive effects on increasing traveller inflow into Canada. In turn, traveller inflow into Canada has positive effects on Canada’s total service exports.

8.3 Tourism

A number of research papers have produced evidence that air services at airports positively support tourism, and that increases in air service results in an increase of tourist activity.


Warnock-Smith and Morrell (2008)42

The authors examine the impact of liberalising extra-regional air services on air traffic growth and tourism growth for the region, using data from 1995 to 2003.

The authors found that the U.S.-Caribbean market pairings which did not liberalise traffic rights saw lower passenger traffic growth compared to those that had liberalised.

Graham and Dennis (2008)43

The authors examined the effect of the Maltese government’s decision in 2006 to provide incentives low cost carriers (LCCs) to fly to the islands. The research made use of data in Malta on passenger/tourist numbers, passenger survey results, and airline schedules.

The authors conclude that traffic to Malta significantly increased in 2007, in large part due to LCC services. Furthermore, they find that the LCCs attract a younger more affluent and more independent tourist, which differs from a charter or package tourist.

Dennis (2007)44 Uses data from the UK on tourist arrival information, air passenger traffic, survey data and airline ticket information.

Concludes that air travel increases tourism abroad and that as air travel becomes a smaller portion of the vacation cost, the penalty for taking shorter, more frequent trips is reduced, stimulating air travel.

Rey (2011)45 Examines tourist demand from the principal EU-15 member states to estimate the impact of low-cost airlines on Spanish tourism.

The findings suggest that the expansion of LCC activity had a strong positive effect on the number of tourist arrivals.

41 Oum T. (2015), “Effects of Air Transport Liberalization on Foreign Visitor Inflow and International Services Trade: Application to Canada” 42 Warnock-Smith, D., Morrell, P., 2008. Air transport liberalisation and traffic growth in tourist-dependent economies: a case study of some US-Caribbean markets, Journal of Air Transportation Management 43 Dennis, N., Graham, A. (2008) The Impact of Low Cost Airline Operations To Malta, 48th Congress of the European Regional Science Association, August 44 Dennis, N (2007) Impact of The Low-Cost Scheduled Airlines On Charter Operations And The Inclusive Tour Holiday Market, Association for European Transport and Contributors 2007 45 Rey, B (2010) Effect of low-cost airlines on tourism in Spain. A dynamic panel data model, Journal of Air Transport Management


8.4 Investment and Business Location

The impact of aviation on investment and business location decisions has been the subject of a number of papers. These papers have found evidence of air connectivity contributing to in


Hansen and Gerstein (1991)46

Used data from 1982 to 1987, the analysis related the amount of Japanese investment in each US state to measures of level of air service operated between Japan and that state (and other background factors).

The amount of Japanese investment in each US state was causally linked to the air service between Japan and that state.

EUROCONTROL (2005)47

Analysed the relationship between air transportation and business investment in the EU.

A 10% increase in air transportation usage increases business investment by 1.6% in the long run (the impact takes approximately five years to fully manifest).

IATA (2005)48 IATA surveyed 625 businesses in five countries (China, Chile, United States, Czech Republic and France).

25% of surveyed businesses in five countries indicated that 25% of their sales were dependent on good air transport links; 30% of Chinese firms reported that they had changed investment decisions because of constraints on air services.

Bel and Fageda (2008)49

Statistically analysed the relationship between international air service and the location of large firm’s headquarters across major European urban areas.

A 10% increase in supply of intercontinental air service was associated with a 4% increase in the number of large firm headquarters located in the corresponding urban area.

Arndt et al. (2009)50 Survey of 100 foreign-owned businesses in Germany.

Air connectivity was one of the four most important factors affecting location decisions, and that 57% of businesses would have chosen another location had connectivity been less good.

46 Hansen, M. and R. Gerstein "Capital in Flight: Japanese Investment and Japanese Air Service in the United States During the 1980s," Logistics and Transportation Review, 1991, Vol. 27, No. 3, pp. 257-276. 47 Cooper, A. and Smith, P. (2005), “The Economic Catalytic Effects of Air Transport in Europe,” Commissioned by EUROCONTROL. EUROCONTROL is a civil and military organisation established in 1963 to facilitate a safe, seamless pan-European Air Traffic Management (ATM) system. 48 Airline Network Benefits, IATA Economic Briefing No. 3, 2006. 49 Bel, G. and Fageda, X. (2008), “Getting There Fast: Globalization, Intercontinental Flights and Location of Headquarters”, Journal of Economic Geography, Vol. 8, No. 4. 50 Arndt, A., et al. "Economic catalytic impacts of air transport in Germany–The influence of connectivity by air on regional economic development." ATRS Conference. 2009.



PWC (2013)51 Econometric analysis of the UK’s air connectivity, air seat capacity and Foreign Direct Investment (FDI).

A 1% increase in international seat capacity was associated with a 0.47% increase in FDI inflows and a 0.19% increase in FDI outflows.

8.5 Impact on Employment, Economic Growth and Productivity

The increased trade, investment, business activity and tourism facilitated by aviation ultimately results in increases in economic productivity (e.g., GDP per worker), in GDP and in employment (e.g., increased trade facilitated by air services results in increased employment in the businesses producing the traded goods and services). A number of research papers have examined the overall impact on the economy and employment as a result of the wider economic benefits of aviation.


Button, Lall, Stough and Trice (1999)52

Used data from 321 US metropolitan areas in 1994 to regressed high-tech employment against a number of controlling factors including a dummy indicating that the region was served by a hub airport.

The analysis found that the presence of a hub airport increased high-tech employment by an average of 12,000 jobs in a region.

Button and Taylor (2000)53

Used data for 41 metropolitan areas in the US to regress “new economy” employment against a number of control factors including the number of direct routes to Europe offered by airports in the region.

Increasing the number of routes between the US and Europe from 3 to 4 at an airport generated approximately 2,900 “new economy” jobs in the surrounding region.

Brueckner (2002)54 Regressed employment in 94 metropolitan areas in the US against a number of factors including measures of air service.

A 10 percent increase in passenger enplanements in a metropolitan area leads to an approximately 1 percent increase in employment in service-related industries.

51 PWC (2013), “Econometric Analysis to Develop Evidence on the Links Between Aviation and the Economy”, Report for the UK Airports Commission, December 2013. 52 Button, K., Lall, S., Stough, R. and Trice, M. (1999), “High-technology employment and hub airports,” Journal of Air Transport Management, Vol. 5, Issue 1, January 1999. 53 Button, K. and Taylor, S. (2000), “International air transportation and economic development”, Journal of Air Transport Management, Vol. 6, Issue 4, October 2000. 54 Brueckner, J. (2002), “Airline Traffic and Urban Economic Development”.



InterVISTAS/IATA (2006) 55

Used data on 48 countries over nine years to examine the relationship between air connectivity (a measure of international air service) and labour productivity growth.

The research found that a 1% increase in a nation’s air connectivity increased GDP per labour hour by 0.0068%

Ishutkina and Hansman (2009)56

Aggregate and individual country-level data were analysed in terms of the relationship between air transportation passengers and GDP. A data analysis of 139 countries over a time period of 30 years (1975 to 2005).

Found statistical evidence of a (two-way) feedback relationship between air transport and economic activity.

PWC (2013)57 Estimated an Error Correction Model of UK GDP and air seat capacity between 1991 and 2010.

A 10% change in the growth rate of seat capacity leads to approximately a 1% change in the growth rate of GDP. The analysis also found evidence of a two-way relationship between the variables – GDP growth causes seat capacity and seat growth causes GDP growth.

8.6 Conclusions

A body of research has developed over the last 15 years or so which has examined and quantified the contribution of air transport to trade, investment and economic growth. Through the use of different empirical methods and data sets, this research has consistently found a significant and positive relationship between aviation and economic growth. Furthermore, much of the research has established that air transport growth has been the cause of economic growth, rather than simply economic growth leading to increased air transport levels.

55 InterVISTAS Consulting Inc., “Measuring the Economic Rate of Return on Investment in Aviation”, December 2006. 56 Ishutkina M.A. and Hasnman R.J. (2009), “Analysis of the interaction between air transportation and economic activity: a worldwide perspective”, PhD thesis, Department of Aeronautics and Astronautics, Massachusetts Institute of Technology. 57 PWC (2013), “Econometric Analysis to Develop Evidence on the Links Between Aviation and the Economy”, Report for the UK Airports Commission, December 2013.


9 Estimating the Wider Economic Benefits of Air Transport in Asia Pacific

Summary

The wider economic benefits of aviation in Asia Pacific include tourism impacts, as well as other catalytic impacts related to productivity, trade and investment. The spending of tourists arriving by air generates over 9 million jobs and USD $141.5 billion in GDP. In addition, air transportation facilitates a further 18.6 million jobs and USD $346.7 billion in GDP in the region from other non-tourism impacts.

The estimated wider economic benefits of aviation in Asia Pacific comprise two elements:

Tourism. The tourism impacts attributable to air transportation in Asia Pacific were estimated using tourism spend data from a variety of publically available sources, including national destination marketing organizations, international tourism organizations, national statistic bureaus, the World Bank and the World Travel & Tourism Council. Economic multipliers were applied to the spend figures for each study country to estimate the employment and GDP impacts.

Other catalytic impacts related to productivity, trade and investment. This aspect of the wider economic benefits was estimated using a parameter-based approach utilising previous research on catalytic impacts.

9.1 Tourism Impacts

Tourism is a major industry within Asia Pacific, and aviation plays an important role in facilitating the tourism industry in the region. Based on analysis of air traffic data and a number of publically available sources,58 an estimated 166 million international tourists visited Asia Pacific by air in 2014, spending a total of USD $283.7 billion in the region.

Economic multipliers were applied to the tourism expenditure of each country in the region. Using these multipliers, the direct employment and GDP generated by tourist spending in Asia Pacific is estimated. The resulting economic impact estimates are provided in Figure 9-1. The spending of international tourists arriving by air is estimated to generate over 9 million jobs and USD $141.5 billion in GDP, which equates to 0.6% of GDP in Asia Pacific.

58 Publically available sources include national destination marketing organizations, international tourism organizations, national statistic bureaus, the World Bank, as well as the World Travel & Tourism Council.


Figure 9-1: Jobs and GDP Facilitated by Tourism Spending Wider Economic Benefits of Aviation (2014)

Impact Jobs GDP

(USD Billions) % of

National GDP

Asia Pacific Region

Tourism Spending Wider Economic Benefits

9,052,900 $141.5 0.6%

9.2 Air Connectivity and Economic Growth

A measure of connectivity developed by IATA was also used in the analysis to quantify the non-tourism wider economic benefits of air transportation in the region. The IATA connectivity index seeks to measure the scope of access between an individual airport, region or country, and the global economy. The index measures the number and size (in terms of passenger air traffic) of destinations served, as well as the frequency of service to each destination and the number of onward connections available from those destinations. The index is described in more detail in Appendix B.

The relationship between air connectivity and economic growth was analysed using data on the IATA connectivity index and GDP per capita for all 36 countries in Asia Pacific between 1994 and 2014. This is referred to as panel data, as it incorporates both time series variation (changes over time) and cross-sectional variation (changes between countries).

9.3 Wider Economic Benefits on Productivity, Trade and Investment

To quantify the wider economic benefits related to productivity, trade and investment, InterVISTAS considered the additional air connectivity that airports in Asia Pacific have supported over the past 20 years. The analysis estimates the GDP per capita (and from that, national GDP) that has been contributed by the growth in connectivity. The connectivity parameter was taken from a study undertaken by InterVISTAS on behalf of IATA.59 . It was selected because it is one of few studies that are based on global data (including data on Asia Pacific countries) – most studies have used U.S. data. It also provides a parameter that specifically addresses productivity, rather than other aspects of aviation economic impacts such as airport activity or tourism.

The parameter from that study found that a 1% increase in a nation’s air connectivity increased the nation’s productivity (measured in terms of GDP per hour or GDP per worker) in each year by 0.0068%. While the outcome from the parameter is expressed in terms of GDP per hour or worker, it captures the aggregate net effect of a range of catalytic impacts, including trade, investment, business location, etc., which manifest themselves as greater GDP per worker.60 For example, greater trade allows businesses to benefit from economies of scale as they sell to a larger market. Investment

59 InterVISTAS Consulting Inc., “Measuring the Economic Rate of Return on Investment in Aviation”, December 2006. 60 The original analysis that produced the connectivity parameter did not include any variables related to trade or business location, therefore air connectivity contribution to these effects is captured by the coefficient on GDP per hour.


decisions (expanding operations, developing new operations, introducing new technologies) will also have the effect of improving the value-added produced by each worker.

