report 2013 Institut Leibniz-Institut für Wirtschaftsforschung 56.2% 73.6% 70,669 49% 823,100 Economic Benefits of Aviation

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1 report 2013 Economic Benefits of Aviation report 2013 Economic Benefits of Aviation In cooperation with: Institut Leibniz-Institut für Wirtschaftsforschung an der Universität München e. V. ifo Institute: Share of enterprises in Germany for which air transport is very important or important 56.2% ifo Institute: Share of industrial enterprises in Germany for which air transport is very important or important 73.6% Value of goods in German foreign trade which were airfreighted in billion Value per tonne in German foreign trade which was airfreighted in 2012 (Road: 2,835, Sea: 1,896, Rail: 1,182 ) Share of trips from Germany to destinations abroad which were made by plane in ,669 49% Direct, indirect and induced employment in the German Air Transport Sector in ,100

2 Contents Economic Benefits of Aviation 2 Part A Importance of Air Transport for Germany as a Business Location (catalytic effects) ifo Institute: method and approach 3 ifo Institute: importance of air transport for the German economy 4 ifo Institute: importance of air transport for selected sectors 7 Importance of air transport for foreign trade 10 Importance of air transport for tourism 12 Part B Economic Data relating to the Air Transport Sector Employment and value added in the air transport sector 14 Air transport sector s contribution to the social insurance and tax take 16 Publication details 17

3 report 2013 Economic Benefits of Aviation In cooperation with: Institut Leibniz-Institut für Wirtschaftsforschung an der Universität München e. V. ifo Institute: Share of enterprises in Germany for which air transport is very important or important 56.2% ifo Institute: Share of industrial enterprises in Germany for which air transport is very important or important 73.6% Value of goods in German foreign trade which were airfreighted in billion Value per tonne in German foreign trade which was airfreighted in 2012 (Road: 2,835, Sea: 1,896, Rail: 1,182 ) Share of trips from Germany to destinations abroad which were made by plane in ,669 49% Direct, indirect and induced employment in the German Air Transport Sector in ,100

4 Economic Benefits of Aviation Air transport connects people and cultures all over the world. It gives businesses access to new markets on all continents. In this way, flight routes create and secure jobs both in Germany and abroad. This report compiles data and facts on aviation s immense importance for the economy. Part A looks at the importance of air transport for Germany as a business location (known as catalytic effects). In its survey for the Business Climate Index, the ifo Institute asked more than 7,000 firms about the importance of air transport. The results are representative of the Germany economy. In addition, the report reveals the importance of air transport for foreign trade and tourism. Part B of the report presents economic data relating to the air transport sector (known as direct, indirect and induced effects). The figures include the number of jobs provided by airports, airlines, air traffic control, aircraft manufacturers and service providers. This section also contains information about the tax revenue from the air transport sector and its employees as well as social insurance contributions. Aviation as a driving force to the economy Catalytic effects Indirect effects Direct effects Aviation provides personal mobility to global destinations enables the German economy to participate in the international division of labour makes Germany a more attractive location to do business Induced effects 2

5 ifo Institute: method and approach To determine the importance of air transport for the German economy the ifo Institute surveyed thousands of firms. The results are representative of the German economy. Every month the ifo Institute surveys more than 7,000 firms from industry, trade and the service sector in order to calculate the Business Climate Index. The Institute thus makes highly representative findings about the current situation and outlook of firms in Germany. The survey is all the more significant because the firms surveyed reflect the structure of the German economy. Responses from the largest multinational to the smallest microenterprise are factored into the Business Climate Index. The ifo sample 40% Trade 25% Industry 35% Services Source: ifo Institute In March 2013, the ifo Institute added the following one-off question to the questionnaire: How important to your firm are flight routes to (a) German, (b) European, (c) global destinations? The firms had the option of answering very important, important, less important or not important to each of (a), (b) and (c) responses were received, which enabled the ifo Institute to make representative findings on the importance of air transport for the Germany economy, both overall and broken down by business sector. This is unique because of the size and makeup of the sample. 3

