The economic effects of air transportation

Abstract

"The starting point of this article are the worldwide trends in the air transportation market since the beginning of liberalization and our main focus is on the aviation activities among the continents. Beside the economic strength of world regions it is important to analyze the changing regulatory framework that actuated fundamental impacts on airline competition and air transportation. The various stages of openness in global aviation markets have implications on special patterns of air industry and market power in several continents. The impacts of liberalization increased competition which reduces prices and stimulates traffic growth - are not uniform across countries and therefore their effects on the economy differ respectively. The approach for analyzing the economic impacts of air transportation is to disentangle the value chain of the aviation market into the provision of airport infrastructure and the operation of aviation business. The case of establishing an airport is investigated under the conditions of externalities and monopolistic market structure. The aviation market is explored with respect to the optimization of the network structure of airlines (alliances). The economic advantages of hub-and-spoke networks are determined. In recent years the Low Cost Carrier (LCC) or no-frills point-to-point model is challenging the traditional connecting paths offered by the full service carriers via their hubs. Interdependencies between strategies of airports and airlines are demonstrated in the rising competition between major airports and LCC using secondary airports. After examining the particular features of the air transportation market that affect the airport infrastructure in various locations we move to the public capital hypothesis namely the relationship between productivity and the provision of public infrastructure. The economic effects of public investments in transport infrastructure are well assessed in theoretical and empirical terms. Initially huge positive productivity impacts caused by investments in public infrastructure were found. Recent findings indicate that the contribution of public infrastructure to private productivity and output is, at least in the developed countries, modest or even insignificant. For airports, as a special case of public infrastructure, there exist only a few studies. The analyses focus on the network characteristics, productivity gains and generic effects of regional growth. A further topic relates to the employment effects of airport infrastructure via the catalytic impact on the surrounding economy. More recent studies address the problem of reverse causality between airports and employment growth. Mostly investigated are the demand driven effects of individual airports. They are subdivided into direct (on airport), indirect and induced effects (intermediate inputs and income effects).The most prominent method to quantify these demand effects is the well known input-output analysis. There is a wide range in the results of the studies concerning the resulting multipliers, which indicate the strong dependence of that method regarding the respective underlying assumptions." (Author's abstract, IAB-Doku) ((en))

Cite article

Bogai, D. & Wesling, M. (2013): The economic effects of air transportation. In: M. Zajac & R. Nowaczek (Hrsg.) (2013): Airports and the automotive industry : security issues, economic efficiency and environmental impact, p. 97-124.