The result of the analysis is an estimate of the amount of GDP that would have been foregone if air connectivity in Asia Pacific had been unchanged over the last 20 years. Arguably, this is a conservative approach to estimating the wider economic benefits, as it does not consider connectivity changes prior to 1994.

As an example, between 1994 and 2014, India’s connectivity index increased by 1,130%. Applying the catalytic parameter, this suggests that the contribution to per capita GDP growth was 0.0068 x 1,130% = 7.68%.61 This percentage was applied to the GDP per capita of USD $578.84 in 1994 (inflated to 2014 prices) and multiplied by the 2014 population of 1.3 billion:

USD $578.84 x 7.68% x 1.3 billion = USD $56.3 billion

Similar calculations were performed for each country. The GDP attributable to the wider economic benefits of air transportation in Asia Pacific is the result of incremental economic activity supported and stimulated by air connectivity – greater trade, new investment, higher productivity.

It is possible that some of this productivity growth accrued to industries already captured by the previous analysis of airport activity or tourism spending. To avoid double-counting, the catalytic impact estimate was adjusted downwards. Assuming that the wider economic benefits are spread fairly broadly across the economy, the other catalytic impacts of each country were reduced by the respective combined percentage share of total airport activity impacts and tourism spending impacts of national GDP. For example, total airport activity and tourism spending in India accounted for 0.82% of national GDP in 2014. Thus, the other catalytic impacts linked to aviation in the country were reduced by 0.82%. The same adjustment was conducted for each of the other countries in Asia Pacific.

The GDP attributable to the wider economic benefits of air transportation related to productivity, trade and investment - the non-tourism wider economic benefits - in the region stimulates spending by businesses and individuals in the economy, due to wealth creation, and can be translated into employment impacts. These were estimated based on the income share of total GDP in the I-O tables for each country. Thus, the employment impacts are assumed to be in line with the national average.

The estimated non-tourism wider economic benefit impacts of aviation in the Asia Pacific region are provided in Figure 9-2.62 It is estimated that almost 18.6 million jobs are associated with the non-tourism wider economic benefits of air transportation in the region. The non-tourism wider economic benefits generated approximately USD $346.7 billion in GDP. This is approximately 1.4% of the total GDP of Asia Pacific in 2014.63

61 Rounded from 7.6812%. 62 Wider economic benefits were not estimated for North Korea due to lack of available data. 63 Based on World Bank World Development Indicators, International Financial Statistics of the IMF, IHS Global Insight, and Oxford Economic Forecasting data, the total GDP of the Asia Pacific countries was $24,500 billion in 2014.


Figure 9-2: Jobs and GDP Facilitated by Non-Tourism Wider Economic Benefits of Aviation (2014)

Impact Jobs GDP

(USD Billions) % of

National GDP

Asia Pacific Region

Non-Tourism Wider Economic Benefits

18,565,200 $346.7 1.4%


9.4 Wider Economic Benefits by Country

The 2014 employment and GDP impacts associated with the wider economic benefits of aviation in Asia Pacific are presented by country in Figure 9-3 and Figure 9-4, respectively.

The size of the wider economic benefits as a proportion of the national economy varies greatly between countries from 37% in Maldives to under 1% in New Caledonia. Countries with relatively large tourism industries tend to have larger wider economic benefits, such as Maldives, Macau and Thailand reflecting the importance of aviation to tourism. More remote or island nations also tend to have larger wider economic benefits (e.g. Vanuatu and Fiji), suggesting the importance of air connectivity to integrating those nations with the global economy. A number of other factors affect the differing wider economic benefits across the countries: the relative size of the aviation sector and overall economy (a large economy with a small aviation sector is likely to have a smaller wider economic benefit), the structure of the economy (e.g. whether the economy has large proportion of industries that are particularly dependent on air connectivity), and the historical growth in connectivity (countries with faster growing connectivity tend have larger wider economic benefits, all else being equal).64

While these figures are large, it is worth considering how many of these economies might look if they had substantially reduced air connectivity levels. For example, if many of the direct and highly frequent services did not exist, passengers would have limited or no options to travel to/from these countries, or would have to travel via other hub airports. In such a scenario, it is easy to imagine that tourism to these countries would be much lower, that the overall volume of trade would be substantially lower, and that some companies would chose not to locate or expand in these countries. The net effect of this would be smaller, slower-growing economies.

While, as mentioned previously, the wider economic benefits are not captured in Input-Output tables, the importance of aviation for other industries can be illustrated by examining Input-Output tables.

For example, a review of Australia’s Input-Output tables reveals that the professional, scientific and technical services industry in the country, which includes architecture, engineering and consultancy, spends approximately 2.4% of its total expenditure on air transportation, and accounts for 15.1% of all industry spending on air transportation. Similarly, 3.8% of Australia’s computer systems design and related services industry’s spending is on aviation, comprising 6.6% of all industry spending on air transportation.65 These high value industries are significant consumers of air transport and rely on air transport for their businesses to function.

Another example can be seen in the Input-Output tables of the Philippines. The country’s wholesale and retail trade industry is the largest purchaser of air transportation, making up 21.5% of all industry spending on aviation. The share of air transportation in the total spending of the telecommunications industry of the Philippines is among the greatest of all industries, with 8.3% of the industry’s total spending being on aviation transportation.66 Each of these major purchasers of air transportation is high value industries, indicating the important linkages between aviation and other industries.

64 Further discussion on the wider economic benefit results by country is provided in Appendix C. 65 Australian Bureau of Statistics (http://www.abs.gov.au/AusStats/[email protected]/MF/5209.0.55.001) 66 Philippine Statistics Authority (http://www.nscb.gov.ph/io/DataCharts.asp)


Figure 9-3: Employment Generated by Wider Economic Benefits by Country, 2014

Country

Jobs % of

National Labour Force

Tourism Spending Impacts

Non-Tourism Impacts

Overall Wider Economic Benefits

India 2,039,000 5,486,800 7,525,800 1.13%

Thailand 1,381,700 354,300 1,736,000 3.53%

China 1,286,200 4,218,100 5,504,300 0.59%

Vietnam 859,300 988,000 1,847,300 2.69%

Indonesia 816,200 3,186,100 4,002,300 2.50%

Philippines 555,800 686,100 1,241,900 2.06%

South Korea 222,800 247,300 470,100 1.58%

Sri Lanka 191,600 89,600 281,300 2.55%

Pakistan 186,400 224,000 410,300 0.43%

Japan 168,200 367,800 536,000 0.74%

Cambodia 155,000 449,300 604,300 4.80%

Malaysia 148,300 122,300 270,600 1.54%

Taiwan 144,600 145,400 290,100 2.09%

Australia 138,000 102,400 240,400 1.65%

Singapore 108,600 43,200 151,800 4.21%

Hong Kong 101,400 47,800 149,300 3.60%

Nepal 93,000 203,300 296,300 1.30%

Laos 84,100 75,700 159,900 3.03%

Maldives 74,000 900 74,900 37.06%

Bangladesh 63,200 1,262,900 1,326,100 1.24%

New Zealand 55,600 17,300 72,800 2.51%

Macau 49,700 1,300 50,900 12.55%

Fiji 36,700 3,100 39,800 8.91%

Myanmar 25,600 164,700 190,300 0.49%

Papua New Guinea 12,600 51,000 63,600 1.19%

Mongolia 11,900 3,600 15,500 0.89%

Vanuatu 10,300 1,800 12,200 6.54%

Brunei 9,600 600 10,200 4.01%

Solomon Islands 9,300 10,200 19,500 5.34%

Western Samoa 6,100 100 6,200 7.93%

Timor-Leste 2,800 9,700 12,500 2.81%

French Polynesia 2,500 - 2,500 1.63%

Tonga 1,400 300 1,700 2.58%

New Caledonia 900 200 1,100 0.74%

Micronesia 400 - 400 0.65%

North Korea - - - 0.00%

TOTAL 9,052,900 18,565,200 27,618,100 1.15% Numbers may not add up due to rounding. * Wider economic benefits were not estimated for North Korea due to lack of credible data.


Figure 9-4: GDP Facilitated by Wider Economic Benefits by Country, 2014

Country

GDP (USD Billions)

% of National GDP


Non-Tourism Impacts


China $15.5 $120.7 $136.2 1.32%

India $10.8 $56.3 $67.1 3.27%

Japan $15.4 $46.5 $61.9 1.35%

Indonesia $7.1 $33.9 $41.1 4.62%

Australia $15.4 $17.3 $32.6 2.26%

South Korea $9.4 $23.0 $32.4 2.30%

Thailand $17.5 $5.6 $23.1 5.71%

Taiwan $5.8 $9.2 $15.0 2.83%

Hong Kong $8.5 $5.5 $14.1 4.83%

Singapore $6.8 $6.1 $12.9 4.20%

Malaysia $4.1 $5.1 $9.2 2.73%

Philippines $4.1 $3.8 $7.9 2.79%

Vietnam $4.6 $3.1 $7.7 4.13%

New Zealand $3.5 $2.4 $5.8 2.96%

Macau $5.3 $0.3 $5.6 10.09%

Bangladesh $0.3 $2.6 $3.0 1.62%

Pakistan $1.0 $1.9 $2.9 1.18%

Sri Lanka $1.7 $0.8 $2.5 3.32%

Cambodia $0.8 $0.6 $1.5 8.89%

Maldives $1.0 $0.0 $1.1 36.94%

Myanmar $0.1 $0.7 $0.8 1.30%

Brunei $0.6 $0.2 $0.8 4.45%

Nepal $0.5 $0.2 $0.7 3.46%

Laos $0.4 $0.2 $0.6 5.48%

Fiji $0.5 $0.04 $0.5 11.67%

Papua New Guinea $0.1 $0.2 $0.3 1.69%

Timor-Leste $0.0 $0.1 $0.2 3.53%

Solomon Islands $0.0 $0.04 $0.1 7.51%

Mongolia $0.1 $0.04 $0.1 1.20%

Vanuatu $0.1 $0.01 $0.1 17.01%

Western Samoa $0.1 $0.002 $0.1 9.51%

French Polynesia $0.1 $0.0 $0.1 1.58%

New Caledonia $0.1 $0.03 $0.1 1.15%

Tonga $0.02 $0.002 $0.02 4.62%

Micronesia $0.003 $0.0 $0.003 0.99%

North Korea* - - - 0.00%

Total $141.5 $346.7 $488.2 2.03% Numbers may not add up due to rounding. * Wider economic benefits were not estimated for North Korea due to lack of available data.


10 Summary: Total Economic Impact Generated and Facilitated by Aviation in Asia Pacific

Summary

Combining the direct, indirect, induced and wider economic benefits, air transportation in Asia Pacific generate or facilitate over 33.7 million jobs and USD $705.3 billion in GDP.

This report estimates the economic contribution that air transport currently makes as a driver of economic activity in the Asia Pacific region, and highlights the importance of this industry to both its regional economies and their population. The results, broken down by impacts, region, and country are provided in the following subsections.

Identifying these benefits is especially important in the context of the Asia Pacific aviation market, not only due to its rapid continued growth, but due to its importance in facilitating activities such as trade, business development and leisure trips. Furthermore, there is a growing concern from industry observers that the rate of investment being made in the region to keep up with passenger growth is insufficient, and will result in unfulfilled passenger demand.

As a result, this study calculates the future economic impact in the Asia Pacific region of airports should they not keep up with passenger growth. It is estimated that the risk of inaction of airports by 2035 could cost up to a total of 23.8 million jobs, as well as a USD $398.6 million contribution to the Asia Pacific regional GDP. This is not only important because of the economic loss, but also because the resulting constrained air connectivity and capacity undermines the ability to achieve full economic potential in other sectors of the region’s economy. Many, if not most economic sectors are dependent on high connectivity and affordability of passenger and freight air transport.

