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IATA: Philippine aviation contributes 2.4% to GDP, employs 4.4-M

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The aviation sector in the Philippines is a key enabler of travel and tourism, and contributes substantially to the overall economy and employment, a study of 54 countries showed

GATEWAY. The Ninoy Aquino International Airport is the main gateway to the Philippines 

MANILA, Philippines – The aviation sector in the Philippines is a key enabler of travel and tourism, and contributes substantially to the overall economy and employment, a study of 54 countries showed.

The International Air Transport Association (IATA), a Canada-headquartered international industry trade group of airlines, said in a statement on Wednesday, February 29, that it had commission Oxford Economics to carry out a study of 54 countries to quantify the ‘economic footprint’ of aviation at the national level. 

This ‘economic footprint,’ stressed the study, covers not only the sector and its supply chain’s contribution to gross domestic product (GDP), jobs and tax revenues, but also the benefits for the customers, passengers, cargo shippers and impact on foreign direct investment.  

These are the findings for the Philippines. The local aviation sector:

  • Contributes 2.4% to GDP – The output of the aviation sector contributes P35.5 billion or 0.4% to the Philippine economy measured by the gross domestic product or GDP. aviation’s support for tourism is taken into account, the sector’s contribution to GDP is increased to P192.2 billion or 2.4% of GDP. 

This P192.2 billion total comprises:

  • P17.6 billion from airlines, airports, ground services
  • P9.7 billion indirectly from supply chains
  • P8.2 billion from spending of those employed in the sector and the supply chain
  • P156.7 billion in ‘catalytic’ benefits thru tourism
  • Brings 98% of foreign tourists – The growth of tourism sector relies heavily on airlines since almost all–over 98%–of foreign visitors reach the Philippines by air (unlike other tourism markets that could be reached via land travel). Among the 54 countries included in the study, the Philippines ranks among the highest for reliance on air transport for its foreign visitor arrivals.
  • Supports up to 4.42 million jobs – The aviation sector directly employs 123,000 highly productive jobs at airlines, airports, ground services, their supply chains. According to the study findings, the average air transport services employee generates P865,000 gross value added annually, approximately 3.8 times more productive compared to the Philippine average. With its contribution to the tourism industry, the tourism sector supports the following jobs:
  • 751,000 people employed in the tourism industry
  • 2.75 million jobs in the tourism supply chain
  • 794,000 people that were supported through the household spending of those employed in the tourism industry and its supply chain 
  • Contributes P26 billion in taxes – Aviation makes a substantial contribution to public finances with a total tax attributed by the sector’s economic footprint of over P26 billion. This comprises: 
  • P7 billion in income taxes from employees, social security contributions and in corporate taxes on profits
  • P17 billion from travel tax, alien head tax and VAT
  • P1.4 billion raised from aviation sector’s supply chain
  • P1.2 billion from spending of employees in aviation and its supply chain
  • Facilitates P575 billion-worth of consumer benefits and P34 billion trade – From visiting family and friends to shipping high value products, 27 million passengers and 596,000 tonnes of freight travel to, from and within the Philippines. The value placed on these services is likely to significantly exceed the expenditure. Oxford Economics estimates that the benefit to travelers is worth around P575 billion and the estimated benefit to shippers is about P34 billion.

What ails Philippine aviation?

Despite these economic contributions, IATA noted that several government policies hamper Philippine aviation from reaching its full potential.   

Reiterating its previous positions on what ails Philippine aviation, IATA said Philippine government “should institute policies that support aviation by reducing the burden of taxes and charges imposed by various government agencies.”

It enumerated the following proposals to “address current myopic policies” that reduce the Philippines’ competitive growth advantage vis-a-vis our neighbors:

  • Elimination of both the Common Carrier Tax (CCT) and the Gross Philippine Billings (GPB) would lower the total cost of international passenger travel in the Philippine market by 2.5%.
  • This would increase the number of international arrivals and departure in the Philippines by 1.9%.
  • Removing the CCT and the GPB taxes would mean a potential gain of between US$38-78 million for the wider Philippine economy from increased tourism.  Lower cargo transport costs could give a boost to export earnings in the order of US$1 billion.

IATA said these excessive tax burdens “adversely impact leisure travelers given their high sensitivity to changes in price.” 

“The removal of taxes could create “win-win” opportunities by boosting economic growth through promoting air transport,” it added.

Recently, KLM cited these tax burdens in its decision to pull out its direct flights between Manila and Europe.

The Department of Tourism has cited the lack of direct flights from Europe as one of the factors why visitor arrivals from that region have remained low. European tourists have to take connecting flights via other airline hubs, including Singapore, Bangkok, Kuala Lumpur, or Hong Kong.

Tourism and budget airlines

Over 3.9 million tourists visited the Philippines in 2011, an all-time high for the Philippines but still a figure that makes the Philippines a laggard among neighbors in southeast Asia.

The Philippines, an archipelago of over 7,100 islands, boasts of tropical islands and friendly, hospitable and English-speaking people.

The growth of the airline industry has been hampered for decades by industry monopoly granted to former state-owned and now privatized Philippine Airlines (PAL).

Budget airlines, including aggressive players like Cebu Pacific, as well as AirPhil Express, Zest Air, Seair, and soon, AirAsia Philippines, have stimulated air travel within the country and within southeast Asia through low-cost fares.

The success of the budget airline model has eclipsed shipping, the traditional mode of inter-island transportation that has been marked by many accidents and had claimed lives.

In 2011, President Aquino passed an executive order implementing a pocket open skies policy, which further regulates the local aviation industry by allowing foreign airlines to mount unlimited flights at unlimited frequencies to select airports outside of the Manila airport, currently the main gateway.  

New and improved aviation infrastructure for airports covered by the open skies policy is included in the priority projects of the Aquino administration.

Aside from tourists, overseas Filipino workers (OFW) are also directly affected by lack of flights and high airfare costs. – Rappler.com

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