By Pratap John
Chief Business Reporter
Geneva

Real air transport costs have now more than halved compared to some 20 years ago, says IATA chief economist Brian Pearce.
“The price of air transport to users continues to fall, after adjusting for inflation. The average return fare (before surcharges and tax) of $375 in 2016 is forecast to be 61% lower than 21 years earlier, after adjusting for inflation,” Pearce said in a presentation at the “IATA Global Media Day” here.
He said consumers would see a substantial increase in the value they derived from air transport this year, though in dollar-terms, measures have been distorted downwards by the sharp rise of the greenback.
New destinations should rise 2.2% this year, with frequencies up too. IATA expects almost 1% of world GDP to be spent on air transport in 2016, totalling almost $750bn.
Air travel is accelerating, with a growth of 6.9% expected next year, the best since 2010, well above the 5.5% trend of the past 20 years.
“This is being driven mainly by forecast stronger economic growth,” Pearce said.
The IATA chief economist said governments have also gained substantially from the good performance of the airline industry. Airlines and their customers are forecast to generate $118bn in tax revenues next year. That’s the equivalent of 45% of the industry’s GVA (Gross Value Added, which is the firm-level equivalent to GDP), paid to governments in payroll, social security, corporate and product taxes. In addition, the industry continues to create high value-added jobs.
Currently, air transport is vital for manufacturers’ trade, particularly trade in components, which is a major part of cross border trade.
“We forecast that the value of international trade shipped by air this year will be $5.9tn, down from 2014 only because of the stronger dollar. Tourists travelling by air next year will spend a forecast $634bn. Another impact on the wider economy comes through the influence increased airline activity has on jobs in the sector, in its supply chain, and the jobs generated as spending ripples through other sectors of the economy. These ‘supply chain’ jobs around the world are estimated to have been 58.1mn in 2012,” Pearce said.
But in many countries the value of aviation for governments, and the wider economy, is not well understood. The commercial activities of the industry remain highly constrained by bilateral and other regulations. Moreover, regulation is far from ‘smart’ with unnecessarily high costs in many situations.
Passenger rights/consumer protection laws are one example of well-intentioned but often badly designed regulation that can lead to disproportionate, inconsistent and badly targeted costs. There are some 63 regimes currently in force around the world, based on information available, he said.