10.1 Total Economic Impacts

Including direct, indirect, induced and wider economic benefits, it is estimated the air transport in the Asia Pacific region supports approximately 33.7 million jobs, and contributes a total of USD $705.3 billion in GDP, equal to 3% of GDP of the 36 countries in the Asia Pacific region. The combined total impacts of aviation in Asia Pacific is summarised in Figure 10-1.


Figure 10-1: Total (Direct+Indirect+Induced+Wider Economic Benefits) Impacts, 2014

Impact Jobs GDP

(USD Billions)

Asia Pacific Region

Direct 2,379,500 $113.2

Indirect 1,852,500 $63.6

Induced 1,806,300 $40.2

Wider Economic Benefits 27,618,100 $488.2

Total 33,656,400 $705.3


It should be noted that these figures are not attempting to credit aviation with solely creating nearly 3% of the Asia Pacific economy. These economies are far more complex than that. It clearly takes a wide range of players acting together to generate economic growth – government, business, infrastructure providers, residents and others. For example, if no one had decided to build large amounts of hotels in many of these countries, tourism would also be substantially lower. What the estimates do show is that without Asia Pacific airports, and particularly without the diverse and affordable connectivity supported by these airports, the economies of these countries would not be as large, affluent or diverse as they are today.

A Comment on the Magnitude of the Results

One of our key findings are that today there are 2.4 million direct jobs in aviation in the Asia Pacific region, with an additional 3.7 million indirect and induced jobs for total sector linked jobs of 6.1 million. Including job impacts in the aviation dependent tourism industry plus the catalytic impact of aviation connectivity on trade and economic productivity, total job impacts are 33.7 million. This is a large number and some might be tempted to dismiss the results as being incredible. However, these impacts are reasonably proportionate. These are impacts for the largest population and economic region in the world. In this region there are 2.4 billion jobs, and the total aviation impacts are 1.4 percent of the total. Similarly our current GDP total impact of roughly USD $700 billion is 3% of the total USD $24 trillion GDP.

Another way to consider these impacts is by considering a counterfactual scenario where the region has a much smaller aviation sector (as it did 20 to 30 years ago). While Japan, for example, had a reasonably developed aviation sector then, that was not the case for China, India, Korea, etc. The jobs in aviation (and in the indirect industries) were a fraction then of what they are now. The tourism sectors in these nations were tiny then, by comparison to today. Trade flows were also very small. Aviation connectivity has played a major role in the development of these large emerging economies and large numbers of jobs, appropriately proportionate to the new magnitude of these economies, were enabled by that connectivity.


10.2 Total Economic Impacts by Country

Figure 10-2 presents the total economic impacts of air transportation in the Asia Pacific region at the country level, while Figure 10-3 provides a map of the combined total employment impacts by country. In total, 36 countries were included in the report, each contributing a significant number of jobs, and in turn GDP to the broader global economy.

Out of the study countries, India supports the largest number of total jobs with an estimated 8 million. Additionally, it contributes approximately USD $71.6 billion dollars to the country’s respective economy. In fact, the top three countries alone account for just over 60% of the entire region’s total employment.


Figure 10-2: Total (Direct+Indirect+Induced+ Wider Economic Benefits) Employment & GDP by Country, 2014


(USD Billions) % of

National GDP

China 8,024,100 $195.8 1.9%

India 7,969,400 $71.6 3.5%

Indonesia 4,403,200 $49.6 5.6%

Thailand 2,045,400 $29.0 7.2%

Vietnam 1,958,900 $8.6 4.6%

Philippines 1,444,700 $9.8 3.4%

Bangladesh 1,341,600 $3.1 1.7%

Japan 1,117,200 $94.7 2.1%

South Korea 678,200 $53.1 3.8%

Cambodia 617,400 $1.5 9.2%

Australia 515,800 $61.0 4.2%

Malaysia 500,200 $13.0 3.8%

Pakistan 452,500 $3.3 1.3%

Taiwan 426,500 $21.2 4.0%

Singapore 323,300 $30.0 9.8%

Nepal 309,700 $0.7 3.6%

Hong Kong 301,700 $25.4 8.7%

Sri Lanka 297,500 $2.9 3.9%

Myanmar 200,300 $0.9 1.4%

New Zealand 199,500 $17.0 8.6%

Laos 165,500 $0.7 5.8%

Maldives 82,300 $1.4 47.3%


Macau 61,900 $7.4 13.3%

Fiji 47,700 $0.7 15.6%

Solomon Islands 20,400 $0.1 8.3%

Mongolia 18,300 $0.2 1.8%

Brunei 14,300 $1.2 6.8%

Vanuatu 13,500 $0.2 18.7%

Timor-Leste 13,000 $0.2 3.8%




Tonga 2,500 $0.0 7.4%

Micronesia 900 $0.0 2.1%

North Korea 500 $0.0 0.0%

Total 33,656,400 705.3 2.9%

Numbers may not sum due to rounding. * Wider economic benefits were not estimated for North Korea due to lack of credible data.


Figure 10-3: Total (Direct+Indirect+Induced+Wider Economic Benefits) Employment by Country, 2014


11 Future Economic Impact in Asia Pacific: Unconstrained Projection for 2035

Summary

It is estimated there will be 72.3 million jobs in the Asia Pacific region associated with the air transportation sector in 2035, which includes direct, indirect, induced and wider economic benefits. GDP is expected to reach just above USD $1.3 trillion in 2035 from USD $705 billion in 2014.

As air services in Asia Pacific grow, the economic contribution of aviation is expected to grow as well. As more aircraft take-off and land, additional staff will be needed to crew, clean and maintain the aircraft, to service passengers and transport their luggage, and to process, load and unload air cargo (i.e., the direct impacts). Air carriers and other businesses in aviation will order additional goods and services from their suppliers (indirect impacts), and the increased employment will stimulate spending in the general economy (induced impacts). In addition, the new routes and greater frequencies at Asia Pacific airports will help facilitate increased tourism, trade, investment and attract business to the region (wider economic benefits).

The following section discusses the future economic contribution of air transportation in Asia Pacific.

11.1 Forecast Scenario

To grow the economic contributions calculated for 2014, InterVISTAS used a country-level passenger traffic forecast provided by IATA. The forecast included passenger numbers, broken down by sector, between 2014 and 2035. It is expected that if none of the Asia Pacific airports experience any passenger throughput constraints (i.e., terminal or runway constraints), then the number of passengers moving through airports in the region will increase from over 2.2 billion in 2014 to just under 4.4 billion in 2035, representing a Compound Annual Growth Rate (CAGR) of 3.2%.67

InterVISTAS used the country-level employment impacts calculated for 2014 and grew these numbers – in line with the IATA forecast growth rates – for each year until 2035. However, using the forecast growth rates alone does not capture the potential productivity improvements and economies of scale that aviation may achieve in the future. It is expected that the aviation industry will become more efficient over time (due to economies of scale and other productivity improvement), reducing their unit employment requirements. Therefore, an elasticity approach was used where the growth in country passenger traffic is multiplied by an elasticity coefficient.

The following formula highlights the approach:

67 The IATA forecast is an unconstrained forecast, which assumes all study Asia Pacific airports and air space will have the necessary capacity to handle all passenger growth.


% 𝐼𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝐸𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 = % 𝐼𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝑃𝑎𝑠𝑠𝑒𝑛𝑔𝑒𝑟 𝑇𝑟𝑎𝑓𝑓𝑖𝑐 × 𝐸𝑙𝑎𝑠𝑡𝑖𝑐𝑖𝑡𝑦68

The elasticity coefficient, otherwise known as a productivity factor, lowers the growth of employment and assigns some of this growth to productivity improvement across Asia Pacific airports.

InterVISTAS also examined a number of other forecast reports to cross-check and cross-reference our analysis:

Boeing Market Outlook 2015 – 2034. Boeing provides a detailed set of passengers and traffic forecasts for the next 20 years. Forecasts are available at a macro region level. Some highlights include:

o Passenger traffic to grow 4.9% per annum. o Cargo traffic to grow 4.7% per annum. o World fleet is expected to double in size over the next 20 years with the addition of

approximately 38,000 planes.

Airbus Global Market Forecast 2015 – 2034. Airbus develops its own forecasts for passenger and freight transportation. Some highlights include:

o Air traffic will grow at an average annual rate of 4.6% over the next 20 years. o Half of the 2034 top-20 traffic flows will involve Asia-Pacific. o In 2034, LCCs will fly approximately 21% of the world RPKs.

11.2 Total Future Contribution of Air Transport in Asia Pacific

Using the IATA forecast growth rates, and taking into account productivity improvements over the forecast period, InterVISTAS estimated the economic contribution of air transportation in the Asia Pacific in 2020, 2025 and 2035. The results for the Asia Pacific region are presented in Figure 11-1.

By 2035, it is estimated that jobs attributed to direct, indirect, induced and wider economic benefit impacts will increase to 72.3 million, compared to 33.7 million in 2014. GDP is expected to reach just over USD $1.3 trillion in 2035 from USD $705 billion in 2014.

11.3 Asia Pacific Countries

Figure 11-2 provides a country level breakdown of the jobs expected to be generated in 2035, as well as the GDP to be contributed to each country’s economy. Including direct, indirect, induced and wider economic benefits, India is expected to support the largest number of jobs in 2035 out of all the study countries with 19.1 million. In addition, India is estimated to contribute 171.8 billion in GDP.

68 The elasticity coefficient used was 0.667, which means a 10% increase in traffic increases employment by 6.67%. The elasticity figure is based on prior InterVISTAS research.


Figure 11-1: Total (Direct, Indirect, Induced & Wider Economic Benefits) Future Impacts in Asia Pacific, 2020, 2025, 2035.

Impacts Jobs GDP

(USD Billions)

Total 2014 Economic Impact in the Asia Pacific Region

Direct 2,379,500 $113.2

Indirect 1,852,500 $63.6

Induced 1,806,300 $40.2


Total 33,656,400 $705.3


Direct 3,100,800 $145.1

Indirect 2,432,800 $81.1

Induced 2,379,100 $50.7


Total 45,077,800 $909.0


Direct 3,600,200 $166.3

Indirect 2,830,800 $92.5

Induced 2,781,800 $57.4


Total 53,568,000 $1,049.7


Direct 4,616,700 $208.2

Indirect 3,630,900 $114.8

Induced 3,605,500 $70.7


Total 72,253,800 $1,340.4



Figure 11-2: Total (Direct+Indirect+Induced+ Wider Economic Benefits) Employment & GDP by Country, 2035


(USD Billions) % Increase

2014 vs. 2035

India 19,112,700 $171.8 240%

China 16,440,500 $401.1 205%

Indonesia 8,820,000 $99.4 200%

Vietnam 5,252,600 $23.2 268%

Thailand 3,752,000 $53.2 183%

Philippines 3,371,700 $22.9 233%

Bangladesh 3,284,400 $7.5 245%

Cambodia 1,421,300 $3.5 230%

Japan 1,359,100 $115.2 122%

Pakistan 1,252,300 $9.0 277%

South Korea 1,200,700 $94 177%

Malaysia 1,018,300 $26.4 204%

Taiwan 814,100 $40.4 191%

Australia 784,700 $92.9 152%

Singapore 699,100 $64.9 216%

Nepal 677,500 $1.6 219%

Sri Lanka 673,100 $6.7 226%

Hong Kong 612,300 $51.5 203%

Laos 403,000 $1.7 244%

New Zealand 311,000 $26.5 156%

Myanmar 200,300 $0.9 100%

Papua New Guinea 185,400 $0.9 273%

Maldives 153,700 $2.6 187%

Macau 137,300 $16.3 222%

Fiji 87,500 $1.2 183%

Solomon Islands 50,000 $0.2 245%

Mongolia 46,900 $0.6 256%

Timor-Leste 31,800 $0.5 245%

Vanuatu 27,300 $0.3 201%

Brunei 22,900 $1.9 160%

Western Samoa 18,100 $0.3 247%

French Polynesia 17,400 $0.8 184%

New Caledonia 8,500 $0.6 243%

Tonga 4,100 $0.05 168%

Micronesia 1,400 $0.01 175%

North Korea 600 $0.003 120%

Total 72,253,800 $1,340.4 215%



12 The Benefit of Fully Enabled Air Transport Capacity Development

Summary

Using and comparing an unconstrained forecast of Asia Pacific air traffic with a capacity constrained forecast, we estimate the benefit of fully enabling air transport growth. We estimate that the value of capacity expansion is to enable over 23.7 million additional jobs, compared to a scenario with constrained growth. This equates to a contribution of approximately USD $398.5 billion to the regional economy.

