Europe’s GDP – 5% generated by airports (ACI report): unravelling the statistics and philosophy

Posted 28/11/2024 22:07

The well known and respected Amsterdam-based consultancy SEO Economics has recently researched a report on behalf of ACI Europe, which makes some impressive claims about the continent's airports: such as that they employ 14 million people (that's a country between the size of Belgium and the Netherlands). And that they generate 5% of the total European GDP between them.

More questionably: that such an increase in business has positive social implications such as on education, research and development, helps reduce poverty, improve gender equality, and even makes people happier.

Two examples given in the text here do lend support to the claims about education and R&D, at least.

The report is not a standalone one in that it must be seen (and was possibly solicited) in conjunction with two independent reports by European ex-politicians with gravitas, into (inter alia) the lack of investment in the EU and how to remedy it; how a concerted, joined-up transportation network policy is required urgently, and how to achieve even more decarbonisation across the entire air transportation network at the same time.

It isn't hard to see how this is ACI Europe playing its cards to ensure that airports get the best deal out of all this, because they - and the airlines - have been on the rack for years now, as sacrificial lambs to the God of the Environment.

The trouble is that the whole ball game has changed in a matter of a day with the election again of Donald Trump as US president. Like it or not, the airports business is now, as the other presidential candidate often said, 'unburdened by what has gone before' and must prepare itself for its own version of The Great Reset.

Summary

ACI-sponsored study suggests that 5% of Europe’s GDP is generated by airports.
Claims about employment numbers often conflate those in ‘indirect’ job.
The study suggests that airport direct flight growth impacts employment in R&D and education; fine but…
…a drop in poverty rates, increase in gender equality and a growth in life satisfaction, too?
Two examples from the UK help support the education and R&D theorem.
The study comes on top of two independent reports published in 2024 which call for greater investment, a concerted transportation network policy, and an increase in decarbonisation in the EU.
Is it not time that we stopped believing that those objectives are complementary?
The age of the train is dawning again in Europe.

There are 14 million claimed to work at Europe's airports

ACI EUROPE, the trade body representing airports on the continent, released the results of a study conducted by SEO Amsterdam Economics ('SEO)', which highlights the contribution of the airport industry to the European economy.

The study also, for the first time, quantifies its "positive relationship" with a diverse range of societal benefits enshrined in the 'United Nations Sustainable Development Goals'.

The report claims that Europe's airports generate 14 million jobs and EUR851 billion in GDP (being 5% of the entire European GDP) each year.

Moreover, every 10% increase in direct air connectivity (point-to-point flights) yields a 5% increase in GDP per capita, and a 1.6% increase in jobs.

Claims concerning the economic impact of airports have been around for decades. And their credibility is dependent on how one believes that impact should be assessed.

Indirect employment is the variable factor

While it is possible that 14 million people in Europe are directly employed by airports, an average of 7,000 at each of the 2,000 airports, commercial or otherwise, and one in every 53 people (not workers) - that is not realistic.

It is indirect employment statistics that are often injected into the equation, and those are sometimes questionable. Although 75,000 might work at London Heathrow, Europe's busiest airport, and 114,000 jobs in total are 'supported' there, it is the latter statistic - the 39,000 which are not 'direct' but 'implied' - that can be nebulous.

For example, if a freight handler or other direct service supplier like a wholesale catering company specialising in prepared meals opens a new branch close to an airport, there is little argument that the additional GDP generated by it is airport-related, along with the jobs.

But what about a convenience store, or even a travel agent (they still exist), opening in a nearby heavily populated suburb? Are they directly related?

Do people stop off at the convenience store en route to the airport to avoid paying inflated food and beverage prices in the terminal or onboard the aircraft?

How many customers use the travel agent to book direct flights from the airport, and how do you 'weight' those that do and those that don't in the calculation?

Or an increase in bus services in the locality which means an extra vehicle being purchased and a couple of new drivers employed? Is that relatable?

What about a petrol station? Is that there because it is the closest to the airport or because it is on a town's High Street, or both? Or are there other factors such as it is close to a major motorway junction?

The subject of implied economic impact is a minefield, and such calculations might be treated quite differently in separate studies.

That said, most organisations that are active in this field have found a way to normalise these calculations, and their determinations are usually credible.

Start a new air service and see child poverty rates plummet?

But the SEO study goes much further.

The study produced "quantifiable evidence" that every 10% increase in direct air connectivity is correlated with a 14% drop in poverty rates, a 9% boost in access to education, a 5% increase in investment in research and development, a 19% increase in gender equality, and a 1.2% growth in life satisfaction.

These are very big claims, especially those with sociological implications such as 'well-being', 'poverty' and 'gender equality', which vary hugely both between, and within, countries.

SEO isn't your average consultant, more of a think tank

It should be of no surprise that SEO undertakes such a study. Its remit goes well beyond that of a traditional economic impact analyst.