6 ifo Institute: importance of air transport for the German economy The results of the ifo survey indicate that aviation is highly important for the German economy per cent of respondents from the largest to the smallest firm stated that flight routes to German, European or global destinations are very important or important. The importance of air transport varies from sector to sector. The importance of air transport is particularly high for core sectors of German industry, i.e. mechanical engineering (89.6 per cent), automotive engineering (79.6 per cent) and the chemical industry (79.2 per cent). Importance of air transport How important is air transport to your firm? Very important Important Less important Not important Mechanical engineering 57.8% 31.8% 89.6% 56.2% Automotive engineering Chemical industry 58.1% 21.5% 48.3% 30.9% 79.6% 79.2% All sectors Selected sectors Source: ifo Institute However, the real importance of aviation is likely to be even higher than 56.2 per cent when the entire supply chain is taken into consideration per cent of all respondents stated that air transport is not important, in the retail sector, as many as one in two firms stated that air transport is not important for their particular business model. However, the exact opposite applies to the manufacturers of the goods sold in retail trade; for example, clothing (83.6 per cent very important or important) and electronics (84.5 per cent very important or important). In their case, aviation is essential for getting seasonal goods and electronic products manufactured and delivered to the shops as quickly as possible. In other 4

7 words, without air transport there would be no new summer collection or new smartphone; nor would retail revenue be generated. Importance of flight routes to German destinations According to the German Federal Statistical Office, almost a quarter (23 per cent) of all air passengers in 2012 flew from one German airport to another, travelling an average distance of 435 kilometres per flight per cent of all firms in Germany stated that flight routes to German airports are very important or important. This applies above all to firms in the service sector, such as film and television (75.6 per cent), advertising and market research (68.3 per cent) and business consulting (65.8 per cent). Importance of flight routes to German destinations How important to your firm are flight routes to German destinations? Very important Important Less important Not important 40.3% Film and Television Advertising and market research Business consulting 55.6% 20.0% 43.5% 24.8% 39.8% 26.0% 75.6% 68.3% 65.8% All sectors Selected sectors Source: ifo Institute Importance of flight routes to European destinations In 2012, almost two thirds (59 per cent) of all passengers flew from a German airport to a destination elsewhere in Europe, travelling an average distance of 1,265 kilometres per flight per cent of all firms in Germany stated that flight routes to European destinations are very important or important. This applies especially to industrial firms in the oil-refining industry (84.0 per cent), in the footwear and leather industry (80.0 per cent) and in the automotive engineering industry (73.2 per cent). 5

8 Importance of flight routes to European destinations How important to your firm are flight routes to European destinations? Very important Important Less important Not important 44.5% Oil-refining industry Footwear and leather industry Automotive engineering 44.0% 40.0% 17.5% 62.5% 46.4% 26.8% 84.0% 80.0% 73.2% All sectors Selected sectors Source: ifo Institute Importance of flight routes to global destinations In 2012, almost one fifth (18 per cent) of all passengers flew from a German airport to a destination outside Europe, travelling an average distance of 6,569 kilometres per flight per cent of all firms in Germany stated that these flight routes are very important or important. This applies particularly to export-oriented firms in the mechanical engineering (85.2 per cent), pharmaceutical (83.1 per cent) and electrical industry (74.6 per cent). Importance of flight routes to global destinations How important to your firm are flight routes to global destinations? Very important Important Less important Not important 33.5% Mechanical engineering Pharmaceutical industry Electrical industry 50.9% 34.3% 39.4% 43.7% 45.4% 29.2% 85.2% 83.1% 74.6% All sectors Selected sectors Source: ifo Institute 6

9 ifo Institute: importance of air transport for selected sectors After the economic collapse of 2008/2009, the Germany economy returned to growth relatively quickly. The country s strong industrial base is regarded as a key reason: these are the very firms to which air transport is of particular importance. For decades, German industry has been producing competitive products for clients worldwide. Firms in Germany benefit from excellent transport links as they enable them to develop business contacts on every continent and distribute their products. Good flight routes in particular are essential per cent of German industrial firms stated that this mode of transport is very important or important. The ifo Institute s analysis reveals that business sectors to which air transport is very important have above-average growth rates. Importance of air transport by economic sector How important is air transport to your firm? Very important Important Less important Not important Industry 41.6% 32.0% 11.6% 14.8% 73.6% Services 28.7% 23.1% 17.4% 30.8% 51.8% Trade 20.3% 22.5% 16.5% 40.7% 42.8% Source: ifo Institute Mechanical engineering Since 2003, revenue in the German mechanical engineering sector has grown by 49 per cent (inflationadjusted), considerably more than Gross Domestic Product (GDP), at 13 per cent. The firms employ a total of 971,000 people in Germany. According to the German Engineering Federation (VDMA), the German mechanical engineering industry exports three quarters of its products. This often goes hand in hand with services, to provide which engineers and specialists have to fly to the customers. 7