Many airports around the world, including a number in the Asia Pacific region, are currently or will soon be unable to grow due to insufficient terminal and/or runway capacity. This creates a situation where passenger demand for the use of a hub or airport is unable to be accommodated, and therefore passengers must choose to use a different airport.

Many airports will make the necessary adjustments and expand to accommodate the increased demand in the coming years. However, those with no planned capital expenditures to upgrade existing infrastructure will create, over time, a value of capacity expansion in terms of jobs and GDP.

This section provides an estimate of the value of capacity expansion due to airports reaching a capacity constraint within the study time period (2015-2035).

12.1 Existing and Potential Air Transport Capacity Constraints in Asia Pacific

An airport constraint in the context of this chapter’s analysis is defined as the failure of an airport to invest in the adequate terminal or runway infrastructure necessary to handle the estimated passenger growth during the study period (2015-2035). We consider both terminal and runway constraints in Scenario 1 which is the analysis presented in this chapter. An alternate scenario, Scenario 2, considers only runway constraints.

Many airports located within the Asia pacific study region are expected to come up against either a terminal or runway constraint over the next 20 years. One example is China’s Beijing Capital International Airport, which has no slots available for carriers and may very well become the world’s busiest airport in terms of passenger traffic in 2015. Terminal capacity at the airport is stretched, as Beijing Capital is currently experiencing a throughput of passengers higher than the listed capacity, and in addition, runway capacity is expected to reach its maximum in 2018.

India is a country-wide example of where constraints are expected to be prevalent in the short, medium and long term. Appropriate funding flowing into airport infrastructure has been a concern for some time, and analysis conducted by CAPA India anticipates that the country will require approximately USD $40 billion of investment in 50 greenfield airports by 2025 to keep pace with


growth.69 The constraints analysis provided to InterVISTAS by IATA certainly corroborate this estimate, as eight Indian airports are expected to become runway constrained at some point during the report’s study period. Should no additional investments be made in expanding runway capacity in India over the study period, it is estimated that India will forego over 6.1 million jobs and a contribution of USD $45.6 million to GDP. When terminal constraints are considered, the number of jobs and contribution to GDP gets significantly larger.

A number of other countries are subject to runway constraints at key hub airports throughout the next 20 years. Australia, for example, has four airports that are expected to reach runway capacity within the study period. Only one of these airports currently has plans to build a new runway and ensure the appropriate infrastructure is in place to accommodate future passenger growth. As a consequence, Australia runs the risk of foregoing over 40 million passengers in 2035, which would result in an additional 140,000 jobs.

12.2 Capacity Constrained Forecast Scenario

The analysis in this section estimates the difference in the economic impact of the constrained and unconstrained passenger demand of airports in the Asia Pacific region. That is to say that if, by 2035, some airports are not able to keep up with terminal or runway capacity, what would be the value of capacity expansion (or unfulfilled demand)?

IATA provided InterVISTAS with a list of airports in the Asia Pacific region that have been assessed to currently face, or will come up against capacity constraints in the study period. These constraints could be due to either a lack of terminal space or a limited availability of runway movements. In general, airports are constantly making capital investments to upgrade or build new terminal space. In the situation where construction is on-going and terminal capacity has been reached, an airport can still find ways to accommodate additional passengers. Runway capacity constraints, however, can be more troublesome for airports as they require longer term planning and many additional considerations.

With this information on hand, InterVISTAS considered the results from two scenarios:

Scenario 1. This scenario considers the constraint (terminal or runway) which comes online the earliest and limits the growth of passengers at that airport for future years. A total of 73 individual airport constraints are considered in this scenario.

Scenario 2. It is assumed that airports will build the appropriate terminal capacity as needed and only airports with current or future runway constraints are considered. If there are plans to build or upgrade runways in the future, then normal unconstrained growth will again resume at that point.

The analysis presented in the following section takes into account both terminal and runway constraints (scenario 1). The second scenario is considered in Appendix D. Caution must be exercised when considering the results from each scenario as actual air traffic growth over the next two decades may differ quite significantly compared to forecasts. World events and the economic health of study countries change over time and can present unanticipated impacts to forecast passenger levels.

Figure 12-1 illustrates the impact of the terminal and runway constraints on the study period Compound Annual Growth Rate (CAGR) a country by country basis. The table compares the CAGRs of both the unconstrained and constrained scenarios. As can be observed, Cambodia and Sri Lanka

69 http://www.capaindia.com/PDFs/CAPA-India-Airport-Capacity-Review.pdf


are affected most significantly by the constraints, followed closely by Nepal and Hong Kong. Those countries not facing constraints experience no change in their CAGR, such as Laos, for example.


Figure 12-1: Difference of Passenger Growth for Constrained & Unconstrained Scenario,

2014-2035

Country Unconstrained

Growth (%) Constrained Growth

(%) Change

(%)

Cambodia 4.1% 0.8% -3.3%

Sri Lanka 4.0% 0.8% -3.2%

Nepal 3.8% 0.8% -3.0%

Hong Kong 3.4% 0.8% -2.7%

Macau 3.9% 1.4% -2.5%

Indonesia 3.4% 0.9% -2.5%

Philippines 4.1% 1.8% -2.3%

Singapore 3.7% 1.5% -2.3%

Viet Nam 4.8% 2.7% -2.1%

China 3.5% 1.4% -2.0%

India 4.3% 2.3% -1.9%

Pakistan 5.0% 3.1% -1.9%

Thailand 2.9% 1.1% -1.8%

Taiwan 3.1% 1.4% -1.7%

South Korea 2.8% 1.1% -1.6%

Malaysia 3.4% 2.1% -1.4%

Bangladesh 4.4% 3.0% -1.3%

New Zealand 2.1% 0.8% -1.3%

Australia 2.0% 1.1% -1.0%

Japan 0.9% 0.9% -0.1%

Maldives 3.0% 3.0% 0.0%

Brunei 2.3% 2.3% 0.0%

Laos 4.3% 4.3% 0.0%

Myanmar 0.0% 0.0% 0.0%

Papua New Guinea 4.9% 4.9% 0.0%

Mongolia 4.6% 4.6% 0.0%

Fiji 2.9% 2.9% 0.0%

Solomon Islands 4.4% 4.4% 0.0%

Tonga 2.4% 2.4% 0.0%

Vanuatu 3.4% 3.4% 0.0%

French Polynesia 2.9% 2.9% 0.0%

New Caledonia 4.3% 4.3% 0.0%

North Korea 0.9% 0.9% 0.0%

Western Samoa 4.4% 4.4% 0.0%

Timor-Leste 4.4% 4.4% 0.0%

Micronesia 2.4% 2.4% 0.0%


12.3 Economic Contribution of Asia Pacific Region if Capacity is Constrained

When summing the direct, indirect, induced and wider economic benefits in the constrained scenario,

it is estimated that in 2035, over 48.5 million jobs will be supported by the air transportation industry

in the Asia Pacific region. Furthermore, a GDP contribution of over USD 941.8 billion will be made to

the broader regional economy.

Figure 12-2: Total (Direct, Indirect, Induced & Wider Economic Benefits) Future Constrained Impacts in Asia Pacific, 2020, 2025, 2035.

Impacts Jobs GDP

(USD Billions)


Direct 2,379,500 $113.2

Indirect 1,852,500 $63.6

Induced 1,806,300 $40.2


Total 33,656,400 $705.3


Direct 2,727,600 $127.3

Indirect 2,123,400 $71.3

Induced 2,080,800 $44.9


Total 40,192,100 $804.8


Direct 2,891,300 $134.0

Indirect 2,252,300 $75.0

Induced 2,209,800 $47.2


Total 43,003,700 $851.3


Impacts Jobs GDP

(USD Billions)


Direct 3,207,200 $147.2

Indirect 2,499,800 $82.4

Induced 2,458,300 $51.7


Total 48,501,900 $941.8


12.4 The Value of Unconstrained 20-Year Capacity Growth in Asia Pacific

The analysis in this section considers the value of capacity expansion, in terms of GDP and employment, due to runway and terminal constraints at study airports in the Asia Pacific region. Several important assumptions were made:

The economic impacts provided in Section 5 are grown in line with the forecasts provided by IATA.

InterVISTAS accounted for future gains in productivity associated with technological advances, competition-induced efficiency gains by applying an elasticity coefficient to the IATA growth rates. Detail on the application of this number is provided in Section 10.1.

For the airports that encounter runway or terminal capacity constraints throughout the study period: their growth is limited to 1% per annum following the constraint. If a new runway or terminal is expected to come online at some point in the future, passenger traffic growth will resume normally following the completion of construction.

By 2035, the value of capacity expansion in terms of economic impact associated with the unfulfilled passenger demand is estimated to account for over 23.8 million jobs and an associated USD 398.6 billion contribution to GDP. These estimates include the direct, indirect, induced, and wider economic benefit activities associated with each of the constrained, or temporarily constrained, airports in the Asia Pacific region throughout the study period. Figure 12-3 presents the value of capacity expansion in terms of direct, indirect, induced and wider economic benefit impacts in the region in 2020, 2025 and 2035.

While the analysis in this section of the report focuses on runway and terminal constraints faced by airports, the analysis provided in Appendix D takes into account those airports only facing runway constraints.


Figure 12-3: Value of Capacity Expansion Asia Pacific Direct, Indirect, Induced and Wider Economic Benefits Economic Impacts, (2020, 2025, 2035)

Impacts Jobs GDP

(USD Billions)

Total 2020 Value of Capacity Expansion Economic Impact in the Asia Pacific Region

Direct 373,200 $17.8

Indirect 309,400 $9.8

Induced 298,300 $5.8


Total 4,885,700 $104.2


Direct 708,900 $32.3

Indirect 578,500 $17.5

Induced 572,000 $10.2


Total 10,564,300 $198.4


Direct 1,409,500 $61.0

Indirect 1,131,100 $32.4

Induced 1,147,200 $19.0

Wider Economic Benefits 20,064,100 286.2

Total 23,751,900 $398.6



12.5 2035 Constrained Economic Impacts, by Country

The value of capacity expansion in terms of employment and GDP varies quite significantly across countries. In many situations, such as the South Pacific islands and smaller island countries, there is no estimated concern that jobs will be lost by 2035. On the other hand, Hong Kong could expect to lose almost half of its potential employment should it not keep up with passenger demand and build new runway and terminal infrastructure.

Figure 12-4 illustrates each study country’s value of capacity expansion in terms of employment and GDP impacts due to airport runway and terminal constraints. Cambodia, Sri Lanka and Nepal are a few the most critically effected countries by runway constraints (in terms of a proportion of foregone jobs, not number of jobs) and could lose a significant amount of employment should no action take place to upgrade infrastructure. Across all study airports, it is expected that if airports do not take action to alleviate their passenger demand constraints, then by 2035 over 33% of potential jobs will be lost.


Figure 12-4: Total Constrained (Direct+Indirect+Induced+ Wider Economic Benefits) Employment & GDP by Country, 2035


(USD Billions) Foregone Jobs

(%)

India 12,905,800 $115.9 32.5%

China 10,838,900 $264.5 34.1%

Indonesia 5,285,700 $59.6 40.1%

Vietnam 3,450,700 $15.2 34.3%

Thailand 2,571,200 $36.5 31.5%

Bangladesh 2,514,100 $5.7 23.5%

Philippines 2,094,900 $14.2 37.9%

Japan 1,338,800 $113.5 1.5%

South Korea 856,800 $67.1 28.6%

Pakistan 854,900 $6.2 31.7%

Malaysia 767,700 $19.8 24.6%

Cambodia 722,300 $1.9 49.2%

Australia 644,100 $76.3 17.9%

Taiwan 576,600 $28.6 29.2%

Singapore 437,600 $40.6 37.4%

Laos 402,900 $1.7 0.0%

Nepal 362,400 $0.8 46.5%

Hong Kong 353,000 $29.7 42.4%

Sri Lanka 348,100 $3.4 48.3%

New Zealand 237,200 $20.2 23.7%

Myanmar 200,400 $0.9 0.0%


Maldives 153,800 $2.5 0.0%

Fiji 87,500 $1.4 0.0%

Macau 82,400 $9.9 40.0%

Solomon Islands 50,000 $0.2 0.0%

Mongolia 46,900 $0.6 0.0%

Timor-Leste 31,800 $0.4 0.0%

Vanuatu 27,300 $0.3 0.0%

Brunei 23,000 $1.9 0.0%




Tonga 4,100 $0.05 0.0%

Micronesia 1,300 $0.01 0.0%

North Korea 600 $0.003 0.0%

Total 48,501,900 $941.8 33.2%



13 Impacts in the ASEAN Region

Summary

Combining the direct, indirect, induced and wider economic benefits, air transportation in the ASEAN region generates or facilitates an estimated 11.7 million jobs and USD 144.4 billion in GDP.

