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Aviation Sector Report

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Aviation Sector Report Aviation Sector Report 1. This is a report for the House of Commons Committee on Exiting the European Union following the motion passed at the Opposition Day debate on 1 November, which called on the Government to provide the Committee with impact assessments arising from the sectoral analysis it has conducted with regards to the list of 58 sectors referred to in the answer of 26 June 2017 to Question 239. 2. As the Government has already made clear, it is not the case that 58 sectoral impact assessments exist. The Government’s sectoral analysis is a wide mix of qualitative and quantitative analysis contained in a range of documents developed at different times since the referendum. This report brings together information about the sector in a way that is accessible and informative. Some reports aggregate some sectors in order to either avoid repetition of information or because of the strong interlinkages between some of these sectors. 3. This report covers: a description of the sector, the current EU regulatory regime, existing frameworks for how trade is facilitated between countries in this sector, and sector views. It does not contain commercially-, market- or negotiation-sensitive information. Description of sector 4. The UK is a global player in the aviation sector and has the third largest aviation network in the world. It was the largest air transport system in Europe in 2015, serving 250 million terminal passengers.12 The UK has direct connections to over 370 international destinations with at least a weekly service and nearly 200 with at least a daily service from at least one UK airport.3 49 per cent of the UK’s adult population flew abroad at least once in 2014.4 Aviation is a significant industrial sector in its own right, directly contributing at least £22 billion to the UK economy in 2015.5 5. Aviation also underpins several other sectors including international trade in goods, global business and tourism: • International trade in goods: In 2015, goods worth £155 billion were shipped by air between the UK and non-EU countries, over 40 per cent of the UK’s extra-EU trade by value;6 1 http://ec.europa.eu/eurostat/statistics-explained/index.php/Passenger_transport_statistics 2 https://www.gov.uk/government/statistical-data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport 3 A new aviation strategy for the UK: call for evidence, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/636625/aviation-strategy-call-for- evidence.pdf 4 British Social Attitudes Survey (DfT) 2014, https://www.gov.uk/government/statistics/british-social-attitudes- survey-2014 5 A new aviation strategy for the UK: call for evidence, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/636625/aviation-strategy-call-for- evidence.pdf 6 HMRC trade statistics, 2015, https://www.uktradeinfo.com/Statistics/BuildYourOwnTables/Pages/Home.aspx 1 • Global business: The UK’s geographical location and extensive aviation network makes it a very attractive location for global business; • Tourism: 73 per cent of visitors to the UK come here by air, 61 per cent of which came from other EU countries.7 6. Taken together, the aviation and aerospace sectors combined provide the UK with over half a million jobs, either directly or indirectly and often in high value roles.8 Employment in the aviation sector is spread across all regions of the UK, as shown below:9 A Growing, Improving And Integrated Market 7. The aviation sector has seen significant growth, bringing much greater levels of connectivity, with the UK and EU at the forefront of these trends. Since the 1990s the trend in the aviation sector is one of global growth and the UK has been a significant participant in this growth. In 2015 there were 3.3 billion air passengers worldwide.10 Asia and the Pacific accounted for the largest proportion of world air traffic in 2014, representing a notable 7 per cent growth. This was followed closely by Europe and North America who also displayed a substantial share of world air traffic.11 Overall, the global demand for seats has grown on average by 5.5 per cent per year.12 Although airlines are still subject to restrictive ownership and control requirements in 7 ONS, Travel trends 2015, Section 4 Overseas Residents Visits to the UK, https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/datasets/overseasresidentsvisitstothe uk 8 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/636625/aviation-strategy-call-for- evidence.pdf 9 Direct employment by region, excluding Northern Ireland, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/636625/aviation-strategy-call-for- evidence.pdf 10 ICAO statistics, 2015 https://www.icao.int/annual-report-2014/Pages/the-world-of-air-transport-in-2014.aspx 11 ICAO statistics, 2015 