Supporting aviation during the global economic downturn

The transport industry has long been seen as a barometer of economic health. When times are good, we travel more and freight volumes grow. But when the economy weakens, transport is often among the first industrial sectors to feel the impact.

It is unsurprising, therefore, that the unprecedented global economic downturn that we have experienced over the past year has proved particularly challenging for airlines, airport operators, and the broader air industry.

Although oil prices have returned to more affordable and sustainable levels since the record highs of last summer, the immediate outlook for aviation around the world remains turbulent. But despite these concerns, I believe that the long-term prospects for the industry are very positive.

In the UK, air travel has increased five fold over the past 30 years, and air freight traffic has doubled since 1990. A survey towards the end of last year showed that two thirds of people still want to take more flights, and we can be sure that in an increasingly globalised world, long-term latent demand for air travel will continue to grow.

Aviation supports our economy in different ways, like helping us to provide an attractive business environment for foreign investors. Those investors are located in the UK because we are a global hub for finance, trade and culture, and because they need rapid access to international markets through fast, effective air connections.

As a Government, we believe that the short term macro economic picture must not distract from the ongoing need to develop our aviation industry. That’s why we remain committed to major infrastructure schemes like a third runway at Heathrow, which will help boost jobs, productivity and business confidence, and the £16 billion Crossrail project, which will transform access to Heathrow from central London, the City and eastwards including Canary Wharf.

For us, investment in aviation is also investment in our economy and our competitiveness as a nation. Indeed, a robust aviation industry can help us take advantage of the economic recovery once it arrives, as it surely will.

Although attention has understandably focused on Heathrow and South East England over the past year, it is also important to remember that airports across the UK such as Manchester, Liverpool and Glasgow have played a significant role in supporting regional economic growth recently.

The UK aerospace industry is the second largest in the world in terms of numbers employed, and we are committed to funding new initiatives that will help the industry compete successfully in a global market. In fact, aerospace has been more successful than any other industrial sector in winning support from the Government’s Technology Programmes.

But at the same time, we remain committed to reducing the climate change impact of aviation. That’s why the Government and the industry support a comprehensive package of measures to make air transport more sustainable – including the development of greener aviation technologies; emissions trading; and improvements to air traffic management.

Of course the economic downturn means that in the short term, the global aviation industry will have to reduce output and costs to react to falling demand for both air services and new aircraft. We can expect to see more restructuring, and a greater number of business acquisitions, sell-offs and consolidations across the sector.

But the aviation industry that emerges from the downturn will be leaner, more efficient, and in a strong position not just to benefit from the subsequent economic recovery, but to help lead our economic recovery too.

Acknowledgement

© Crown copyright 2009. Reproduced with the permission of the Controller of Her Majesty’s Stationery Office/Queen’s Printer for Scotland and Department for Transport.