This section presents the current and future (constrained and unconstrained) economic impacts of the ASEAN region. As noted in Section 2 of this report, the ASEAN study countries represent a subset of the Asia Pacific study region and this group of nations are taking steps to facilitate growth of air transport and connectivity within and beyond the region. The list of countries included in the ASEAN region can be found below:

Brunei

Cambodia

Indonesia

Laos

Malaysia

Myanmar

Philippines

Singapore

Thailand

Vietnam

13.1 Air Transport in ASEAN

The Association of Southeast Asian Nations (ASEAN) was formed in 1967 by Thailand, Indonesia, Malaysia, Singapore and the Philippines. ASEAN serves as a regional bloc, similar to the European Union. It works to harmonize policy, and encourages cooperation on trade, tourism, and economic growth. Since it was originally founded, the ASEAN group has expanded and now includes Brunei, Vietnam, Laos, Myanmar and Cambodia. The region has a population of approximately 600 million, which is about 9% of the world population. In 1997, ASEAN established an end-goal of full economic integration by 2020. On January 2007, the member states agreed to accelerate the fulfilment of this goal by five years to the end of 2015.

The region as a whole sits at a crossroads of global travel. The ASEAN Single Aviation Market (ASEAN-SAM) is the region’s major aviation policy geared towards the development of a unified and single aviation market. The roadmap to ASEAN-SAM was ratified by member countries at the ASEAN Transportation Ministers Meeting in Singapore at the end of 2007. The ASEAN-SAM is intended to fully liberalize air travel between member states by 2015. However, the extent of liberalization between and among the ASEAN member states is relatively limited compared to other international agreements. It does not include, for example, 7th freedom rights. The current state of liberalization is a product of successive packages agreed to by most – but not all – ASEAN member states.

This study provides a total of the economic impacts in the 10 ASEAN member states.


13.2 Direct Impacts

Figure 13-1 presents the direct jobs and GDP associated with air transportation in the ASEAN region.

The ASEAN countries accounted for 584,110 direct jobs in 2014, while the GDP contribution from the region was approximately USD 22.0 billion. This accounts for 25% of total direct jobs in the Asia Pacific region.

Figure 13-1: Direct Jobs and GDP in the ASEAN Region (2014)

Impact Jobs GDP

(USD Billions) % of

Regional GDP

ASEAN Member States

Direct 584,110 $22.0 0.1%


13.3 Direct, Indirect and Induced Economic Impacts

Figure 13-2 shows direct, indirect, induced and total jobs and GDP associated with air transportation in the ASEAN region.

Total direct, indirect and induced jobs sum up to over 1.4 million for the ASEAN region, 24.2% of the Asia Pacific total.

The total GDP contribution for the ASEAN region is estimated at approximately USD 39 billion, while the entire Asia Pacific region sums to a contribution of over USD 217 billion.

Figure 13-2: Direct, Indirect and Induced Economic Impact in the ASEAN Region, 2014

Impact Jobs GDP

(USD Billions) % of

National GDP

ASEAN Member States

Direct 584,100 $22.00 0.9%

Indirect 395,900 $10.0 0.4%

Induced 478,900 $6.80 0.3%

Direct+Indirect+Induced Total

1,458,900 $38.7 1.5%



13.4 Wider Economic Benefits

Figure 13-3 presents the wider economic benefits, both tourism and non-tourism impacts for the ASEAN region.

The overall wider economic benefits in the ASEAN region accounted for 10.2 million jobs in 2014. The GDP contribution in the ASEAN countries associated with the wider economic benefits was approximately USD 105.6 billion. In the Asia Pacific countries, the overall wider economic benefits totalled 27.6 million jobs, with contributions of approximately USD 488 billion to GDP.

Figure 13-3: Wider Economic Benefits of Aviation by Region (2014)

Impact Jobs GDP

(USD Billions) % of

National GDP

ASEAN Member States

Tourism Spending Impacts 4,144,200 $46.2 1.8%

Non-Tourism Impacts 6,070,300 $59.4 2.4%

Overall Wider Economic Benefits 10,214,500 $105.6 4.2%

Numbers may not sum due to rounding.

13.5 Total Future Contribution of the ASEAN Region

Further to the entire Asia Pacific region, future economic contributions of ASEAN countries were also examined in 2020, 2025 and 2035. The results are displayed in Figure 13-4.

For ASEAN countries, the number of jobs increased to over 25 million in 2035 compared to 11.7 million in 2014. Contributions to GDP also grew in the same time frame, increasing to USD 298 million in 2035.

Figure 13-4: Total (Direct, Indirect, Induced & Wider Economic Benefits) Future Impacts in ASEAN, 2020, 2025, 2035.

Impacts Jobs GDP

(USD Billions)

Total 2014 Economic Impact in the ASEAN Region

Direct 584,100 $22.0

Indirect 395,900 $10.0

Induced 478,900 $6.8


Total 11,673,400 $144.4


Impacts Jobs GDP

(USD Billions)


Direct 754,100 $28.3

Indirect 509,500 $12.9

Induced 615,500 $8.9


Total 15,224,500 $183.8


Direct 899,200 $33.8

Indirect 606,000 $15.4

Induced 733,600 $10.6


Total 18,207,700 $219.1


Direct 1,220,600 $45.60

Indirect 822,600 $20.71

Induced 999,100 $14.21


Total 24,961,300 $298.0


13.6 Future Constrained Economic Contribution of the ASEAN Region

When summing the direct, indirect, induced and wider economic benefits in the constrained scenario,

it is estimated that in 2035, approximately 16 million jobs will be supported by the air transportation

industry in the ASEAN region. Furthermore, a GDP contribution of over USD 192.3 billion will be

made to the broader regional economy.

A summary of the impacts for 2014, 2020, 2025 and 2035 is available in the following table, Figure

13-5.


Figure 13-5: Total (Direct, Indirect, Induced & Wider Economic Benefits) Future Constrained Impacts in ASEAN, 2020, 2025, 2035.

Impacts Jobs GDP

(USD Billions)


Direct 584,100 $22.0

Indirect 395,900 $10.0

Induced 478,900 $6.8


Total 11,673,400 $144.4


Direct 675,000 $25.4

Indirect 453,400 $11.6

Induced 549,000 $8.0


Total 13,405,100 $164.7


Direct 715,600 $26.6

Indirect 481,400 $12.2

Induced 582,300 $8.5


Total 14,221,100 $173.6


Direct 799,400 $29.2

Indirect 539,800 $13.4

Induced 652,000 $9.3


Total 15,956,400 $192.3



13.7 20-Year Capacity Constrained ASEAN Value of Capacity Expansion

Airport runway and terminal constraints in the ASEAN region are expected to produce an estimate total of approximately 9 million unfulfilled jobs by 2035, as well as an associated USD 105.7 billion contribution to GDP. This value of capacity expansion is expressed in terms of jobs and GDP at the direct, indirect, induced and wider economic benefit levels. The value of capacity expansion in the ASEAN region over the next 20 years is summarised in Figure 13-6.

Figure 13-6: Value of Capacity Expansion ASEAN Direct, Indirect, Induced and Wider Economic Benefits Economic Impacts, (2020, 2025, 2035)

Impacts Jobs GDP

(USD Billions)

Total 2020 Value of Capacity Expansion Economic Impact in the ASEAN Region

Direct 79,100 $2.9

Indirect 56,100 $1.3

Induced 66,500 $0.9


Total 1,819,400 $19.1


Direct 183,600 $7.2

Indirect 124,600 $3.2

Induced 151,300 $2.2


Total 3,986,600 $45.5


Direct 421,200 $16.4

Indirect 282,800 $7.3

Induced 347,100 $4.9


Total 9,004,900 $105.7



13.8 Total Economic Impacts

Including the direct, indirect, induced and wider benefits, jobs in the ASEAN region account for approximately 35% of the total jobs in the Asia Pacific region. This 35% accounts for 11.7 million jobs, as well as a contribution of an estimated USD 144.4 billion to the ASEAN economies, as shown in Figure 13-7.

Figure 13-7: Total (Direct+Indirect+Induced+ Wider Economic Benefits) Impacts in ASEAN Region, 2014

Impact Jobs GDP

(USD Billions)

ASEAN Region

Direct 584,100 $22.0

Indirect 395,900 $10.0

Induced 478,900 $6.8


Total 11,673,400 $144.4



14 Impacts by Country

The following section includes individual profiles for each of the 36 study countries in the Asia Pacific

region. Each profile includes details on the current and future economic impacts of air transport, as

well as the value of investment should there be any capacity constraints at any of the airports in each

respective country. Each country profile also includes the labour force and GDP (across all industries)

to give the reader perspective on the size of air transportation, relative to the country’s entire

economy.

Details on specific airport constraints in each of the countries can be found in Appendix E.


AUSTRALIA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 129.1 196.4 35.2

Indirect 87.2 132.6 23.7

Induced 59.2 90.1 16.1

Tourism Spending 138.0

Productivity & Trade 102.4


Total 515.8 784.7 140.6

GDP (Millions USD)

Direct $13,700 $20,800 $3,700

Indirect $8,900 $13,500 $2,400

Induced $5,900 $8,900 $1,600

Tourism Spending $15,400

Productivity & Trade $17,300

Wider Economic Benefits $32,600 $49,700 $8,900

Total $61,000 $92,900 $16,600


149 millionpassengers

515,800jobs

$61 billionGDP

Country Overview (2014):

Labour force: 14.5 million GDP: $1.4 trillion Population: 23.6 million

2014

Current Total Aviation

Economic Impacts

Future Total Aviation

Economic Impacts


784,700jobs ↑52%

$93 billionGDP ↑53%

2035


BANGLADESH

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 6.8 16.5 3.9


Induced 6.2 15.1 3.5


Productivity & Trade 1,262.9

Wider Economic Benefits 1,326.1 3,246.5 761.5

Total 1,341.6 3,284.4 770.4

GDP (Millions USD)

Direct $60 $200 $40

Indirect $10 $30 $10

Induced $10 $30 $10

Tourism Spending $300



Total $3,100 $7,500 $1,800


9 millionpassengers

1.3 millionjobs

$3 billionGDP


Labour force: 107.3 million GDP: $183.8 billion Population: 158.2 million

2014

Total Aviation

Economic Impacts Future Total Aviation

Economic Impacts


3.3 millionjobs ↑145%


2035


BRUNEI

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 2.4 3.8 -

Indirect 0.9 1.4 -

Induced 0.9 1.4 -



Wider Economic Benefits 10.2 16.4 -

Total 14.3 22.9 -

GDP (Millions USD)

Direct $270 $400 -

Indirect $80 $100 -

Induced $60 $100 -


Productivity & Trade $160

Wider Economic Benefits $760 $1,300 -

Total $1,200 $1,900 -


1 millionpassengers

14,300jobs

$1 billionGDP



2014

Total Aviation


Economic Impacts

2 millionpassengers

22,900jobs ↑60%


2035


CAMBODIA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 5.9 13.7 6.7


Induced 4.7 10.8 5.3



Wider Economic Benefits 604.3 1,391.1 684.1

Total 617.4 1,421.3 699.0

GDP (Millions USD)

Direct $40 $100 $50

Indirect $10 $20 $10

Induced $6 $10 $10




Total $1,500 $3,500 $1,700


6 millionpassengers

617,400jobs

$2 billionGDP



2014

Total Aviation


Economic Impacts




2035


CHINA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 882.3 1,807.7 615.9

Indirect 867.2 1,776.7 605.4

Induced 770.3 1,578.3 537.8

Tourism Spending 1,286.2


Wider Economic Benefits 5,504.3 11,277.7 3,842.5

Total 8,024.1 16,440.5 5,601.6

GDP (Millions USD)

