Douglas Baker , Rico Merkert, MD...

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Baker, Douglas, Merkert, Rico, & Kamruzzaman, MD(2014)The role of air transport & economic growth : the case of regional airports,Australia. InRegional Airport Development 2014, 2014-04-30 - 2014-05-01.

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The Role of Air Transport & Economic Growth: The Case of Regional Airports, Australia

Douglas Baker , Rico Merkert, MD Kamruzzaman

Regional Airport Development 2014

Outline

1. State of Regional Aviation in Australia 2. The Relationship between Regional Aviation

and Economic Growth 3. Needs and Challenges for Regions/Airports 4. Conclusion


Challenges for Regional Aviation in Australia

• Maintaining infrastructure – and future costs (50% operate at a loss)

• Increasing security compliance • Training and retention of staff • Maintaining RPT service • Land use planning around airports


Limited Policy and State support

• Very little policy to support regional aviation and airports in the White Paper

• Limited State and Commonwealth support for infrastructure

• Local government has the responsibility for a majority of airports with little state or commonwealth support or direction


So What?


Critical Infrastructure for Regions

• Economic benefits • Social connection • Tourism • Health • Security • Disaster resilience


• Linked to Economic Growth?


Setting the scene

Remote Australia – Tourism + FIFO

Regional/rural Australia – Business Development?

Does regional aviation impact on economic development in all of Australia’s regions?

What about the other way around?


Literature review

• Typically strong correlation between air traffic and economic growth (Airbus (2013), Deloitte (2012), Joint Study on Aviation Capacity for the Sydney Region 2012, regional associations)

– implementation of transportation infra & accessibility leads to economic development

– airports act as catalysts for local investment (jobs)

• Causation between the two not entirely clear (Green 2002; Button et al. 2009)

• Jaunky (2011): CO2 emissions and income; Lio, Liu and Ou (2011): Internet and corruption

• Mukkala and Tervo (2012)

– 86 regions in 13 European countries

– Granger non-causality analysis in a panel framework

– causality processes are homogenous from regional growth to air traffic

– causality from air traffic to regional growth in peripheral regions but the causality is less evident in core regions

• Nothing on regional Australia where the context of regional aviation is specific


Methodology

Analysis of regional airport passenger data

Dynamic panel data causality regression models for 88 airports/LGAs (1985/86 - 2010/11; ARTI and Pax)

Panel data causality regression models for 28 airports in 13 regions in Queensland (Experimental Estimates of Gross Regional Product 2000/01, 06/07, 10/11 and Pax)


Analysis of regional airport pax data tells a very positive story

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,00019

85-8

619

86-8

719

87-8

819

88-8

919

89-9

019

90-9

119

91-9

219

92-9

319

93-9

419

94-9

519

95-9

619

96-9

719

97-9

819

98-9

919

99-0

020

00-0

120

01-0

220

02-0

320

03-0

420

04-0

520

05-0

620

06-0

720

07-0

820

08-0

920

09-1

020

10-1

120

11-1

220

12-1

3

TOTAL PASSENGERS

Source:BITRE Regional Airport Development 2014

Source: BITRE

At the federal level strongest growth in?

Source:BITRE

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

Passengers

Queensland the clear winner


Source: BITRE

Magnitude of growth strongest in non-remote regions and driven by major domestic airlines

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

1985

-86

1988

-89

1991

-92

1994

-95

1997

-98

2000

-01

2003

-04

2006

-07

2009

-10

2012

-13

Total regionalPassengers

Remote regionaltotal

Non-remoteregional

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

1985

-86

1988

-89

1991

-92

1994

-95

1997

-98

2000

-01

2003

-04

2006

-07

2009

-10

2012

-13

MAJOR DOMESTICAIRLINES

REGIONAL AIRLINES

INTERNATIONALAIRLINES

Source: BITRE


Sample Queensland NSW Western Australia South Australia

Northern Territory Tasmania Victoria

BAMAGA ALBURY ALBANY CEDUNA ALICE SPRINGS BURNIE HAMILTON BILOELA (THANGOOL) ARMIDALE BROOME COOBER PEDY AYERS ROCK DEVONPORT MILDURA