Specialising in applied economics (the application of economic theory to determine the likely outcomes associated with various possible courses of action in the real world), it was originally founded by, and is still affiliated with, the University of Amsterdam, retaining "a strong academic component" (which, it could be argued, stands in contrast to 'the real world!')

It operates on a nonprofit basis, and grants its staff time to pursue continuing education, to publish in academic journals, and to participate in academic networks and conferences. It might reasonably be considered to be a 'think tank'.

Its work is concentrated in 16 research fields, namely Labour markets, Education, Aviation economics, Energy, Sustainability, Health Care, Social security and pensions, Socioeconomic inequality, Competition and regulatory economics, Innovation, Big-data science, Financial markets and Finance, Corporate governance, International Economics, Economics of Development and Cost-benefit analyses.

Many of those subject areas seem to have been cobbled together to research an ACI report that puts a gloss on the activities of member airports.

Higher education can be connected to airport activity, as demonstrated in the UK

Some of them can easily be seen as being connected to airport activity - such as R&D and education.

Taking Manchester Airport as an example - the UK's third busiest, and one that may exceed 30 million passengers in 2024, but at which freight activities are low compared to other airports in the group (London Stansted and East Midlands).

In the field of education, Manchester Airport can point to its impact on tertiary and level studies at the city-region's four main universities - three of them in the city centre, and universities that collectively host 100,000 students annually (one of the largest localised conglomerations in Europe).

Manchester University alone has over 10,000 foreign students on its campus, from 160 countries. (That number is set to decrease considerably owing to new government regulations, but the point remains).

Many students from the Middle East and China would be attracted by direct flights from places such as the Gulf States, Jeddah, Hong Kong, Beijing and Shanghai, and the viability of some of those services might even be questionable without them.

And there is a spin-off effect too: it might be labelled as a version of the 'aerotropolis' concept, with courses at universities in cities such as Liverpool, Leeds and Sheffield benefitting from those services.

Moreover, Manchester Airport is noted for the training and insights it offers to school students in airport-related activities, ensuring a continuing pool of school leavers to take positions in high turnover jobs, many of them from the closest suburbs, including Wythenshawe, which was at one time the largest council estate in Europe.

Parallels can be drawn between airports and R&D too

Turning to Research & Development (R&D), clear parallels can be made between airport development and research investment.

Manchester has a decorated history in scientific advancements, from Rutherford splitting the atom and the invention of 'Baby', the first stored-programme electronic digital programmable computer, to the discovery of graphene at Manchester University.

Today, the region accounts for around 23% of all life sciences employment in the UK; Manchester Metropolitan University has Europe's largest clinical academic campus, and conducts some of the largest clinical trials in the world.

'Big pharma' has made the North West of England its home, with several global pharmaceutical companies - including Eli Lilly, AstraZeneca's biologics arm, Medimmune, Novartis Vaccines and RedX Pharma - operating manufacturing facilities.

Setting aside the likes of Rutherford, Baby, and graphene, the accumulation of research organisations in the city-region today would not be so comprehensive if not for the role played by the airport.

London Stansted Airport stands at the confluence of overlapping research zones

And much the same can be said of London Stansted Airport.

The airport is another member of the Manchester Airports Group and the UK's fourth busiest, which services the fast-growing university research city of Cambridge. Also three overlapping areas - the 'golden triangle' of university cities (London, Oxford and Cambridge); the Oxford-Cambridge Arc, a "globally significant" area between Oxford, Milton Keynes and Cambridge; and the 'UK Innovation Corridor', which joins London and Cambridge, and which is billed as "a pioneering region where cutting-edge ideas shape the future".

In London Stansted's case those commercial developments have gone hand-in-hand with its own growth, from when it was recognised as London's third airport in 1985.

Does any of this offset the perceived impact on the environment?

But does an increase in flights between cities have a specific positive impact on people's life satisfaction? When so many of them consider air transport to be the 'work of the Devil' in its claimed impact on the environment? (Aviation's carbon impact has risen from 2%-3% to 4% of the total, seemingly because the effect of contrails [vapour trails] is now being taken into account).

The raison d'être for the study has to be understood in connection with the Letta and Draghi reports, both of which were published in 2024.

Draghi points to a need for a more coordinated industrial policy, more rapid decisions, and massive investment in Europe

The Draghi report - authored by former European Central Bank President and former prime minister of Italy, Mario Draghi - deals with European competitiveness and the future of the European Union, which is going through a period of reassessment in several countries.

Parts of the Draghi report's proposals have already been adopted by the European Commission president Ursula von der Leyen, for the work programme of her 2024-2029 Commission term.

It urges the EU to foster more investment to increase European productivity. The report proposes new prudential rules for banking and institutional investors to facilitate risky investments.

Draghi warned that if the EU failed to catch up with its rivals, it would face 'slow agony'. He wrote that the EU "needs far more coordinated industrial policy, more rapid decisions, and massive investment if it wants to keep pace economically with rivals like the United States and China.