Direct $31,200 $63,900 $21,800

Indirect $19,800 $40,600 $13,800

Induced $8,600 $17,600 $6,000




Total $195,800 $401,100 $136,700



8 millionjobs

$196 billionGDP


Labour force: 930.1 million GDP: $10.4 trillion Population: 1.4 billion

2014

Total Aviation

Economic Impacts


Economic Impacts

2 billionpassengers



2035


FIJI

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 2.5 4.7 -

Indirect 2.2 4.0 -

Induced 3.2 5.8 -




Total 47.7 87.5 -

GDP (Millions USD)

Direct $90 $200 -

Indirect $50 $90 -

Induced $30 $60 -



Wider Economic Benefits $500 $900 -

Total $700 $1,200 -


2 millionpassengers

47,700jobs

$700 millionGDP



2014

Total Aviation


Economic Impacts

3 millionpassengers

87,500jobs ↑83%

$1.2 billionGDP ↑71%

2035


FRENCH POLYNESIA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 2.5 5.1 -

Indirect 2.2 3.1 -

Induced 3.2 4.5 -


Productivity & Trade 0


Total 9.5 17.4 -

GDP (Millions USD)

Direct $160 $300 -

Indirect $80 $100 -

Induced $100 $200 -




Total $400 $800 -


2 millionpassengers

9,500jobs

$400 millionGDP



2014

Total Aviation

Economic Impacts

Future Total Aviation Economic Impacts

4 millionpassengers

17,400jobs ↑83%

$800 millionGDP ↑100%

2035


HONG KONG

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 74.3 150.7 63.8

Indirect 42.9 87.0 36.9

Induced 35.3 71.6 30.3




Total 301.7 612.3 259.4

GDP (Millions USD)

Direct $5,800 $11,800 $5,000

Indirect $3,000 $6,100 $2,600

Induced $2,500 $5,000 $2,100




Total $25,400 $51,500 $21,800



301,700jobs

$25 billionGDP



2014

Total Aviation


Economic Impacts


612,300jobs ↑103%


2035


INDIA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 171.9 412.2 133.8

Indirect 125.8 301.8 98.0

Induced 145.9 350.0 113.7




Total 7,969.4 19,112.7 6,206.8

GDP (Millions USD)

Direct $2,900 $6,900 $2,200

Indirect $1,200 $2,900 $900

Induced $400 $1,100 $400




Total $71,600 $171,800 $55,800



8 millionjobs

$72 billionGDP


Labour force: 666 million GDP: $2.1 trillion Population: 1.3 billion

2014

Total Aviation

Economic Impacts





2035


INDONESIA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 160.9 322.4 129.2

Indirect 95.0 190.3 76.3

Induced 145.0 290.4 116.4




Total 4,403.2 8,820.0 3,534.4

GDP (Millions USD)

Direct $5,800 $11,700 $4,700

Indirect $1,900 $3,900 $1,500

Induced $800 $1,600 $600




Total $49,600 $99,400 $39,800



4.4 millionjobs

$50 billionGDP



2014

Total Aviation

Economic Impacts


Economic Impacts




2035


JAPAN

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 284.4 346.0 5.2

Indirect 171.7 208.8 3.1

Induced 125.1 152.1 2.3




Total 1,117.2 1,359.1 20.4

GDP (Millions USD)

Direct $14,800 $18,000 $300

Indirect $9,900 $12,100 $200

Induced $8,000 $9,700 $100




Total $94,700 $115,200 $1,700



1.1 millionjobs

$95 billionGDP


Labour force: 72.2 million GDP: $4.6 trillion Population: 127.1 million

2014

Total Aviation

Economic Impacts


Economic Impacts




2035


LAOS

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 2.4 5.8 -

Indirect 0.9 2.1 -

Induced 2.3 5.7 -




Total 165.5 403.0 -

GDP (Millions USD)

Direct $30 $100 -

Indirect $10 $10 -

Induced $10 $10 -



Wider Economic Benefits $600 $1,600 -

Total $700 $1,700 -


2 millionpassengers

165,500jobs

$700 millionGDP



2014

Total Aviation

Economic Impacts


Economic Impacts

4 millionpassengers

403 millionjobs ↑143%


2035


MACAU

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 5.3 11.9 4.7


Induced 2.5 5.6 2.3




Total 61.9 137.3 55.0

GDP (Millions USD)

Direct $900 $2,100 $800

Indirect $500 $1,000 $400

Induced $300 $800 $300




Total $7,400 $16,300 $6,500


6 millionpassengers

61,900jobs

$7 billionGDP



2014

Total Aviation

Economic Impacts


Economic Impacts


137,300jobs ↑122%


2035


MALAYSIA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 96.1 195.7 48.2

Indirect 71.6 145.8 35.9

Induced 61.9 126.0 31.0




Total 500.2 1,018.3 250.6

GDP (Millions USD)

Direct $1,500 $3,000 $700

Indirect $1,100 $2,200 $500

Induced $1,200 $2,400 $600




Total $13,000 $26,400 $6,500



500,200jobs

$13 billionGDP



2014

Total Aviation Economic Impacts


Economic Impacts


1 millionjobs ↑104%


2035


MALDIVES

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 4.0 7.5 -

Indirect 2.1 4.0 -

Induced 1.3 2.4 -




Total 82.3 153.7 -

GDP (Millions USD)

Direct $200 $400 -

Indirect $70 $100 -

Induced $20 $30 -



Wider Economic Benefits $1,100 $2,000 -

Total $1,400 $2,600 - Numbers may not add up due to rounding.

4 millionpassengers

82,300jobs

$1 billionGDP



2014



Economic Impacts

7 millionpassengers

153,700jobs ↑87%


2035


MICRONESIA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 0.1 0.2 -

Indirect 0.1 0.2 -

Induced 0.1 0.2 -


Productivity & Trade 0


Total 0.8 1.4 -

GDP (Millions USD)

Direct $2 $3 -

Indirect $1 $2 -

Induced $1 $1 -

Tourism Spending $3



Total $7 $10 -


40,000passengers

800jobs

$7 millionGDP


Labour force: 0.1 million GDP: $333 million Population: 0.1 million

2014

Total Aviation


Economic Impacts

60,000passengers

1,400jobs ↑75%


2035


MONGOLIA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 1.1 2.9 -

Indirect 0.8 2.1 -

Induced 0.8 2.1 -




Total 18.3 46.9 -

GDP (Millions USD)

Direct $50 $100 -

Indirect $20 $50 -

Induced $10 $10 -




Total $200 $600 -


1 millionpassengers

18,300jobs

$200 millionGDP


Labour force: 1.8 million GDP: $12 billion Population: 2.9 million

2014

Total Aviation


Economic Impacts

3 millionpassengers

46,900jobs ↑156%


2035


MYANMAR

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 4.6 N.A. -

Indirect 1.9 N.A. -

Induced 3.6 N.A. -



Wider Economic Benefits 190.3 N.A. -

Total 200.3 N.A. -

GDP (Millions USD)

Direct $40 N.A. -

Indirect $10 N.A. -

Induced $5 N.A. -



Wider Economic Benefits $800 N.A. -

Total $900 N.A. -

Numbers may not add up due to rounding. 2035 Forecast numbers for Myanmar are not availabe (N.A.) in the study.

4.5 millionpassengers

200,300jobs

$900 millionGDP


Labour force: 39 million GDP: $63.1 billion Population: 51 million

2014

Total Aviation


Economic Impacts

N.A.passengers

N.A.jobs

N.A.GDP

2035


NEPAL

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 5.0 10.9 5.1


Induced 7.0 15.4 7.1




Total 309.7 677.5 315.2

GDP (Millions USD)

Direct $20 $50 $20

Indirect $4 $10 $4

Induced $6 $10 $6



Wider Economic Benefits $680 $1,500 $700

Total $700 $1,600 $700


5 millionpassengers

309,700jobs

$700 millionGDP



2014

Total Aviation

Economic Impacts


Economic Impacts


677,500jobs ↑119%


2035


NEW CALEDONIA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 1.1 2.8 -

Indirect 0.7 1.7 -

Induced 0.5 1.3 -




Total 3.5 8.5 -

GDP (Millions USD)

Direct $60 $160 -

Indirect $40 $100 -

Induced $30 $80 -




Total $200 $600 -


1 millionpassengers

3,500jobs

$200 millionGDP



2014

Total Aviation


Economic Impacts

2 millionpassengers

8,500jobs ↑166%


2035


NEW ZEALAND

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 31.3 48.8 11.6

Indirect 46.8 73.0 17.3

Induced 48.6 75.7 18.0




Total 199.5 311.0 73.9

GDP (Millions USD)

Direct $3,600 $5,700 $1,400

Indirect $4,200 $6,500 $1,500

Induced $3,300 $5,200 $1,200




Total $17,000 $26,500 $6,300



199,500jobs

$17 billionGDP



2014

Total Aviation


Economic Impacts


311,000jobs ↑56%


2035


NORTH KOREA

Economic Impacts*

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 0.5 0.6 -

Indirect - - -

Induced - - -

Tourism Spending

Productivity & Trade

Wider Economic Benefits - - -

Total 0.5 0.6 -

GDP (Millions USD)

Direct $2 $3 -

Indirect - - -

Induced - - -

Tourism Spending

Productivity & Trade

Wider Economic Benefits - - -

Total $2 $3 -


97,000passengers

500jobs

$2 millionGDP

2014

Direct Aviation

Economic Impacts*

* Only direct impacts were estimated for North Korea due to lack of credible data.

Future Direct Aviation

Economic Impacts

100,000passengers

600jobs ↑20%


2035


PAKISTAN

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 16.3 45.2 14.4

Indirect 12.0 33.1 10.5

Induced 13.9 38.4 12.2



Wider Economic Benefits 410.3 1,135.6 360.4

Total 452.5 1,252.3 397.5

GDP (Millions USD)

Direct $200 $600 $200

Indirect $90 $300 $100

Induced $40 $100 $30




Total $3,300 $9,000 $2,900



452,500jobs

$3 billionGDP



2014

Total Aviation

Economic Impacts





2035


PAPUA NEW GUINEA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 1.8 5.0 -

Indirect 0.7 1.8 -

Induced 1.8 4.9 -




Total 67.9 185.4 -

GDP (Millions USD)

Direct $20 $50 -

Indirect $4 $10 -

Induced $6 $20 -




Total $300 $900 -


2 millionpassengers

67,900jobs

$300 millionGDP



2014

Total Aviation


Economic Impacts

6 millionpassengers

185,400jobs ↑173%


2035


PHILIPPINES

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 69.8 162.9 61.7

Indirect 71.4 166.7 63.1

Induced 61.6 143.7 54.4




Total 1,444.7 3,371.7 1,276.7

GDP (Millions USD)

Direct $1,000 $2,400 $900

Indirect $600 $1,300 $500

Induced $300 $700 $300




Total $9,800 $22,900 $8,700



1.4 millionjobs

$10 billionGDP



2014

Total Aviation


Economic Impacts




2035


SINGAPORE

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 83.5 180.6 67.6

Indirect 48.2 104.3 39.0

Induced 39.7 85.9 32.1




Total 323.3 699.1 261.6

GDP (Millions USD)

Direct $9,200 $19,900 $7,400

Indirect $4,500 $9,800 $3,700

Induced $3,400 $7,300 $2,700




Total $30,000 $64,900 $24,300



323,300jobs

$30 billionGDP



2014

Total Aviation

Economic Impacts


Economic Impacts


699,100jobs ↑116%


2035


SOLOMON ISLANDS

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 0.4 0.9 -

Indirect 0.1 0.3 -

Induced 0.4 0.9 -




Total 20.4 50.0 -

GDP (Millions USD)

Direct $6 $20 -

Indirect $1 $3 -

Induced $1 $3 -




Total $100 $200 -



26,400jobs

$100 millionGDP



2014

Total Aviation


Economic Impacts


50,000jobs ↑145%


2035


SOUTH KOREA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 110.6 195.8 56.1

Indirect 49.7 87.9 25.2

Induced 47.8 84.6 24.2




Total 678.2 1,200.7 343.9

GDP (Millions USD)