BUNDABERG BALLINA CARNARVON KINGSCOTE BATHURST ISLAND FLINDERS ISLAND PORTLAND CAIRNS BATHURST CHRISTMAS ISLAND MOUNT GAMBIER DARWIN HOBART CHARLEVILLE BROKEN HILL COCOS ISLAND OLYMPIC DAM ELCHO ISLAND KING ISLAND

CLONCURRY COBAR DERBY-CURTIN PORT AUGUSTA GOVE LAUNCESTON COOKTOWN COFFS HARBOUR ESPERANCE PORT LINCOLN GROOTE EYLANDT DOOMADGEE DUBBO GERALDTON WHYALLA MANINGRIDA EMERALD GRAFTON KALGOORLIE GLADSTONE GRIFFITH KAMBALDA GOLD COAST LISMORE KARRATHA HAMILTON ISLAND LORD HOWE ISLAND KUNUNURRA HERVEY BAY MERIMBULA LEARMONTH LONGREACH MOREE LEONORA MACKAY MORUYA NEWMAN MORANBAH MUDGEE PARABURDOO MORNINGTON ISLAND NARRABRI PORT HEDLAND MOUNT ISA NARRANDERA RAVENSTHORPE

NORMANTON NORFOLK ISLAND PALM ISLAND ORANGE PROSERPINE PARKES

ROCKHAMPTON PORT MACQUARIE ROMA TAMWORTH

SUNSHINE COAST TAREE THURSDAY ISLAND WAGGA WAGGA

TOOWOOMBA WILLIAMTOWN TOWNSVILLE WEIPA


Sample Remote and very remote airports

Queensland NSW Western Australia South Australia Northern Territory Tasmania Victoria

BAMAGA ALBURY ALBANY CEDUNA ALICE SPRINGS BURNIE HAMILTON BILOELA (THANGOOL) ARMIDALE BROOME COOBER PEDY AYERS ROCK DEVONPORT MILDURA

BUNDABERG BALLINA CARNARVON KINGSCOTE BATHURST ISLAND FLINDERS ISLAND PORTLAND CAIRNS BATHURST CHRISTMAS ISLAND MOUNT GAMBIER DARWIN HOBART CHARLEVILLE BROKEN HILL COCOS ISLAND OLYMPIC DAM ELCHO ISLAND KING ISLAND

CLONCURRY COBAR DERBY-CURTIN PORT AUGUSTA GOVE LAUNCESTON COOKTOWN COFFS HARBOUR ESPERANCE PORT LINCOLN GROOTE EYLANDT DOOMADGEE DUBBO GERALDTON WHYALLA MANINGRIDA EMERALD GRAFTON KALGOORLIE GLADSTONE GRIFFITH KAMBALDA GOLD COAST LISMORE KARRATHA HAMILTON ISLAND LORD HOWE ISLAND KUNUNURRA HERVEY BAY MERIMBULA LEARMONTH LONGREACH MOREE LEONORA MACKAY MORUYA NEWMAN MORANBAH MUDGEE PARABURDOO MORNINGTON ISLAND NARRABRI PORT HEDLAND MOUNT ISA NARRANDERA RAVENSTHORPE