10 The top markets in 2012 were China and the United States per cent of the mechanical engineering firms surveyed by the ifo Institute stated that air transport is very important or important. Importance of air transport to Mechanical engineering How important is air transport to your firm? 89,6% Very important/ important Revenue of the Mechanical engineering industry +49% GDP Germany +13% Sources: ifo Institute, German Federal Statistical Office (Values adjusted for inflation, 2003 = 100) Automotive engineering Since 2003, the automotive engineering industry has grown by 35 per cent, more than the economy as a whole. The German automotive industry employs 742,000 people in Germany. According to the German Association of the Automotive Industry (VDA), the export ratio in 2012 was 76.7 per cent. Importance of air transport to Automotive engineering How important is air transport to your firm? 79,6% Very important/ important Revenue of the Automotive engineering industry +35% GDP Germany +13% Sources: ifo Institute, German Federal Statistical Office (Values adjusted for inflation, 2003 = 100) 8

11 Thus, of the 5.4 million cars the sector produced in Germany, 4.1 million were exported out of the country per cent of the automotive engineering firms surveyed by the ifo Institute stated that air transport is very important or important. Pharmaceutical industry Since 2003, the pharmaceutical industry has grown by 37 per cent, ahead of the economy as a whole. The sector currently provides 110,000 jobs in Germany. According to the German Chemical Industry Association (VCI), the industry s exports were worth more than 54 billion euros in per cent of the pharmaceutical firms surveyed by the ifo Institute stated that air transport is very important or important. Importance of air transport to Pharmaceutical industry How important is air transport to your firm? 85,9% Very important/ important Revenue of the Pharmaceutical industry +37% GDP Germany +13% Sources: ifo Institute, German Federal Statistical Office (Values adjusted for inflation, 2003 = 100) Because it is so important to key sectors of German industry, air transport is also becoming very important to the suppliers and service providers within the individual industries, as well as their employees. Airlines and airports thus play a significant role in creating and securing value added and millions of jobs in export-oriented firms in Germany. 9

12 Importance of air transport for foreign trade In 2012, Germany s combined imports and exports valued more than 2,000 billion euros, equivalent to three quarters of German Gross Domestic Product. Air freight plays an important role here, especially in foreign trade with countries outside Europe. Exports Share of Air freight from overseas exports ( ): By quantity (in tonnes) By value (in euros) 2% 30% Firms and forwarders airfreight high-value goods in particular, such as high-tech products, machinery, vehicle parts, as well as time- and temperature-sensitive goods to and from Germany. According to the German Federal Statistical Office, cargo and passenger aircraft transported imports and exports worth 204 billion euros in 2012, 10.2 per cent of the total figure for Germany. Source: German Federal Statistical Office The advantage of air freight fast and safe transport over long distances comes to bear in particular when trading with countries overseas (America, Asia, Africa, Australia and Oceania). By value, exports transported by air freight accounted on average for 30.0 per cent of total exports to these regions between 2007 and For imports, the figure was 25.8 per cent. Imports Share of Air freight from overseas imports ( ): By quantity (in tonnes) By value (in euros) 1% 25% These figures only take into account the declared value of the goods transported by air freight. The economic value may be considerably higher. For example, a microswitch may only cost a few euros, but if an entire production line had to stop if a replacement could not be rapidly delivered by air, the real value would soon run into millions. Source: German Federal Statistical Office 10