Direct $14,100 $24,900 $7,100

Indirect $4,300 $7,600 $2,200

Induced $2,300 $4,000 $1,100




Total $53,100 $94,000 $26,900



678,200jobs

$53 billionGDP


Labour force: 29.8 million GDP: $1.4 trillion Population: 50 million

2014



Economic Impacts




2035


SRI LANKA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 7.4 16.7 8.1


Induced 5.0 11.4 5.5




Total 297.5 673.1 325.1

GDP (Millions USD)

Direct $300 $700 $400

Indirect $90 $200 $100

Induced $30 $100 $40




Total $2,900 $6,700 $3,200


8 millionpassengers

297,500jobs

$3 billionGDP


Labour force: 11 million GDP: $74.9 billion Population: 21 million

2014

Total Aviation

Economic Impacts


Economic Impacts


673,100jobs ↑126%


2035


TAIWAN

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 55.0 104.9 30.6

Indirect 33.0 62.9 18.4

Induced 48.5 92.6 27.0




Total 426.5 814.1 237.5

GDP (Millions USD)

Direct $2,900 $5,600 $1,600

Indirect $1,400 $2,700 $800

Induced $1,900 $3,500 $1,000




Total $21,200 $40,400 $11,800



426,500jobs

$21 billionGDP


Labour force: 13.9 million GDP: $529.6 billion Population: 23 million

2014

Total Aviation


Economic Impacts


814,100jobs ↑91%


2035


THAILAND

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 110.7 203.0 63.9

Indirect 86.5 158.6 49.9

Induced 112.4 206.1 64.9




Total 2,045.4 3,752.0 1,180.8

GDP (Millions USD)

Direct $3,400 $6,200 $1,900

Indirect $1,600 $3,000 $900

Induced $900 $1,700 $500




Total $29,000 $53,200 $16,800



2 millionjobs

$29 billionGDP



2014



Economic Impacts




2035


TIMOR-LESTE

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 0.1 0.4 -

Indirect 0.1 0.3 -

Induced 0.2 0.4 -




Total 13.0 31.8 -

GDP (Millions USD)

Direct $6 $20 -

Indirect $3 $8 -

Induced $2 $5 -




Total $190 $500 -



13,000jobs

$190 millionGDP



2014

Total Aviation


Economic Impacts


31,800jobs ↑144%


2035


TONGA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 0.3 0.4 -

Indirect 0.2 0.4 -

Induced 0.3 0.5 -




Total 2.5 4.1 -

GDP (Millions USD)

Direct $7 $10 -

Indirect $3 $10 -

Induced $2 $4 -




Total $30 $50 -



2,500jobs

$30 millionGDP


Labour force: 70,000 GDP: $438 million Population: 100,000

2014



Economic Impacts


4,100jobs ↑64%


2035


VANUATU

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 0.4 0.9 -

Indirect 0.4 0.8 -

Induced 0.6 1.1 -




Total 13.5 27.3 -

GDP (Millions USD)

Direct $7 $10 -

Indirect $4 $8 -

Induced $2 $5 -




Total $150 $300 -



13,500jobs

$150 millionGDP


Labour force: 0.2 million GDP: $822 million Population: 260,000

2014



Economic Impacts

1 millionpassengers

27,300jobs ↑102%


2035


VIETNAM

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 47.8 128.1 43.9

Indirect 17.1 45.7 15.7

Induced 46.8 125.4 43.0




Total 1,958.9 5,252.6 1,801.8

GDP (Millions USD)

Direct $700 $1,900 $600

Indirect $100 $400 $100

Induced $100 $300 $100




Total $8,600 $23,200 $8,000



2 millionjobs

$9 billionGDP



2014

Total Aviation


Economic Impacts




2035


WESTERN SAMOA

Economic Impacts

2014 2035

Forecast 2035

Value of Investment

Jobs (Thousands)

Direct 0.4 0.9 -

Indirect 0.3 0.8 -

Induced 0.5 1.1 -




Total 7.4 18.1 -

GDP (Millions USD)

Direct $10 $30 -

Indirect $7 $20 -

Induced $5 $10 -




Total $100 $300 -



7,400jobs

$100 millionGDP


Labour force: 80,000 GDP: $827 million Population: 200,000

2014

Total Aviation

Economic Impacts



18,100jobs ↑145%


2035


Appendices


Appendix A: Inferring Direct Employment

It was necessary to estimate or infer the employment at the airports where no direct employment or other information was available.

To infer the employment for these airports, econometric analysis was conducted of the airports from which data was collected to analyse the relationship between direct employment and characteristics of the airport. Unsurprisingly, there was a strong relationship between the volumes of traffic at the airport and its direct employment. This is illustrated in Figure A-1, which shows the relationship between traffic and direct employment. Traffic is measured in traffic units (or Work Load Units), a commonly-used standardised measure of traffic at airports, which combines passenger and cargo traffic. One (1) traffic unit equals one passenger or 100kgs of cargo.

Figure A-1: Airport Traffic and Direct Jobs

0

10

20

30

40

50

60

70

80

90

0 20 40 60 80 100

Dir

ect

Jo

bs (

Th

ou

san

ds)

Work Load Units (Millions)


As can been seen, the relationship is very pronounced. Econometric analysis was undertaken to quantify the relationship between work load units and employment, and to examine the impact of other possible variables. These other variables included:

Proportion of passengers connecting at the airport;

Including additional variables to examine whether the relationship between traffic units and employment varied with airport size.

The connecting passenger variable was found to be statistically insignificant and was dropped from the regression. The resulting parameters estimated are shown in Figure A-2.

Figure A-2: Direct Employment Regression Results

Airport Size / Traffic Type Comment

Less than 25 million WLU Each increase of 1,000 WLU increases

employment by 0.91 Jobs

Over 25 million WLU Each increase of 1,000 WLU increases

employment by 0.94 Jobs

The estimated parameters showed no evidence of economies of scale: the employment generated by each additional 1000 traffic units for smaller airport under 25 Million is actually slightly greater than that for large airports. While for airports under 25 Million WTUs, each additional 1,000 WTUs increases direct employment by 0.91 jobs, for airports over 25 Million WTUs increases direct employment by 0.94. The difference in the two parameters, however, is not statistically significant.

The inferred employment was combined with the actual employment data gathered from airport economic impact studies, master plans, and annual reports airports and also compared and where appropriate combined with ATAG70 direct employment figures71 or other relevant studies to provide an estimate of total direct employment in 2014.

The adjusted r-squared value is provided at the bottom of the table in Figure A-2. The adjusted r-squared provides an indicator as to how well the estimated regression equation explained the variation in the dependent variable (sometimes referred to as the statistical fit). A value of 1 would indicate that the regression equation perfectly explained the variation in the dependent variable, while a value close to zero would indicate that the regression equation was a poor fit. The adjusted r-squared value of this regression model, 0.79, indicates a good statistical fit.

70 ATAG – Aviation Benefits Beyond Border, April 2014 71 Note that ATAG direct employment figures were for 2012. Those figures were extrapolated to 2014 figures by looking at the growth rate of passenger traffic in 2012 versus 2014 and growing direct employment at the same rate. However, a productivity factor was also applied to the 2014 numbers assuming that productivity increases each year.


Appendix B: The IATA Air Connectivity Index

Connectivity can be seen not simply as a matter of the number of routes or number of frequencies operated. Connectivity is fundamentally about access to markets and regions. A country or region that has continental and intercontinental linkages only to a limited number of destinations will be a less desirable place to do business. Travel costs for staff and for goods will be higher due to the need to purchase multiple flight legs to move people and goods. On the other hand, a community with direct access to a broad range of markets, especially the fastest growing markets, will be a lower cost place to do business. It will also enhance customer servicing and goods and support staff can easily and quickly get to a range of destinations.

To capture this, the International Air Transport Association (IATA) has developed a measure of air service connectivity which aims to measure the quality of the air transport network from the point of view of the country’s economy. The IATA connectivity index seeks to measure the scope of access between an individual airport, region or country, and the global economy. The index measures the number and size (in terms of passenger air traffic) of destinations served, as well as the frequency of service to each destination and the number of onward connections available from those destinations. Thus, the index recognises that connections to major global gateways provide greater global connectivity than connections to the same number of spoke ends. For example, direct service to 40 small regional destinations does not have the same importance as direct connections to 40 major global markets.

The IATA index is calculated from airline schedule data for passenger services and is based on both domestic and international services. The connectivity index measures the number of frequencies and available seats to a particular destination. It then weights the number of available seats by the size of the destination airport (in terms of number of passengers handled in each year). This weighting reflects both the size and economic importance of the destination and the potential for convenient onward connections.

For example, in 2014, Hartsfield–Jackson Atlanta International Airport was the world’s largest airport, and so, was given a weighting of one. Hong Kong International Airport, which handles 70% of the number of passengers handled by Atlanta, was given a weighting of 0.70. Therefore, if an airport has 1,000 seats available to Atlanta it is given a weighted total of 1,000. But if it also has 1,000 seats available to Hong Kong, these are only given a weighted total of 700. The weighted totals are then summed for all destinations (and divided by a scalar factor of 1,000) to determine the connectivity indicator.

The connectivity index is therefore calculated as:

[ Number of destinations x Weekly Frequency x Seats per flight ] Weighted by the Size of the Destination Airport

Scalar factor of 1000

A higher figure for the connectivity indicator denotes a greater degree of access to the global air transport network. Figure H-1 demonstrates how the connectivity index reflects the importance of not only serving a large number of destinations, but serving destinations that are global hubs and the ability to access a large number of onward connections. Hong Kong International Airport had the highest connectivity score in 2014 despite it not serving the highest number of destinations (Beijing Capital International Airport served the most, with 554 more than Hong Kong; a number of other airports also served more destinations than Hong Kong). Because Hong Kong serves more of the major gateway destinations and with higher frequencies, its index of connectivity is higher than that of any other airport.


Figure B-1: Top 10 Airports in Asia Pacific Based on the IATA Connectivity Index (2014)

Airport Number of Destinations

Served

Total Outbound Seat Capacity

(millions)

Connectivity Index

Hong Kong International Airport

652 40.6 342

Beijing Capital International Airport

1,206 55.0 303

Singapore Changi Airport

535 36.3 295

Suvarnabhumi Bangkok International Airport

684 32.0 224

Shanghai Pudong International Airport

859 34.0 217

Seoul-Incheon International Airport

946 28.7 213

Taiwan Taoyuan International Airport

577 22.8 195

Guangzhou Baiyun International Airport

849 33.7 192

Kuala Lumpur International Airport

369 34.0 187

Tokyo Narita International Airport

483 23.2 183

Source: InterVISTAS Analysis Based on Diio Mi Schedule Data.

For this study, the connectivity measure has been estimated for all the Asia Pacific countries from 1994 to 2014 by summing the connectivity indexes of the individual airports in each country. To illustrate the relative connectivity of these countries, Figure B-2 presents the connectivity measures for each of these countries in 201472. As can be seen, China has the highest connectivity score, followed by Japan, Indonesia, India and Australia.

72 Note that for the purposes of estimating the wider economic benefit, connectivity per capita is used.


Figure B-2: Connectivity Index of Asia Pacific, 2014

Source: InterVISTAS Analysis Based on Diio Mi Schedule Data.


Appendix C: Discussion of the Relative Magnitudes of the Results on Wider Economic Benefits

This appendix provides further explanation to the empirical results of the wider economic benefits by

country provided in Section 9.4. In particular, a review of the relative employment and GDP impacts

associated with the wider economic benefits of aviation in China and India is provided.

As China’s economy is five times larger than India’s and its aviation connectivity is higher, one might

expect that the wider economic benefits of air transport in China should also be higher. This is true for

GDP; however, for employment it is not the case. India generates higher benefits from the productivity

increasing effect of increased air transport connectivity. This is because its low average wages

generates many more jobs per million dollars (or rupees) of increased GDP. This appendix provides

some additional analysis on this issue.

Figure 9-3, summarised in Figure C-1 below, shows that employment generated by wider economic

benefits (both tourism spending and non-tourism impacts) in India (7.5 million jobs) is higher than that

of China (5.5 million jobs).

