PDF Icon Economic benefits from air transport in the UK

The aviation economists Oxford Economics have published the report ‘Economic Benefits from Air Transport in the UK’. The reports describes how air transport to, from and within the UK creates three distinct types of economic benefit – these are described under the three headings: ‘Aviation’s economic footprint’; ‘consumer benefits for passengers and shippers’ and ’enabling long-term economic growth’. The report argues that typically, economic assessments of aviation focus on the ‘economic footprint’ of the industry, measured by its contribution to GDP, jobs and tax revenues generated by the sector and its supply chain. But the report authors argue that economic value created by the industry is wider still. They assert that principle benefits are created for the customer, the passenger or shipper using the air transport service. In addition, they argue that the connections created between cities and markets represent an important infrastructure asset that generates benefits through enabling foreign direct investment, business clusters, specialization and other spill-over impacts on an economy’s productive capacity. This report describes these sections in more detail.

  • Section 1 analyses the economic footprint of the aviation sector – the airlines, the ground-based infrastructure, aerospace manufacturing and spill over effects on tourism and trade – to quantify the value of its output and the jobs it supports in the UK.
  • Section 2 quantifies the benefits of air travel for air passengers and air freight shippers.
  • Section 3 examines the way in which the aviation sector supports long-run prosperity: by delivering supply-side benefits through a variety of different channels, which help to increase the economy’s level of productivity, and hence its long-term sustainable rate of growth.

The main findings are:

Aviation’s economic footprint

The aviation sector contributes £52bn (3.4 per cent) to UK Gross Domestic Product. This total comprises:

  • £22.3bn contributed through the output of the aviation sector (airlines, airports and ground services, aerospace) itself;
  • £16.7bn indirectly contributed through the aviation sector’s procurement from its domestic supply chain; and
  • £12.9bn contributed through the wage-financed spending by the employees of the aviation sector and its direct supply chain.

Consumer benefits for passengers and shippers

From visiting family and friends to shipping high value products, the aviation industry is responsible for transporting more than 197 million passengers and 2 million tonnes of freight to, from and within the UK. More than 770,000 scheduled international flights depart the UK annually, destined for over 500 airports in 131 counties. Domestically, over 420,000 scheduled flights provide seats for passengers travelling to UK airports.

The 197 million passengers pay £71.5bn (inclusive of tax), with UK residents paying around £44.4bn. Calculations by Oxford Economics suggest the value of the benefit to travellers from flying, in excess of their expenditure, is worth £35.6bn a year (£22.1bn for UK residents).

Enabling long-term economic growth

The report argues that the aviation industry is responsible for the UK’s integration into the global air transport network, transforming the possibilities for the UK economy by:

  • Opening up foreign markets to UK exports;
  • Lowering transport costs, particularly over long distances, helping to increase competition because suppliers can service a wider area and potentially reduce average costs, through increased economies of scale;
  • Increasing the flexibility of labour supply, which should enhance allocative efficiency and bring down the natural rate of unemployment
  • Encouraging UK businesses to invest and specialise in areas that play to the economy’s strengths.