The aviation industry worldwide has been remarkably resilient in the aftermath of the global financial crisis. But there is now growing political uncertainty following the UK’s referendum decision to leave the EU and the US presidential election. The most immediate consequence of the recent change in the political climate is a rise in risk and uncertainty. We explore how these new political developments will affect global aviation growth and how airlines and airports should respond to these developments in their business planning and investment.
In both Britain and Australia, the relationship between air traffic demand and GDP remains strong and significant. Other drivers such as demography, competition and geography are also affecting air traffic and should be taken into account. We explore how the UK's vote to leave the European Union may affect passenger demand in the medium term.
Global air travel has changed considerably over the past decade. Major improvements in technology means air travel is more efficient and making distances between countries seem shorter than ever. Air connectivity plays a key role to unlocking a country’s economic growth potential. We estimate that a 10% increase in seat capacity could improve short-term GDP by 1% and tourism by 4% within the UK. By understanding how air connectivity is measured, how it has changed, how it relates to economic growth and what drives it, key aviation stakeholders can make strategic decisions on how to enable and unlock the air connectivity potential of a country.
Aeronautical charges impact airline network decisions but the level of impact varies from airport to airport depending on factors such as market power, regulation, route network and airline customer base. The challenge for airports is finding the delicate balance of setting the level of charges to optimise revenues.
Short term traffic in the UK post referendum vote has remained very resilient but certain carriers have signalled they may slow down expansion in the UK. There are emerging signs that some UK airlines are facing yield pressures. At present there is uncertainty around the form any deal negotiated between the UK and EU for the aviation sector may take but some of the factors that will determine the outcome include the extent of access to a single aviation market, the direction of aviation market liberalisation and free trade agreements signed with non-EU countries. Depending on the outcome of the deal negotiated for the aviation sector, there may be winner and loser airports within the UK.