Business and Technology Development

The Cost of Fuelling Development

From the termination of the Airbus A380 to the controversial third Heathrow runway, there has been growing discontent about the future of air travel.

B efore mass air travel took off in the 1960s, passenger liners would take at least three days to cross the Atlantic. Once idolised as the future of transport, the air travel industry has increasingly faced threats from rising oil prices to growing union pressures, as well as the prevailing environmental concerns. With the recent Green New Deal calling for ‘high-speed railway to replace air travel’, the industry now has to make significant changes to remain competitive. Moreover, the economic and social benefits remain largely unclear in the current debate.

The greatest economic benefit of air travel is its impact on other industries and its role as an impetus for globalisation. Currently, air travel accounts for 20% of all international trade across the world. It remains a significant facilitator of world trade as it enables greater consumer markets; furthermore, it allows countries to specialise in certain activities in which they have a comparative advantage, and therefore trade with other countries for other goods. Given the rise of MNCs, it allows companies to boost their productivity and enables employees to utilise improved travel links between their destinations. It also plays a significant role in allowing firms to exploit economies of scale and benefit from the reduced production costs. Coupled with greater competition due to bigger consumer markets, air travel has a net positive effect on industries in maximising their economic potential.

With any benefit, however, there are drawbacks associated with it. Some important considerations include whether the effect on the environment is justified by the increased consumer surplus. Initial CO2 estimates of air travel were put at 2% of overall emissions yet that remains highly contentious. Stefan Gössling, a professor at Sweden’s Lund and Linnaeus universities and co-editor of the book Climate Change and Aviation: Issues, Challenges and Solutions, “That’s only half the truth… nitrogen oxides (NOx), water vapor, particulates, contrails and cirrus changes have additional warming effects.” Even if the 2% value is accepted, it is important to note that currently only 3% of the global population travels by air; therefore, making the number disproportionally alarming.

The production of A380 by Airbus was seen as a milestone in energy-efficiency as it was the world’s most environmentally friendly wide-body plane, using 40% less fuel per seat than other similarly sized aircraft. However the significant decline in sales by its largest buyer, Emirates, made it undesirable in the aircraft market. This marks a change in strategy for aircraft suppliers as they now have to increase energy efficiency on their smaller fleets, including the A350 and A220, through greater technological advances.

Air travel also represents almost 40% of international tourism – a key determinant of development for a number of low income countries. Tourism has been key to a number of countries in the African continent, including Mauritius, Morocco and Egypt. It is a significant component of the Gross Domestic Product of many developing countries, making up 10% of GDP in Ghana for instance. This allows Ghana to decrease its foreign currency gap – the disparity between currency outflows and inflows – and facilitates further investment given the decreased cost of borrowing, enabled by the increased number of loanable funds.

Given the rise in eco-tourism, air travel also plays a role in enabling sustainable development. The African continent is home to 15% of the total protected areas worldwide; therefore, the expansion of nature-based tourism allows air travel to be a significant source of revenue and employment, which in turn can be used to conserve and protect these areas.

Air transport has always been a futuristic ideal and this dream is becoming a reality for an ever greater number of people. It has significant economic benefits for the world economy and will remain one of the greatest contributors to the advancement of modern society.

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