Special Report: Air traffic growth a result of prosperity, ‘not a cause’

A study on the impact of expanding airports suggests claims that increasing air passenger numbers drives economic growth no longer apply in mature aviation markets.

 

The study, by Brussels-based group Transport & Environment (T&E), was published last month as the UK government backed Gatwick expansion and prepared to choose between rival plans to construct a third runway at Heathrow.

 

The authors of the report, entitled ‘Economics of Air Transport in Europe’, claim its conclusions undermine “industry claims, echoed by governments, that more flights benefit the economy”.

 

However, airports association ACI Europe hit back, branding the report’s claim that aviation growth does not produce economic growth “astonishing” and “at odds with scores of studies”.

 

The study by economists at the New Economics Foundation (NEF) is claimed to be the first Europe-wide analysis of aviation expansion and economic growth. It concludes industry claims “are deeply flawed”.

 

The NEF’s analysis of 274 European regions through the period 2000-23 found that higher incomes drove increased air traffic “not the other way around” in 143 of these (53%), mostly in northern and western Europe. It found air connectivity appeared to drive economic growth in 37% of regions, mostly driven by outbound tourism.

 

The report concluded: “Air traffic growth is most often a consequence of prosperity, not the cause of it.

 

“Earlier research, which established wider economic benefits . . . based primarily on business passengers, is now outdated.”

 

The study found that in areas of northern and western Europe, which it described as “saturated” by air traffic, additional capacity “delivers diminishing or even negative economic returns”.

 

It found this applied specifically to regions of the UK, Germany, Belgium and the Netherlands “where air travel is increasingly dominated by people holidaying abroad” and business travel “has stagnated or declined over the past decade”. 

 

The report notes that about three quarters of European countries have seen business passenger numbers decline against pre-pandemic levels, yet “the industry claims these regions will benefit from additional corporate travel”, and concludes that airport expansions “are unjustified and should be halted”.

 

New Economics Foundation senior economist Dr Alex Chapman said: “We need a wholesale rethink of Europe’s air transport strategy. Policymakers can no longer rely on outdated assumptions to judge aviation’s economic value.”

 

‘Value not volume’ of visitors matters

 

The T&E report on expansion notes the link between air travel and economic growth “is more complex” in tourism destinations such as Spain, Italy and Portugal where a fall in the economic value of air tourism “is shaped by . . . visitors staying for shorter periods [and] the rise of informal accommodations”.

 

It notes the average length of stay in southern European has fallen from 4.3 nights in 2000 to 3.4 nights in 2023, increasing the proportion of flight costs in average trip expenditure while reducing the value of trips.

 

T&E concludes: “The value created is influenced by the quality of local tourism infrastructure (e.g. hotel beds) and value left by visitors not just the volume of arrivals.”

 

It recommends policymakers “pause growth in air travel and review the evidence on economic benefits [in] regions where growth in air connectivity no longer drives growth in GDP per capita”.

 

T&E spokesperson Denise Auclair said: “Allowing uncontrolled aviation growth isn’t just terrible climate policy, it’s bad economic policy. It’s an industry myth that air traffic growth automatically brings sustainable jobs growth and boosts the economy.”

 

However, ACI Europe insisted: “There is overwhelming evidence of a causal relationship, [that] air connectivity drives economic growth.”

 

Demand determined by supply, not air tax

 

A separate T&E study of the impact of aviation taxes and charges on passenger numbers, published in late October, dismissed industry claims that a rise in air passenger duty (APD) would affect demand.

 

It concluded demand is “primarily driven by airline strategies and market trends”, noting “only a weak correlation between costs and passenger numbers” and concluding: “Demand is mainly determined by supply. Airlines set flight schedules months in advance and then fill seats by adjusting prices.”

 

The study, by two economists, examined the relationship between location-based costs and passenger volumes at 101 European airports in 2024 and found: “Airports with low costs do not guarantee higher passenger numbers.”

 

On the contrary, it found “airports with higher costs tend to have more passengers” and cited Heathrow, which “has the highest location-based costs but also the highest passenger numbers in Europe”, as an the example.

 

T&E aviation officer Marte van der Graaf described pleas not to raise APD as “just a campaign to cut taxes” and claimed lower taxes “would simply be a gift to the airlines”.