The report was expected to affect trans Atlantic ties in the years to come. But it was published months before the recent election of Donald Trump as the US president introduced a huge 'unknown' quotient into the proceedings. That may certainly result in a renewed industrial policy in the USA, quick decisions and the sort of investment - in both goods and people - that Draghi describes in Europe.

It was one of two widely anticipated reports on EU reforms in 2024, together with the Letta report on the EU internal market.

Letta looks to a 'truly integrated Trans-European Transport Network'

Enrico Letta is an Italian politician who served as prime minister of Italy from Apr-2013 to Feb-2014, leading a coalition of centre-left and centre-right parties. He is currently the dean of IE University's School of Politics, Economics and Global Affairs in Madrid, Spain, and president of the Jacques Delors Institute.

His Apr-2024 report, 'More than a market', dealt with the future of the European Single Market, specifically 'Empowering the Single Market to deliver a sustainable future and prosperity for all EU Citizens'. He concluded, inter alia, in the transport realm that:

"A genuine Single Market in the area of transport remains a major objective to be achieved. This requires the EU to establish a truly integrated Trans-European Network of Transport, encompassing key railways, inland waterways, short sea shipping routes, and roads that connect urban nodes, ports, airports, and terminals, as well as to eliminate the inefficient and unnecessary residual barriers between modes and national systems, including by addressing the existing regulatory and technical barriers."

So the ACI-SEO report cannot be viewed in isolation, but rather as a support document for airports as the future of investment and regulation come under review in order to fabricate policy for years, if not decades, to come in Europe.

The age of the train

The warning signs for European airports have been there for many years already, with the growing desire of the EU to replace both domestic and international air services with rail over distances of 600km (and that distance is lengthening). While academic studies that have demonstrated that high-speed rail is more efficient door-to-door than air over distances between 300km and 1000km - at 300km almost all air services have been withdrawn where HSR has been introduced.

And the prospect of the 1000km/hour Magnetic Levitation train in China actually entering service there must be giving the air transport business in Europe sleepless nights.

(See Does China's 1000km per hour ultra-high-speed train spell more trouble for the airline business?, a related CAPA - Centre for Aviation report from Mar-2024.

Green means stop

Mr Letta has offered his support to the SEO report, describing air connectivity as one of the fundamental pillars of European integration and cohesion.

But he added, "The future of our EU Single Market depends very much on the resilience and effective decarbonisation of our transport systems. By highlighting the far‑reaching economic and social benefits linked to our European airport network, the study released today by ACI EUROPE confirms this - and also makes it crystal clear that we need to ensure both EU and national policies effectively support and enable aviation's green growth trajectory".

While Olivier Jankovec, Director General of ACI EUROPE, responded to Mr Letta's remarks by saying that airports and the aviation ecosystem are unique in their ability to facilitate and support wider economic activities, resulting in increased trade and productivity, along with greater investments, tourism activity and increased employment rates overall, it is impossible to ignore the paramount nature of the green agenda in the EU.

It can only be speculated how this will end.

It is disingenuous to support the growth of 'sustainable aviation' while admitting that the sustainability aspect is inadequate, and that further decarbonisation will be required.

The new US administration is set to rip it all up and start again

Perhaps it would be better to consider an action plan that responds to what Mr Trump's administration is going to do with respect to the environment on 20-Jan-2025.

Withdrawing from the Paris Agreement on Climate Change for the second time looks to be a shoo-in from Day 1 along with the air transport CORSIA carbon offsetting and reduction scheme.

At the end of the day there is something paradoxical about the EU's position on the greening of aviation and ACI's requirement to look after the interests of its members. The Letta and Draghi reports warn about the urgent need for the EU to address its structural lack of competitiveness, so as to preserve its social model and deliver on its green ambitions.

But that 'green ambition' is increasingly becoming a noose around the neck of airport operators - Dublin, for example, being a case in point, where passenger numbers are capped at a ridiculously low level, while limitations are in place at Amsterdam. More will surely follow.

ACI Europe's President, Armando Brunini (SEA Milan Airports) talks about a new Aviation Deal for Europe and that it must start with including aviation within the Clean Industrial Deal that EU President von der Leyen is set to table early next year.

But again, that flies directly in the face of the onslaught the new US administration is ready to prepare on environmental restrictions.

The need for a holistic approach

One other observation ought to be made.

Sometimes with these studies, as with any piece of consultancy in any discipline, the contractor will feel obliged (if not actually to produce) a piece of public relations material, at least not to deviate from the message that the contractee (the sponsoring organisation) wishes to convey.

Consultants that fashion negative messages when a positive one is required are often not hired again. There is no suggestion that is the case here.

But irrespective of the 'big picture', perhaps it would be better if airports and their representatives organised a study of the negative aspects of airports on communities as well, so that societal dis-benefits could be examined in addition, and presented the two together as a holistic study.