NORMANTON NORFOLK ISLAND PALM ISLAND ORANGE PROSERPINE PARKES

ROCKHAMPTON PORT MACQUARIE ROMA TAMWORTH

SUNSHINE COAST TAREE THURSDAY ISLAND WAGGA WAGGA

TOOWOOMBA WILLIAMTOWN TOWNSVILLE WEIPA


Causality regression results Regional aviation Economic Growth

First-differenced IV regression Group variable: AirportID Number of obs = 1796 Time variable: Year Number of groups = 88 R-sq: within = 0.4426 Obs per group: min = 17 between = 0.9976 avg = 20.4 overall = 0.9893 max = 21 Wald chi2(4) = 19.97 corr(u_i, Xb) = -0.9870 Prob > chi2 = 0.0005 ------------------------------------------------------------------------------ D.LnARTI | Coef. Std. Err. z P>|z| [95% Conf. Interval] -------------+---------------------------------------------------------- -------------+------ LnARTI | LD. | -.8906469 .4528895 -1.97 0.049 -1.778294 -.0029999 | LnTotTot | D1. | .0161805 .0094961 1.70 0.088 -.0024316 .0347925 L2D. | .012739 .0042383 3.01 0.003 .004432 .0210459 L3D. | .0197574 .0102974 1.92 0.055 -.000425 .0399399 | _cons | .0394296 .010296 3.83 0.000 .0192498 .0596093 -------------+----------------------------------------------------------


Causality regression results Economic Growth Regional aviation

First-differenced IV regression Group variable: AirportID Number of obs = 1532 Time variable: Year Number of groups = 88 R-sq: within = 0.0025 Obs per group: min = 14 between = 0.8228 avg = 17.4 overall = 0.2942 max = 18 Wald chi2(4) = 21.57 corr(u_i, Xb) = -0.0611 Prob > chi2 = 0.0002 ------------------------------------------------------------------------------ D.LnTotTot | Coef. Std. Err. z P>|z| [95% Conf. Interval] -------------+---------------------------------------------------------- -------------+------ LnTotTot | LD. | .0356418 .1743109 0.20 0.838 -.3060013 .3772849 | LnARTI | D1. | .6760712 .2105554 3.21 0.001 .2633902 1.088752 LD. | .361041 .2154063 1.68 0.094 -.0611476 .7832296 L6D. | .3120038 .1397229 2.23 0.026 .0381519 .5858558 | _cons | -.0139086 .020695 -0.67 0.502 -.0544701 .0266529 -------------+----------------------------------------------------------


Causality regression results

Strong impact of regional aviation on economic activity in all regions Strong impact of pax numbers on the taxable income of the respective local

government areas (particularly in remote and very remote areas) with a lag of one financial period (year)

Particularly economic growth in remote areas of WA has induced demand for regional aviation

Causality (significant relationship) does not hold for Queensland sample (in either way) as individual airports too small to impact on GRP of a region

Regional aviation and regional business/economic activity depend on each other; one cannot do without the other; right approach to measure that is at the LGA level


Creative solutions


Business Models

• How do we finance and fund different business models?

• What are optimal business models for different species of airports: airside and landside?

• What thresholds in RPT determine business models?


Management and Operation Models

• What are best practice models?

• Asset Management – present status?

• Masterplanning?


Conclusion

• Clear bi-directional link between regional aviation and economic growth

• How can Local Governments change the present status of RRR airports?

• How can we develop solid empirical research for evidence-based policy?

• What are world’s best-practice business and management models?


Q&A

• Professor Doug Baker School of Civil Engineering and Built Environment QUT [email protected]

• Dr Rico Merkert ITLS, The University of Sydney Business School [email protected]


mailto:[email protected]:[email protected]

The Role of Air Transport & Economic Growth: �The Case of Regional Airports, Australia�Douglas Baker , Rico Merkert, MD Kamruzzaman��OutlineChallenges for Regional Aviation �in AustraliaLimited Policy and State supportSo What?Critical Infrastructure for RegionsSlide Number 7Setting the sceneLiterature reviewMethodologyAnalysis of regional airport pax data �tells a very positive storyAt the federal level strongest growth in?Magnitude of growth strongest in non-remote regions and driven by major domestic airlinesSampleSample� Remote and very remote airportsCausality regression results�Regional aviation Economic GrowthCausality regression results�Economic Growth Regional aviation Causality regression resultsCreative solutionsBusiness ModelsManagement and Operation ModelsConclusionQ&A

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