Volcanic ash disruption to air travel costs US$5bn in global GDP

Report shows far-reaching economic impacts of volcanic ash crisis

26 May 2010 Press Release

Nearly US$5 billion in global GDP has been lost to air travel disruption caused by the Icelandic volcano eruption, according to a report launched today at the World Travel and Tourism Council’s 10th Global Travel & Tourism Summit in Beijing, China.

The study by leading economic forecasting consultancy Oxford Economics finds that passengers, airlines and the destinations themselves were not the only losers in the recent airspace shutdown.  In the first week after Eyjafjallajokull spewed a giant ash plume into the sky, the temporary closure of large portions of European airspace resulted in US$4.7 billion of lost global GDP.  The roughly 5,000 further flights cancelled through to 24 May added a further five percent to that figure, which represents the damage done to economies around the globe.

Speaking at the event Adrian Cooper, CEO at Oxford Economics, said: “The far reaching impacts of the recent disruption to air transport have of course been felt acutely by travellers, airlines and destinations.  But the impact has also been felt by those who rely on goods that are imported and exported by airfreight, and on general production and productivity.  This report shows the integral role aviation plays in the basic and every day functions of society and commerce.”

‘The Economic Impacts of Air Travel Restrictions Due to Volcanic Ash’ reports that for the seven-day period from 15-21 April, more than 100,000 fewer flights crossed European airspace than in the previous week, representing a 53 percent fall.  Net aviation sector losses amounted to US$2.2 billion after accounting for deferred travel; net visitor expenditure losses tallied US$1.6 billion after accounting for monies spent by stranded passengers is taken into account.  With more than seven million passengers and nearly all international regional travel involving Europe affected, the wider economic impacts have been felt across the globe.

Summary of regional economic impacts of one-week aviation shutdown:

• Americas: US$957 million in GDP
• Asia: US$517 million in GDP
• Europe: US$2,632 million in GDP
• MEAF: US$591 million in GDP

Cooper explained: “Beyond the direct effects on airlines and destinations, economies worldwide have been damaged   indirectly as suppliers to the sector realise indirect losses. Further, economic output is reduced as lost employee income translates into lower downstream consumer and business spending. In addition, there’s lost output from staff stranded and unable to work – some US$490 million – and international trade has suffered severely, particularly for ‘just-in-time’ production and perishable goods such as exotic fruit and fresh-cut flowers.”

Two such examples are the US$112 million estimated to have been lost by Korean component suppliers and the US$65 million estimated to have been lost by African countries because of the loss of airfreight on perishable good exports.  Behind the numbers, there is also the impact on the communities who depend on such activity for their livelihood.

Rainer Ohler, SVP Public Affairs & Communications, at leading aircraft manufacturer Airbus commented: “Today, many of the benefits of air transport are so integrated into the social and economic fabric of our society that they are taken for granted.  The Oxford Economics study shows the catalytic impact of air travel – to trade, investment, tourism and productivity – and the need to ensure its sustainable future.  A cloud from Eyjafjallajokull has made this clear at least.”

These findings echo a more detailed study published last year by Oxford Economics, which highlighted that aviation supports US$1.5 trillion in global GDP; 33 million jobs worldwide and 35 percent of world trade.

Notes to editors

To see the report, commissioned by Airbus, go to http://www.oxfordeconomics.com/free/pdfs/oeaviationweb10.pdf

The more detailed study published last year, entitled “Aviation: The Real World Wide Web”, highlighted that
• Air Transport directly employs over 5.5 million people and contributes US$425 billion to global GDP, which is more than several members of the G20.
• Aviation’s GDP contribution is around one and a half times the size of the pharmaceutical industry (US$270 billion GDP) or the textile industry (US$286 billion GDP) and a third bigger than the motor production industry (US$322 billion GDP).
• When combined with its supply chain and dependent industries, including its contribution to tourism, aviation supports over 33 million jobs and US$1.5 trillion GDP. As a country this would rank aviation in eighth position, between Italy and Spain.
• An estimated 35% of all trade (by value) in manufactured goods travel by air. This is worth some US$3.5 trillion.
• Limiting aviation’s growth to 1% below its current trend rate would cost 6 million aviation related jobs and the industry’s GDP contribution by US$600 billion
• For every US$100 million invested in aerospace R&D, an additional US$70 million of GDP is generated year-after-year.
• Aviation currently contributes 2% of worldwide man-made CO2 emissions and will be no more than 3% by 2050. Journeys of over 1,500 kilometres, for which no practical alternatives exist, account for 80% of aviation’s green house gas emissions.
• While reduced growth in aviation would have a considerable impact on global employment, economic output and social development, it would not necessarily imply lower emissions when the impact of replacement activities and alternative transport are taken into account

To access videos and articles highlighting the case studies from the report go to www.LiftTheEarth.com

• Read the Oxford Economics study on economic impacts of air transportation disruptions caused by Iceland's Eyjafjallajokull volcano.

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