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The Economic Impacts of Airfreight Transportation Essay

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Updated: Mar 9th, 2022

Introduction

Most countries have invested in expensive and sophisticated air transport infrastructure for a long time. Air transport includes passengers travel, air cargo, parcel transport, for hire freight carriers, private transportation, logistics providers, etc. Freight is a major part of transport sector in all economies. Other than moving goods and people from one area to another, freight industry has offered a lot of employment opportunities to a large population in the world. The economic advantages of the airfleight industry entail its contribution towards the development of economy of a country.

It is generally agreeable that no country can survive economically especially at the current economic times without investing substantially in the air transport industry. The recent phenomenon in the air transport industry indicates a rapidly growing sector accompanied by a network of airlines that connect to every part of the world.

Air transport includes all the activities that are carried out in transporting people and goods by air. It has been suggested that the air freight industry is composed of two major sectors: the civil aviation sector and the civil aerospace sector. The civil aviation entails all services related to passenger and cargo transport as well as facilities such as airlines and airports necessary for the provision of the services in the airfreight business; while on the other hand, the civil aerospace sector involves the manufacturing and maintenance of aircraft systems frames and engines as well as other aviation equipments (Air Transport Action Group (ATAG, 2008: p 2).

Employment opportunities

Airfreight industry provides employment for a large number of people. People are employed not only directly by the industry but also indirectly. The industry allows men and women to earn a living in manufacture and maintenance of aircrafts, air freight services (like pilots, cabin crew etc.), catering services and other support services like security departments, rescue department etc. this people are directly employed by the air travel sector. In addition a lot of people are employed indirectly by the airfreight transport industry including the people in firms involved in infrastructure construction and maintenance. Moreover O’Connor (2001, p. 14) indicates that air transport contributes significantly to the economic, social, cultural and infrastructural development in the economy.

When more people are employed in any industry, they actively contribute in building of the economy through raising their living standards and also increased revenue collection through taxation. According to Andrew and Bailey (n.d., p.1) it is projected that with the rapid growth of the industry more people will be employed in the industry

The research conducted in European airports indicates that an addition of 1 million more passengers will need 1000 workers to be employed directly in the industry (Andrew and Bailey, n.d. p 7). A more resent study shows that the aviation industry in the world had offered 5.5 billion people employment in the world through the direct, indirect, induced and catalytic jobs by the year 2006 (ATAG 2008: p 6)

Transport of people, goods and services

The survey conducted by Kasarda et al (2005: p. 2) indicated that the air cargo transport contributed to approximately 29.9 percent of all international trade in the whole world by year 2005. It has been projected that due to its flexibility and speed which has characterized the nowadays economies which accompanies international transactions, air cargo transportation will be the ultimate choice. No other means of transport is as flexible as and better equipped to meet economic goals in the current economic era than air transport. The use of air freight transport will prompt producers to ship smaller quantities at a higher frequent over long distances.

The continued preference of air transport over other means of transport is projected to increase by 80 percent manufactured goods that are traded internationally by year 2020 where air transport industry will witness a rapid growth at an expected rate of 5.9 percent annually for the next 20 years.

Air transport is critical to the transport of goods and services. A countries economy is fuelled by the production of goods and services for domestic as well as international trade. Air transport offers a means of transport for both heavy and light cargo. Although producers prefer transporting heavy cargo using other means like sea transport due to the high charges of air freight, air transport has offered a reliable means of transport for perishable goods and high value-to weight goods and emergency deliveries.

In addition, air transport forms part of the integrated transport chain for some goods that involve several means of transport before reaching the final destination. In addition to transport of goods and services, air transport enables free flow of human as a labour resource across international boundaries. In this way, companies are able to employ the most competent people in their operations. This is greatly enhanced by accessibility and affordability of air transport industry.

Revenue generation

Air travel industry contributed to the economy of any given country through generation of revenue. Productivity growth in freight industry contributes to the productivity by generating revenue.

The air transport industry contributes significantly to other industries that generate revenue in economies e.g. the tourism industry. Revenue from this industry is generated through taxations of different services offered which includes taxation on profits, purchase of new equipments and charges on assorted aviation supplied including fuel.

It has been reported that in the global scale, air cargo industry represented approximately 100 billion revenue ton-miles of transportation. This includes an estimated $52 billion in direct revenues in 2005. In addition, air transport sector contributes to the revenue generation in related trucking and logistic services (Kasarda, et al, 2005: p 2).

Other studies reveal that up to 6.3 million indirect jobs are maintained trough trade of goods and services in the air transport industry. These jobs contributed USD 465 billion to the global gross domestic product in 2006. (ATAG 2008: p 7)

Consumption of products and services from other industries

Air transport industry is a consumer of other products and services from other industries. Therefore, in addition to contributing directly to the GDP of countries they contribute to consumption of goods and services. This aspect is captured in the indirect and induced jobs. This industry supports jobs in industries e.g. those that produce consumer goods and a range of other products and services. This includes banking industries, restaurants, security companies etc (ATAG 2008: p 7)

In this aspect, the air transport industry also takes this opportunity to offer services to other industries. One of the industries that consume the services of air industry is the tourism industry. In real sense, tourism can prove to be impossible without air transport industry. It is estimated that over 43 percent of international tourists travel by air (ATAG, 2008: p 11). Tourism is a key part of the economy especially in developing countries. It is estimated that in Africa, 1.5 million people are directly employed in the tourism industry and their jobs are supported by tourists who travel by air. This fraction represents 25 percent of all jobs directly connected to the tourism sector.

Infrastructural development

Air transport industry contributes significantly to the development of the infrastructure in the country. Due to its political and economic importance, most of the government’s revenues allocated to logistical infrastructure are primarily directed towards airline development. The infrastructure includes runways, airports, and control systems. Also the air transport industry fosters infrastructural development in areas surrounding the airports. This includes road networks for accessibility of the airports and other social support infrastructure like accommodation facilities.

Conclusion

Air transport’s most significant contribution to the economies has been cited as its great impact on the performance of other industries where it acts as a facilitator of their growth and development. Although its direct contribution towards economic growth cannot be overlooked, air industry has a catalytic benefit that affects a chain of other industries in the integrated economic environment.

The enormous effect of air transport industry is anchored in its ability to connect far and wide different economies across the globe reliably and effectively. World trade is made possible by the availability of a system that enables free transport of people, goods and services across regional and international boundaries.

One of the advantages of air transport over other means of transport is its ability to shorten delivery times, minimize inventory cost and reduce interruptions to production. Express services offered by the air transport industry enable firms to guarantee rapid delivery of goods and services to clients. Also they are able to hasten the time required for the delivery of spare parts from supplies in occasions of emergency and short notice.

References

Air Transport Action Group. (2008). The economic and social benefits of air transport 2008. Web.

Andrew, H. R. and Bailey, R. (N.d). The contribution of airports to regional economic development. University of Luton. Web.

Kasarda, J. D. et al. (2005). The impact of air cargo industry to the global economy the centre for Air commerce. Kanan Institute of Private Enterprises. Web.

O’Connor, W. E. (2001). An introduction to airline economics. CA, Greenwood Publishing Group.

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