Strong air links create strong trade links!

In a recent report published by the Confederation of British Industry (CBI), they identified that the UK risks missing out on billions of pounds in trade unless it boosts direct flights to the fastest growing world economies. The new analysis reveals that by adding just one additional daily flight to each of the eight largest high-growth markets would increase UK trade by as much as £1billion a year, with every increase in 1000 passengers generating up to £920,000 in new business.

In the report, Trading Places, the CBI warns that the UK is failing to keep pace with major European competitors in winning new direct connections to Brazil, Russia and China, hitting long-term export potential, damaging competitiveness and deterring inward investment.

The CBI says that to solve the problem, the UK should quickly improve access to UK airports and maximise capacity at Heathrow.  In the medium-term, there should be new runway capacity in southern England including the option of a third runway at Heathrow.  In the long-term (from 2030), a new airport for London should be considered.

Measures covering the next few years will be outlined in an interim report, due at the end of this year, from the Davies Commission on aviation.  The full report is due in 2015.

Steer Davies Gleave’s Analysis

As part of the research undertaken for the report, Steer Davies Gleave conducted analysis for the CBI. We looked at the trends in international aviation over the last 20 years and the relationship of these trends with trade and investment. Our study looked at three specific areas:

• Passengers, flights and routes to fast-growing economies - We analysed all flight routes, passengers and number of flights from Germany, the UK, France, Spain, Italy and the Netherlands to the five fast-growing economies (China, India, Indonesia, South Korea and Turkey) and another three countries (Brazil, Mexico and Russia) predicted to grow quickly in the next decade.
• Relationships between air connectivity and trade and investment – We conducted a regression analysis of the number of flights, passengers and routes for the same countries above, with trade and investment, while controlling other important variables that affect trade relations in this analysis, including distances, size of the economies, economic growth rates, income levels, language and historical links.
• Trends in passengers at hub and non-hub airports – We analysed the growth in total passenger numbers for the ‘ten hub airports’ (airports with >30% transfer passengers): Paris CDG, Frankfurt, Amsterdam, London Heathrow, Los Angeles, Atlanta, Dubai, Hong Kong, Singapore and Shanghai Pudong, and the‘ten non-hub airports’ (with <15% transfer passengers) with similar geographical distribution and spread in traffic volume: Manchester, Lyon, Düsseldorf, Brussels, Taiwan, Bangkok, Guangzhou Baiyun, Riyadh, Baltimore and San Diego