13 In German foreign trade in 2012, by weight, aircraft transported the lowest amount of imports and exports of all modes of transports, at 0.3 per cent. However, on average valued at 70,669 euros, a tonne transported by aircraft was 25 times the value of a tonne transported by road (2,835 euros), 37 times the value of a tonne transported by sea (1,896 euros) and 60 times the value of a tonne transported by rail (1,182 euros). Value per tonne in foreign trade (by mode of transport) 60,000/ t 40,000/ t 20,000/ t 0/t Rail Sea Road Air 1,182 1,896 2,835 70,669 Source: German Federal Statistical Office (figures for 2012) By no means is air freight only transported in special cargo planes: half of air freight is transported in the holds of passenger aircraft. This is referred to as belly cargo. Thus major passenger hubs like Frankfurt am Main (48 per cent of the air freight volume in Germany) and Munich (seven per cent) are also major air cargo locations. Express deliveries are handled at Leipzig/Halle (20 per cent of air freight volume in Germany) and Cologne/Bonn (17 per cent) airports in particular. This is largely done by night, as this is the only way to ensure that customers receive the consignments the next day. 11

14 Importance of air transport for tourism The plane is the most used means of transport for travel from Germany to anywhere in the world (outgoing) and for travel from anywhere in the world to Germany (incoming). Air transport is thus crucial to personal mobility and secures jobs in the tourism industry. The plane is the means of transport of first choice for those travelling abroad for personal or work reasons. Outgoing tourism According to the Society for Consumer Research (GfK), 49 per cent of all personal or business trips from Germany to European or global destinations in 2012 were made by plane, 37 per cent by car, seven per cent by bus and five per cent by train. German holiday flight destinations 2012 Flight destinations abroad in per cent/in millions of trips 1. Spain 2. Turkey 18.4% 31.3% 8.0 Mio. 4.7 Mio. 3. USA 4. Greece 5. Italy 6. Egypt 7. Portugal 8. Russia 9. Caribbean 10. North Africa 4.5% 4.4% 4.3% 4.3% 2.7% 2.2% 2.1% 2.1% 0% 5% 10% 15% 20% 25% 30% 1.2 Mio. 1.1 Mio. 1.0 Mio. 1.0 Mio. 0.7 Mio. 0.6 Mio. 0.5 Mio. 0.5 Mio. Source: FUR-Reiseanalyse 2013 / Trip = Return flight For extended holiday travel (five days or more), it was found that the plane is the most attractive means of transport in most cases. According to the FUR-Reiseanalyse, German holidaymakers took 25.5 million flight trips in 2012 in particular to Spain (8.0 million), Turkey (4.7 million) and USA (1.2 million). Four of the top 10 destinations are outside Europe. 12

15 None of the six European destinations in the top 10 borders Germany. Chosen means of transport Incoming Tourismus Outgoing Tourismus 51% 42% 49% 37% 4% 3% 7% 5% Sources: DZT/ERV Qualitätsmonitor Deutschland-Tourismus 2011/2012, GfK Mobilitätsstudie 2012 Incoming tourism The majority of foreign visitors also go to Germany by plane on their personal or business trip: 51 per cent of visitors stated this in a survey conducted by the German National Tourist Board (DZT) and Europäische Reiseversicherung (ERV) for 2011/ per cent travelled by car, four per cent by train and three per cent by bus. Impact of incoming tourism on employment Spending by foreign visitors who travel to Germany by plane secures the jobs of 367,900 people in Germany, for instance, in the accommodation and food service industry. This figure for 2012 was calculated by Professor Dr. Richard Klophaus from the Centre for Aviation Law and Business (ZfL) for the German Aviation Association (BDL) using data from the United Nations World Tourism Organization (UNWTO) on how much foreign visitors spend in Germany (excluding the cost of transport), surveys on the chosen means of transport and findings on the nature of foreign tourists spending. 13

16 Part B Economic Data relating to the Air Transport Sector Employment and value added in the air transport sector Important growth sectors of German industry rely on air transport, as the ifo Institute s survey shows in Part A. However, the air transport sector in and of itself is also important, providing hundreds of thousands of jobs and creating billions of value added in Germany. Impact on employment = 823,100 Jobs Induced: +145,900 In 2012, firms in the air transport industry provided employment for 823,100 people in Germany direct, indirect and induced. They contributed 57.2 billion euros to Gross Domestic Product (GDP), equivalent to 2.2 per cent of overall economic output in Germany. Indirect: Direct: +352, , ,500 people were employed directly by airports, airlines, air traffic control and civil aircraft manufacturers. Orders from the air transport sector secured 352,700 indirect jobs, that is with suppliers, such as construction and food businesses. Source: Klophaus/ZfL based on ADV, BARIG, BDLI, DFS, IDRF Consumer spending by direct and indirect employees for instance, on food, clothing and durables provided 145,900 people with jobs. Information on the methodology The direct employment figure for Germany is based on surveys conducted by industry associations among their members. The possibility of double counts is ruled out. Professor Dr. Richard Klophaus (ZfL) calculated the indirect and induced effects using input-output analysis and data from the Federal Statistical Office. 14

