Importance of Air Transport Industry to Tourism and Economic Growth

Wazzup Pilipinas!

It is no coincidence that there is “cross-country empirical evidence of the mutually reinforcing relationship between a high level of economic development and a well-established air transport industry, resulting in improvements in living standards.” - Julie Perovic The Economic Benefits of Aviation and Performance in the Travel & Tourism Competitiveness Index International Air Transport Association (IATA) 2013

The vision is to become the “must experience” destination in Asia. In order to accomplish that, our goal is to develop a highly competitive and environmentally and socially responsible tourism that delivers more widely distributed income and employment opportunities.

This could be attained if we strengthen our "gateways" or access to our country, and that would highly depend on how convenient our airports are.

The Ninoy Aquino International Airport (NAIA) has remained the country’s largest gateway, followed by MCIA, and with Kalibo & Clark having the 3rd and 4th largest gateways with an increasingly large share percentage wise. Kalibo still has the biggest share of chartered flights and the full optimization of Caticlan will be a game-changer too. The growth of Davao, Iloilo and Puerto Princesa will depend on airport infrastructure and intensified markets to spur demand.

Sadly, the Philippine air transport industry is not able to capitalize on the growth of the Philippine economy, with the value for the Philippines scoring only 1.5 in air transport benefits from economic growth in 2015. This is the Sensitivity of Air Passenger Traffic Growth to GDP Growth Benchmarks.

The Joint Foreign Chambers and Philippine Business Groups invited us to a press conference on Airport Policy Brief on February 15, 2017 at the AIM Conference Center in Makati City.

The aim is to know the state of the three “A’s” of Philippine air transport infrastructure – airlines, airports, and air traffic management. 

This brief explores recommendations in addressing key issues affecting the Philippines’ ability to be a preferred investment destination for air transport and related industries such as tourism. It is organized into four sections. The first two present the economic importance of the air transport industry worldwide and in the Philippines, as well as developments in regional air transport infrastructure. The third focuses on the Philippine situation. 

Finally, the last section presents (1) recommendations raised by stakeholders in position papers and during roundtable discussions and public hearings; and (2) recent actions implemented by the current administration of President Rodrigo R. Duterte.

Specifically, to provide a framework for understanding the various issues and recommendations raised by stakeholders over the years, explore the state of Philippine air transport infrastructure, and present key recommendations to improve air transport infrastructure.

Invited speakers are the author of the policy brief, Maria Cherry Lyn S. Rodolfo, DOTr Usec. For Aviation and Airports Roberto C.O. Lim, and tourism association executive, Aileen Clemente.

Studies underscore the importance of air transport to economic growth and sustainable development. Air transport facilitates cross-border travel, enables the growth of trade and tourism, and provides the vital link of peripheral island economies to economic, social, and political centers.

So what must we do?

We should continue to pursue a more liberalized civil aviation policy, speed up the development and improvement of our airports, drastically improve the airport departure and arrival experience of tourists which includes assuring we have quality Customs processing even on Immigration & Quarantine, Duty Free, Retail Mix, and even the Toilets, for a satisfactory feeback.

We should continue route development initiatives, attend international aviation events for continuous learning of global methods, provide market support to local and international carriers and charter operations, and conduct familiarization tours for network planners.

Airlines, both local and foreign, are more than ready to augment their capacities and take advantage of regional growth in aviation, tourism, and trade and to increase at least twice the economy’s growth. They have ordered new planes and are preparing their business cases for new routes. The Department of Tourism (DOT) is also at the forefront of pursuing route development especially after Manila successfully hosted “Routes Asia 2016.”
There are a number of recommended reform initiatives that key stakeholders believe could help improve Philippine aviation infrastructure.

Recommendations are to decongest and improve NAIA, implement a multi-airport policy and system in the Greater Capital Region and develop Clark International Airport, develop secondary international gateways and provincial airports, modernize and strengthen transport institutions and improve business environment and travel facilitation.

Why do we need to do this?

We would like to make the Philippines as a globally competitive ecotourism destination with its wealth of natural beauty and cultural richness, conscious of the need to conserve, enhance, sustain and develop these assets and ensure equitable sharing of benefits among its people.

“Well-developed infrastructure reduces the effect of distance between regions, integrating the national market and connecting it at low cost to markets in other countries and regions. In addition, the quality and extensiveness of infrastructure networks significantly impact economic growth and reduce income inequalities and poverty in a variety of ways. A well-developed transport and communications infrastructure network is a prerequisite for the access of less-developed communities to core economic activities and services.” ~ World Economic Forum (WEF) Global Competitiveness Report 2014-2015, p.6

Thus, we should maintain a tourism campaign effort that takes full account of its current and future economic, social and environmental impacts, addressing the needs of visitors, the industry, the environment and host communities.

Our gateways, composed mainly of our airports, should be a primary focus to equate economic growth from the influx of tourism. The convenience in traveling to and from our country is a high necessity in order to keep tourists coming in again and again.

Air service connectivity in the Philippines has significantly improved in recent years due to the liberalization process that reduced entry barriers in the industry. However, the poor state of infrastructure – airports, air traffic management, and institutions – has hindered the ability of the country’s hard and soft players to capitalize on growth opportunities and most importantly of consumers to enjoy safe, seamless, and secure travel. There is greater optimism that long-delayed reforms to achieve competitive, sustainable, and inclusive air transport services in the country will finally happen based on executive actions to decongest NAIA, operate the CNSATM, and roll out the airport projects whether PPP or government-funded.

It is the institutional infrastructure, the glue that binds the three A’s of air transport infrastructure (airlines, airports, and air traffic management) and the most critical to sustain executive actions, that has been the least prioritized for years. Institutions set the rules of the game and the system of incentives and disincentives for the industry to grow.

These institutional reforms need the urgent support of the legislature. Congress plays a very crucial role in modernizing the Philippine air transport industry and in achieving sustainability. These reforms have been included as proposed projects to be covered by the emergency powers to address the traffic crisis in the air. Crisis periods provide opportunities to reform institutions, to strengthen them in performing core functions, and to invest in the human resources that make these institutions work to the greater benefit of the users of air transport.

As the public and private sectors in the Philippines consider recommendations in this policy brief, it would be prudent to keep in mind the status of investments in aviation infrastructure in competing neighbor economies and their continuing success in capturing large shares of regional tourism flows. Similar successful implementation of reforms in the Philippines are essential to increase inbound international visitor volume and resulting benefits to job creation and inclusive growth.

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