Flights of Fancy?
AVIATION'S CONTRIBUTION TO JOBS AND THE ECONOMY
MYTHS, FACTS AND PROPAGANDA
Myth 1 : The aviation industry is a major contributor to the British economy
Fact The airline sector of aviation only accounts for 0.8% of UK Gross Domestic Output - about the same as estate agents or sanitary services - with airports contributing a further 0.13%. The insurance and computing sectors of the economy are double the size of air transport, whilst banking and finance are ten times as large (ref 1). Questions also need to be asked about the economic value of the monopolistic position of BAA, especially in the South East, and the dominance of BA.Myth 2 : Proximity to an airport is a major factor when international firms decide where to locate their business
Fact Only 1 in 10 top executives cite air access as the reason for their choice of location. One of the most comprehensive surveys of recent years, undertaken by KPMG, asked 801 top executives of foreign-owned firms in Britain what factors influenced their decision to locate here. The main factor was quality of life in the area - cited by a third of the executives - followed by general location (18%) and closeness to key markets (15%). And some firms deliberately choose not to be near an airport - for example, Parker Davis moved from Hounslow to South Wales specifically to escape aircraft noise.
Myth 3 : Aviation is crucial for a thriving tourist trade
Fact Air tourism results in £3 billion more going out of Britain each year than comes in. This is because the amount of money spent abroad by Britons flying out of the UK for leisure and holiday trips - £8.1 billion in 1995 - exceeds the amount visitors flying into Britain spend here - £5.2 billion in 1995 (ref 1).
Myth 4 : Constraints to growth or higher prices would damage business
Fact Business passengers are a minority. They fly because they need to and they pay a premium because convenience is more important than price. The great majority of passengers are tourists and the fastest growth is in the ultra-cheap tourist market. Many of these passengers only fly because it is so cheap. If there were constraints in growth, it would be the cheap end of the tourist market which would be affected, not business travel.
Myth 5 : The aviation industry is not dependent on public subsidy
Fact Aviation is one of the most heavily-subsidised industries in the world. In the European Union (EU) alone, the subsidy is estimated at over £30 billion each year (ref 2). Although in recent years the trend in the EU has been to try and attract private money, direct subsidies to the aircraft industry amount to at least £1.8 billion each year (ref 2). [Direct subsidies are the amounts of money which governments give to directly support a certain activity. Examples of direct support include subsidies for the expansion of airports or money to subsidise the running of a particular airline.]
Myth 6 : Indirect subsidies to the aviation industry don't amount to much
Fact Indirect subsidies from the EU to the aviation industry are nearly £20 billion a year. Indirect subsidy comes in many forms: no excise duties on kerosene, £11.6 billion; no VAT on airline tickets, £4.4 billion; no VAT on kerosene, £0.58 billion; no VAT on planes, £20 million. If tax were charged on aircraft fuel at the rate that motorists pay, the tax take in the UK alone would be £5 billion pa. There is a considerable amount spent, though no exact figure is available, on the costs of providing surface access, particularly new roads, to airports (ref 2). There is also the "gift" of slots at busy airports like Heathrow. Airlines who have slots can make money by trading in them - the going rate for a slot at Heathrow is thought to be around £1 million.Myth 7 : The aviation industry more than pays for the costs of noise, pollution, global warming and the depletion of the ozone layer that it causes
Fact These "externalities", as they are called, can be costed in money terms. A study published by the International Union of Railways in 1995 put the external costs of aviation in the European Union at £11 billion per year (ref 2). Work by West London Friends of the Earth has estimated that that Heathrow Terminal 5 alone would impose a cost of at least £60 million pa due to traffic congestion and £40 million due to air pollution. The aviation industry bears none of these costs - they fall on the public.
Myth 8 : The cost of noise pollution is falling because planes are getting quieter
Fact Individual aircraft are, on the whole, getting marginally quieter on take-off. But there has been little improvement in landing noise. And any benefits have been more than off-set by the huge increase in the number of flights in recent years. In Britain, more people than ever before find themselves living under the flightpath to an airport. The cost of the stress and ill-health suffered by these people - who may have a flight going over their homes every single minute - is not borne by the aviation industry.
Myth 9 : The aviation industry is a major employer
Fact In Britain, air transport accounts for only 0.3% of all jobs. Moreover, even within the transport sector, its contribution is small - 72,000 jobs out of a total of 940,000 (ref 3). Thus even a significant % increase in the sector would make little difference to national employment levels.