17 Part B Economic Data relating to the Air Transport Sector Direct employment in Germany Airlines 105,800 International airports (operators) 43,600 International airports (other) 86,500 Regional airports and airfields 12,000 Manufacturers 70,500 Air traffic control 6,100 Total 324,500 Employment in Germany provided by airlines includes jobs provided by domestic and foreign passenger and cargo airlines (source: BARIG) international commercial airports includes jobs provided by the airport operators themselves and other businesses on the airport campus, e.g. forwarders and travel agents; but does not include jobs provided by airlines and manufacturers located there or air traffic control (source: ADV)) manufacturers includes jobs in civil aviation (source: BDLI) regional airports and airfields includes jobs provided by the operators and businesses on the airport campus (source: IDRF) air traffic control includes jobs provided by German air traffic control (DFS) in the control centres and airport towers (source: DFS) Compilation: Klophaus/ZfL The aviation labour market covers the whole qualification spectrum from an airport cleaning job to positions like pilot, air traffic controller and engineer. Munich airport is a good example of how important airports are for providing jobs in the region. Between 1994 and 2012, the number of people employed at the airport more than doubled from 15,455 to 32,250 (+109 per cent). In the same period, more jobs above the social insurance threshold were created (+129 per cent) than the state (+16 per cent) and national average (+two per cent). Most of the employees come from administrative districts across the entire Free State of Bavaria, but some also live outside Bavaria. The average gross wage of 42,965 euros is higher than the national average for the service sector, which is 33,018 euros. At five per cent, the proportion of jobs under the threshold for social insurance is much lower than the national average of 15 per cent. 15

18 Part B Economic Data relating to the Air Transport Sector Air transport sector s contribution to the social insurance and tax take Firms of the air transport sector and their employees pay billions of euros in tax and social insurance. Municipalities, states, the federal government and the social insurance system in Germany all benefit. In 2012, the air transport sector and the supply sectors accounted for 14.0 billion euros in tax revenue, and social insurance contributions of 9.1 billion euros. Tax and social insurance payments PAYE and income tax (incl. solidarity surcharge) Value Added Tax Trade tax and corporation tax German Ticket Tax Tax on energy and electricity Other taxes Total (tax only) Social insurance Total 4.3 billion 3.1 billion 1.3 billion 1.0 billion 1.0 billion 3.3 billion 14.0 billion 9.1 billion 23.1 billion Source: Klophaus/ ZfL The fiscal and regulatory framework is crucial to Germany s competitiveness as an air transport location. Around 80 per cent of German air traffic is international. German airlines and airports are in stiff competition with airlines and airports abroad. Even the slightest differences in the fiscal and regulatory framework can have a strong influence on international competition, as the German Ticket Tax demonstrates: The decision to impose such a tax in Germany only, puts German airlines and airports at a competitive disadvantage. Information on the methodology The Centre for Aviation Law and Business (ZfL) calculated the fiscal contribution based on air transport s direct, indirect and induced effects as well as on data of the Federal Statistical Office on the structure of taxes and social insurance contributions in Germany. 16

19 Publication details Published by German Aviation Association (Bundesverband der Deutschen Luftverkehrswirtschaft e. V., BDL) Französische Straße Berlin Phone: +49 (0) ViSdP (Responsible for the content as defined by German Press Law) Matthias von Randow Managing Director Editorial board Benedikt Langner Head of Economics & Statistics Date of publication December 2013 Implementation and design Jens Köster GDE Kommunikation gestalten BDL 2013

20 Contact Benedikt Langner Head of Economics & Statistics +49 (0) Carola Scheffler Press Officer +49 (0) For the sake of the environment This product complies with the most stringent requirements of modern environmental protection. Recycled Climate-friendly Responsible Independent 100 % Recycling