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The economic impact of aviation connectivity

2 April 2023

Air route development has a large impact on local economies. Economic growth and job creation are undeniably the primary results. Air route development expands a nation’s capability to welcome a larger number of travelers who would spend their funds on an array of products and services; visitors will require access to hotels, restaurants, leisure outlets, groceries and more.

Thus, a country's competitiveness is boosted by increased connectivity, which makes the local economy more attractive to businesses looking to establish branch offices, regional offices, or even headquarters, thus driving more inward investment. Air route development not only increases tourism, but also opens up opportunities for the local population by facilitating better access to once inaccessible marketplaces.

Issues facing route development

Route development, is a core function of aviation planning, . However the success rate of new routes, which is the percentage of newly developed routes that remain in service about two years after their launch, is rather on the low side despite what one would expect. For airlines seeking to optimize their air route network, the right set of analysis methodology is just as important as looking into historical data.

For a number of budget airlines in the U.S., for instance, this rate was recently in the range of 50% to 70%, indicating that in the best-case scenario, about 30% of new routes fail. Considering the costs and investments involved with developing and deploying new routes, an airline cannot afford to have too many failing routes. Understandably, airlines and airports seek strong business growth. One oversight that many planners make is that they rely more on wishful thinking rather than market reality, resulting in a propensity to be overly optimistic in developing route plans.

Thorough route feasibility studies are routinely carried out employing provisional procedures for analyzing the profitability of new routes or the impact of changes to an existing network from reliable data sets. For such studies to be successful, a proper identification of the route, of the demand generation for the latter, of the size of each source of demand generation, and of the competition are necessary.

How air-route development contributes to local economies

There are several channels through which air connectivity plays a positive enabling role.

Airports and airport-related sectors generate output and employment in their neighborhood, as well as attracting other businesses to their vicinity. Thus, the sector contributes to the national economy through jobs creation. Not to mention that aviation creates workplaces that on average are much more productive than other parts of the economy. This higher labor productivity in turn creates positive spillovers to the economy – workers in the aviation sector spend more.

Additionally, aviation plays a crucial role in contributing to the growth of the wider economy through facilitating the movements of goods and services, workers and tourists, investment and ideas, etc. It connects local industries and consumers with the global marketplace and offers people and goods the quickest way to travel across long distances. For individuals doing business in most international markets there is often absolutely no substitute to aviation as a mode of transport. As such, good aviation links facilitate trade and investment, enhance communications and business interactions and improve efficiency through time savings, reduced costs and better reliability.

Nations can raise an all-inclusive business case for airlines to retain and grow their services by involving key public and private sector economic, tourism, and aviation players.

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