Further review of the results indicate that although China’s employment impact is smaller, the GDP

facilitated by wider economic benefits (both tourism spending and non-tourism impacts) in China

(USD 136.2 billion) is larger than the GDP contribution of India (USD $67.1 billion), as shown in

Figure 9-4 and Figure C-2 below. The high employment (but not GDP) impact in India is being driven

primarily by India’s much greater employment per USD $1 million of GDP due to its low wage

economy. In particular, China’s annual GDP per worker is approximately USD $11,000 versus

approximately USD $3,000 for India.73 This translates into roughly 330 jobs in India per USD $1

million of GDP impact versus roughly 100 jobs in China. Thus, although in terms of overall GDP

growth from air transport connectivity the effect is larger for China, India’s smaller GDP impact

generates so much low wage employment that India generates more catalytic jobs from increased air

connectivity than China.

Similar results appear when assessing the impact of tourism spending in India and China. Tourism

spending in India (USD $15.0 billion) is approximately half that in China (USD $29.4 billion).74

However, in India, every dollar of tourism spending creates 72 cents in GDP, while in China a tourist

dollar only creates 53 cents in GDP. Furthermore, as mentioned above, India has a lower GDP per

worker and employs more people for every dollar of GDP than is the case in China. Therefore,

China’s tourism spending and tourism GDP impacts are larger than India’s, but India generates lower

wage jobs than China. In terms of wages, the higher employment impact in India generates less total

wage income than air transport does in China.

73 World Bank, World Development Indicators, 2014; International Monetary Fund, World Economic Outlook Database, October 2015. 74 World Bank, Travel China Guide


Figure C-1: Employment Generated by Wider Economic Benefits in India and China (2014)

Country

Jobs % of

National Labour Force


Non-Tourism Impacts


India 2,039,000 5,486,800 7,525,800 1.13%

China 1,286,200 4,218,100 5,504,300 0.59%

Figure C-2: GDP Facilitated by Wider Economic Benefits in India and China (2014)

Country

GDP (USD Billions)

% of National GDP


Non-Tourism Impacts


India $10.8 $56.3 $67.1 3.27%

China $15.5 $120.7 $136.2 1.32%


Appendix D: Additional Constrained Forecast Scenario

The constrained scenario analysis illustrated in Section 11 considered airports with runway and

terminal constraints.

The analysis in this section reviews the value of capacity expansion in terms of employment and GDP

impacts should airports be unable to address their runway capacity issues (if or when they arise).

By 2035, the value of capacity expansion associated with the unfulfilled passenger demand is estimated to account for over 13.2 million jobs and an associated USD 222.7 billion contribution to GDP, as seen in Figure D-1. These estimates include the direct, indirect, induced and wider economic benefit activities associated with each of the constrained, or temporarily constrained, airports in the Asia Pacific region throughout the study period.

The value of capacity expansion by 2035 associated with the unfulfilled passenger demand is estimated to account for over 4.2 million jobs and an associated USD 59.3 billion contribution to GDP within the ASEAN countries. These estimates in Figure D-2 include the direct, indirect, induced and wider economic benefit activities associated with each of the constrained, or temporarily constrained, airports in the ASEAN region throughout the study period.


Figure D-1: Value of Capacity Expansion Asia Pacific Direct, Indirect and Induced Economic Impacts, (2020, 2025, 2035) – Scenario 2

Impacts Jobs GDP

(USD Billions)


Direct 98,500 $6.3


Induced 64,300 $2.2

Wider Economic Benefits 947,700 $19.6

Total 1,178,800 $31.2


Direct 288,400 $15.5

Indirect 213,600 $7.7

Induced 209,900 $4.9


Total 4,433,300 $86.8


Direct 751,300 $35.7

Indirect 570,200 $17.7

Induced 572,600 $11


Total 13,279,300 $222.7



Figure D-2: Value of Capacity Expansion ASEAN Countries Direct, Indirect and Induced Economic Impacts, (2020, 2025, 2035) – Scenario 2

Impacts Jobs GDP

(USD Billions)


Direct 22,500 $1.5


Induced 15,300 $0.6

Wider Economic Benefits 311,100 $3.4

Total 362,600 $6.2


Direct 83,600 $4.6


Induced 60,500 $1.6


Total 1,432,400 $21.9


Direct 232,600 $11.2

Indirect 153,900 $5.2

Induced 175,300 $3.8


Total 4,224,500 $59.3



Appendix E: Airport Constraint Details

This appendix provides details on the specific airport capacity constraints, if any, for the 36 Asia Pacific study countries.

Australia

There are currently four terminal capacity constrained airports in Australia: Cairns, Hobart Airport, Melbourne, Perth and Sydney.

Perth Airport recently opened a new domestic terminal (November 2015) as part of the airport’s current AUD $1 billion redevelopment, which will provide some passenger demand relief.

Runway constraints are expected to affect four of Australia’s airports at various times throughout the forecast study period (2015-2035).

Brisbane airport is planning to build a new parallel runway, which is anticipated to be ready around 2020. However, this may not come soon enough as the existing airport may be runway constrained in 2018 and 2019.

Bangladesh

Bangladesh’s Shahjalal International Airport is expected to reach its runway capacity in 2019 and terminal capacity in 2021.

An expansion plan for this airport is in place to add another runway, a third terminal and other infrastructural additions; however, it has been reported that the Civil Aviation Authority of Bangladesh (CAAB) is struggling to find funding.

Brunei

Brunei is not expected to encounter any runway or terminal capacity constraints.

Passenger demand is expected to grow from 1 million to approximately 1.7 million in 2035.

Cambodia

Siem Reap International Airport is currently operating at full capacity with its terminal.

There is, however, a plan to upgrade the airport to 5 million passengers per annum (MPPA) for 2016.

China

Of China’s 29 airports facing either a runway or terminal constraint throughout the study period (2014-2035), 11 currently have capacity constrained terminal infrastructure.

Approximately half of 29 airports have already started or planned expansions to address capacity issues with runways, terminals, or both.

Many of these airports are experiencing double digit five-year average growth rates, and efforts will need to be made to ensure enough capacity is in place to withstand passenger demand.


Fiji

Fiji will not likely encounter any capacity constraints within the study period.

Passenger demand is expected to grow from 1.6 million in 2014 to 2.8 million in 2035.

French Polynesia

French Polynesia is not expected to face any terminal or runway constraints within the study period.

The country’s passenger demand is expected to grow from 2.3 million in 2014 to 4.1 million in 2035.

Hong Kong

Hong Kong International Airport is currently runway and terminal capacity constrained.

Given that the five-year average growth of passenger demand is 7%, consideration must turn to expanding the airport and constructing additional runway and terminal space.

India

India currently has eight total airports facing terminal or runway capacity issues between 2015 and 2028.

Expansions are either planned or under construction for six of the eight airports facing constraint issues between 2015 and 2028.

Demand for air travel is growing strongly in the country, and the Indian government is making efforts to expand the industry by looking to build another 200 airports in the country over the next 20 years.

Indonesia

Indonesia currently has two airports with terminals operating at capacity: Soekarno-Hatta International Airport and Juanda International Airport.

Soekarno-Hatta International Airport currently has a capacity constrained terminal, but is expanding terminal 3 to boost their overall capacity from 37 MPPA to 62 MPPA.

Juanda International Airport has plans to build three additional runways, and construction of these runways is set to be completed in 2017.

Japan

Japan’s Fukuoka Airport is currently capacity constrained at its terminal, while Haneda International Airport has already reached its runway capacity limit.

Plans exist to build a second runway at Fukuoka Airport, and the expected completion date for this runway is 2025.

Laos

Laos will not likely encounter any airport constraints between 2015 and 2035.


Passenger demand is estimated to increase to 4.4 million in 2035 from 1.8 million in 2014.

Macau

Macau International Airport is in the process of expanding its terminal capacity to a total of 7.5 MPPA by 2016.

Runway capacity at the airport is expected to reach its limit in 2022.

Malaysia

Kuching International Airport is anticipated to be capacity constrained at its terminal in 2016, with no immediate plans in place for expansion.

Kuala Lumpur International Airport opened a new low cost terminal in 2014 and currently has no other expansion plans in place.

Maldives

The Maldives is not anticipated to encounter airport constraints within this reports study period.

Passenger demand in the country is expected to grow from 3.7 million in 2014 to 6.9 million in 2035.

Micronesia

Micronesia is not expected to be capacity constrained at any of its international airports.

Passenger demand is estimated to grow from 40,000 in 2014 to 60,000 in 2035.

Mongolia

It is not anticipated that Mongolia will run into any airport constraint issues.

Passenger demand in the country is estimated to grow to 2.5 million by 2035 from 1 million in 2014.

Myanmar

Yangon International Airport is currently capacity constrained at its terminal.

A new airport is expected to be built and open for operation around 2020, but forecast demand for air travel in Myanmar is anticipated to be flat.

Nepal

Tribhuvan International Airport is currently capacity constrained at its terminal; however expansion is reported to be on-going.

Ensuring adequate space is critical given the five year average growth rate of passenger throughput totalling 8%.

New Caledonia

No capacity constraints are expected for New Caledonia.


The number of passengers moving through the country’s airports is expected to increase to 2.2 million in 2035 from 900,000 in 2014.

New Zealand

New Zealand has two airports, Auckland and Christchurch, which are currently facing terminal capacity constraints.

Wellington International Airport is expecting to reach capacity at its terminal in 2016, but has plans for an expansion to be completed in the same year. Additional expansion plans see the throughput capability of the airport increase to 8 MPPA by 2020.

North Korea

North Korea will not likely encounter any capacity constraints, and passenger demand is expected to be flat throughout the report’s study period.

Pakistan

Islamabad International Airport is currently capacity constrained at the terminal, but a new airport is under construction and is expected to be completed at the end of 2017.

Papua New Guinea

Papua New Guinea will not likely face any capacity constraint issues throughout the project study period.

Strong passenger growth will see passenger demand increase from 2 million in 2014 to 5.5 million in 2035.

Philippines

The Philippines currently has four airports capacity constrained at their terminals.

Mactan-Cebu International Airport is one of these four airports, and has plans to build a new terminal by 2018 which is expected to add a capacity of 8 MPPA.

Singapore

Singapore Changi International Airport is building a new terminal, to be completed in 2017, that will add capacity for an additional 16 MPPA.

However, the runway capacity limit is expected to be reached in 2018.

Solomon Islands

No constraints are expected to impact the Solomon Islands between 2015 and 2035.

Passenger traffic is estimated to increase to 500,000 in 2035 from 200,000 in 2014.

South Korea

Incheon International Airport is currently terminal capacity constrained, but will expand to enable an additional 18 MPPA through the airport in 2017.


Three other airports in the country are expected to run into constraints by 2025.

Sri Lanka

Bandaranaike International Airport is currently capacity constrained at its terminal, but will expand to add 12 MPPA in capacity by 2016.

Taiwan

Taiwan Taoyuan International Airport is currently capacity constrained at its terminal

Thailand

Expansion plans are in place for four of the five airports in Thailand that are expected to reach a capacity constraint between 2015 and 2035.

Bangkok International Airport will have a third ‘reserve’ runway complete for 2017, as well as a new terminal boosting overall passenger capacity to 65 MPPA in 2019.

Timor-Leste

Timor-Leste is not expecting to encounter any airport capacity constraints.

Passenger traffic is expected to grow to 500,000 in 2035 from 200,000 in 2014.

Tonga

It is not likely that Tonga will face any airport capacity constraints within the study period of this report.

Passenger traffic demand is expected to increase from 200,000 in 2014 to 300,000 in 2035.

Vanuatu

No runway or terminal capacity constraints are expected to take place in Vanuatu during the study period (2014-2035).

Passenger traffic is expected to double to 800,000 in 2035 from 400,000 in 2014.

Vietnam

Tân Sơn Nhất International Airport is facing a capacity constraint as soon as 2017, but plans are in place for a new airport to be named Long Thahn International Airport by 2020.

Two other airports are expected to reach constraints in the study time period, but expansion plans should eventually allow adequate capacity to satisfy passenger demand.

Western Samoa

Western Samoa will not likely encounter any airport capacity issues in the study period.

Passenger traffic is estimated to increase to 700,000 in 2035 from 300,000 in 2014.

Prepared by

InterVISTAS Consulting Inc.

Airport Square – Suite 550 1200 West 73rd Avenue Vancouver, BC Canada V6P 6G5

Telephone: +1-604-717-1800 Facsimile: +1-604-717-1818

www.intervistas.com

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