Myth10 : Air transport creates far more jobs than just the direct ones
Fact There are "indirect" jobs related to the activities of airports and airlines and "induced" jobs such as those supported in the local town where airline employees spend their money. Britain, for example, argues that every one job in the aviation industry means 6.3 others. Germany estimates that one aircraft industry job may lead to about 2 elsewhere (ref 2). But whatever the true value, this figure - the "multiplier effect" - is just a technical tool for economic analysis. It does not mean that all these jobs can be attributed in any real way to air transport. If every industry used this argument, we would arrive at a total employment 6.3 times higher than it actually is in the UK and several times the entire population !
Myth 11 : Airport expansion creates many jobs locally
Fact Expansion seems to have little effect, despite the jobs argument always being used by the industry and its supporters [ Note 1 ]. For example, a 78 per cent increase in flights at Frankfurt Airport over 18 years increased employment by just 0.6% (2). And, at the recent Heathrow Terminal Five Public Inquiry, BAA spoke continually about the "safeguarding" of existing jobs, rather than the creation of new ones. [ See T5 link ]
Myth 12 : Growth of airports and air travel creates many jobs nationally
Fact New jobs in air transport will only be converted to a net increase employment in the national economy if resources were otherwise to lie unused and the money saved were not spent on anythng else. This is patently not the case - if people did not spend so much on flying, they would simply spend their money on something else. That something would also generate jobs. This general principle is true of any economic sector and air transport is no different.
Myth 13 : The expansion of an airport means many more jobs are stimulated in other sectors
Fact Though the existence of airports and air services play some role in attracting "inward investment", there is no evidence of a positive relationship between the volume of air transport or its rate of growth and inward investment.
Myth 14 : An airport will always regenerate a region
Fact Hard figures are very difficult to come by as comprehensive studies have not been done. It is not disputed that an airport may result in increased economic activity in an area. However, there is no evidence that areas near an airport are better-off than those further away. Indeed, around Heathrow the reverse is true. However, comprehensive, independent studies are needed to gain a better understanding of the extent of regeneration, the conditions where is most likely to take place, the real return for the country given the high subsidies paid to the industry, and some idea of whether the economic benefits are outweighed by the increased costs of noise, pollution, traffic congestion and pressures on the labour market, housing, etc.
Myth 15 : It is worth spending money to create jobs in air transport
Fact Given the amount of subsidy received by the industry, the cost to the Government of each job created in aviation is high. The number of jobs created need in any case to be treated with scepticism as the industry and its supporters quote unsubstantiated figures and add in spurious multipliers. Subsidies to the air transport industry can only lead to reduction of jobs in other sectors as these are in effect discriminated against when public money is put into air transport. Even if there is not a direct subsidy, the price can be high. For Heathrow Terminal Five for instance, the cost per extra job would be about £290,000. [ See T5 link ]
References
1 The Contribution of the Aviation Industry to the Economy of the UK 1999 by SASIG, the Strategic Aviation Special Interest Group of the Local Authority Association. This is a paper submitted to Oxford Economic Forecasting, which has been commissioned by the Government to look at the contribution the aviation industry makes to the economy of the UK. (See our story Rigged Economic Study for information on the background to this.)
2 The Myths of Flying, by Van de Pol, published by Friends of the Earth Netherlands, 1999.
3 Aviation Briefing Document, Whitelegg, for Transport 2000 - to be published early 2000.
Notes
1 There was a campaign of deceit and misinformation about jobs that would be created as a result of Runway 2 at Manchester Airport. This included unsubstantiated stories in the Mancester Evening News, which was sysematically biased in favour of Runway 2, and even displays at the airport. It was, for example claimed that as a result of people moving in to take jobs at the airport, more doctors would be needed ! As if those people would not exist and would not need doctors if Runway 2 did not go ahead ! The misrepresentation was so extreme that local residents complained to the Press Complaints Council who found in their favour. The person ultimately responsible for this campaign of deceit and misinformation was the person in charge of the airport and Manchester Council - Graham Stringer. He is now a Labour MP. [ Return to myths ]
Acknowlegments and contactsThis briefing is based on material assembled by ClearSkies, HACAN and West London Friends of the Earth.
::Swansea Airport No Expansion Home Page