Air Traffic Under Liberal Economic Policies: Upside Scenario
Air transport, or the aviation industry, is the fundamental pillar of the world, indispensable to our daily lives, and essential for social and economic progress. The growing availability of affordable air travel has considerably widened aviation’s role, making it no longer a luxury commodity. The industry has brought enormous benefits to developing economies by unlocking their potential for trade and tourism.
As one of the world’s most important industries in terms of contribution to advancement and economic benefits, aviation’s development is critical to any nation. The industry plays a decisive role in the lives of people, promoting a better quality of life by improving living standards. Research conducted by the International Air Transport Association (IATA) forecasts the growth in air traffic to almost double in the next two decades, hitting close to 7.3 billion in 2034, driven by socioeconomic recovery, low air fares, and demographic changes.
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However, if the aviation industry is helped by seamless boundaries and liberal economic policies promoting immigration and cross-border trade, we may see an upside in this forecast of air traffic. As globalization results in more companies establishing international operations and foreign subsidiaries, leading to greater import penetration, we expect traffic to increase by approximately 4.7% year-on-year, as compared to 4.1% in the base case.
Under a scenario where liberal economic policies are coupled with higher standards of living due to a faster economic recovery in the world, we may see a still higher upside of 6.5% in air traffic.
This could be a happy surprise for the airline industry which, after a long struggle, has recently bounced due to the impact of low oil prices on its bottom line.
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for American Airlines
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