https://www.icao.int/annual-report-2014/Pages/the-world-of-air-transport-in-2014.aspx 12 IATA, http://www.iata.org/pressroom/pr/Pages/2017-02-02-01.aspx 2 some countries, we have seen a trend to liberalise aviation markets. The EU and its Member States have been at the forefront of this trend, but it has also been pushed by North American states and more recently Gulf States. This trend continues, with southeast Asian nations (the ASEAN 10 country regional block) now forming their own internal aviation market. Growth in global aviation13 8. We have seen a notable trend in the emergence of low cost carriers (in comparison to Full Service Carriers, Legacy Carriers or Charter Carriers). In Europe, these airlines have developed a business model based upon taking advantage of the very liberal internal market and the ability to source labour from across the EU. 9. In 2015 air services in Europe accounted for almost 928 million passengers carried (approximately 26.3 per cent of world traffic).14 The overall passenger growth in the UK over the past five years is largely attributed to EU-27 destinations - see the chart below. 10. Growth in passenger numbers has been stimulated by the steadily falling cost of aviation since the 1990s.15 13 ICAO, 2015 , https://www.icao.int/annual-report-2014/Pages/the-world-of-air-transport-in-2014.aspx 14 ICAO, 2016, https://www.icao.int/annual-report-2015/Documents/Appendix_1_en.pdf 15 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/278966/boc-transport.pdf 3 International passengers at UK airports by region, 2000-201516 11. Passenger experience in the UK and EU has also been improving, driven by high safety standards and improving air traffic management. Aviation safety has been steadily improving throughout the world and in 2013, the EU had the lowest rate of fatal accidents in the world.171819 In Europe average delays per flight have decreased by 30 seconds per flight in July 2015, when compared to July 2014.20 Under the ‘Single European Sky’ a new operating concept for flight planning and the air traffic management system has been agreed (this is detailed further in Section 2.) 12. Aviation demand correlates closely with economic growth. As an economic enabler and vital piece of infrastructure the demand for aviation relies on the health of the rest of the economy. This can be seen from the drop in passenger numbers at the time of the 2008 financial crisis - see diagram below. The sector is also sensitive to wider economic confidence as well as several macroeconomic factors such as fuel prices and exchange rate. Passenger numbers at UK airports increased by 5.5 per cent in 2015. This was the fifth successive year of growth following three years of decline from 2008 to 2010.21 16 Table AVI0105, Air traffic at UK airports, Department for Transport, https://www.gov.uk/government/statistical- data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport 17 Figure 1, https://www.easa.europa.eu/system/files/dfu/European-Aviation-Safety%20Plan-%28EASp%29- 2014-2017.pdf 18 EASA Member States 19 Figure 2, https://www.easa.europa.eu/system/files/dfu/European-Aviation-Safety%20Plan-%28EASp%29- 2014-2017.pdf 20 https://www.eurocontrol.int/sites/default/files/content/documents/official-documents/facts-and-figures/coda- reports/flad-july-2015.pdf 21 DfT analysis of Table AVI0101, Air traffic at UK airports, Department of Transport, https://www.gov.uk/government/statistical-data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport 4 Growth in UK aviation, indexed 199122 13. There has been a trend of consolidation, partnership and network integration in parallel to the growth of low-cost, point to point travel. This has resulted in the expansion of ‘hub-and-spoke’ networks run by major carriers and alliances at the world’s largest airports. The three major airline alliances control half of global seat capacity. 14. In Europe, the major hubs are at Amsterdam Schiphol, Paris Charles de Gaulle, Frankfurt International and at London Heathrow.23 These European hubs have faced strong competition over recent years, in particular from Middle Eastern hubs and carriers. However, different international hubs are better placed to compete in different markets due to their location. The image below shows the top 15 interregional transfer passenger flows in 2012. 22 DfT analysis of Table AVI0101, Air traffic at UK airports, Department of Transport, https://www.gov.uk/government/statistical-data-sets/avi01-traffic-passenger-numbers-mode-of-travel-to-airport; Gross Domestic Product, ONS, https://www.ons.gov.uk/economy/grossdomesticproductgdp, 2016 23 Airports Commission Final Report , 2015 5 Inter-regional transfer passenger flows for 201224 A Connected Market That Provides Multiple And Reciprocal Economic Benefits 15. Our major airports help increase the UK’s and EU’s connectivity.
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