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Bridging the gap between tourism and aviation policies

Bridging the gap between tourism and aviation policies ( Vijay Poonoosamy, the Vice President, International and Public Affairs, Etihad Airways, was one of the experts who had been invited to address the first Tourism Ministerial Meeting by the 20 Member IORA (Indian Ocean Rim Association) that was hosted in Seychelles at the end of last week. Mr. Poonoosamy, who described the Seychelles meeting as “the most productive IORA first Tourism Ministers Meeting," said when he addressed the historic Ministerial Meeting as follows: “Globally, Travel&Tourism represents US$7 trillion, 266 million jobs – that’s 1 in 11 jobs on the planet. 35% of international trade by value is transported by air, and this equates to an aggregate value of goods transported in excess of USD 6.8 trillion.

Taking its wider supply chain impacts into account, the World Travel and Tourism Council found that Travel&Tourism’s total contribution to global GDP grew by 3.0% in 2013, faster than overall economic growth for the third consecutive year and outperforming other global sectors such as manufacturing, retail and distribution, public services and financial and business services.

The multiplier effect of air transport is amazing as ICAO estimated that every US$ 100 of revenue produced by air transport triggers an additional US$ 325 and that every 100 jobs generated by air transport triggers over 600 additional jobs in other industries.

It behooves the critical importance of International Civil Aviation that while World War II was still underway in Europe and Asia 52 States met, formulated and on 07 December 1944 signed the Convention on International Civil Aviation better known as the Chicago Convention.

As we celebrate the 100 years of commercial aviation and the 70 years of the International Civil Aviation let us remember the strategic value of air transport as a catalyst for socio-economic growth and as a key enabler of international trade.

A more dramatic case for aviation was made in 2010 when Iceland’s volcanic ash led to the closure of 300 European airports for 5 days, over 100,000 cancelled flights, more than 10 million stranded passengers and $5 billion in lost GDP worldwide.

Aviation is a key facilitator of tourism as over 52% of international tourists arrive by air - a proportion that is significantly higher for remote destinations.

WTTC’s 2014 Travel and Tourism Economic Impact Report had the following 2013 data for 16 Members of the IORA:

Australia: 6.4m visitors; US$151b to GDP; 1449 thousand jobs.
Bangladesh: 292,000 visitors; US$5.9b to GDP; 2846 thousand jobs.
India: 6.9m visitors; US$113.2b to GDP; 35439 thousand jobs.
Indonesia: 8.7m visitors; US$80.8b to GDP; 9228 thousand jobs.
Iran: 3.2m visitors; US$22.4b to GDP; 1184 thousand jobs.
Kenya: 1.4m visitors; US$5.3b to GDP; 590 thousand jobs.
Madagascar: 217,000 visitors; US$1.6b to GDP; 648 thousand jobs.
Malaysia: 26.1m visitors; US$50.3b to GDP; 1857 thousand jobs.
Mozambique: 2.1m visitors; US$1.1b to GDP; 718 thousand jobs.
Oman: 1.5m visitors; US$5.4b to GDP; 72 thousand jobs.
South Africa: 9.5m visitors; US$33.4b to GDP; 1404 thousand jobs.
Sri Lanka: 1.3m visitors; US$6.3b to GDP; 689 thousand jobs.
Tanzania: 1.1m visitors; US$4.3b to GDP; 1196 thousand jobs.
Thailand: 26.7m visitors; US$78.1b to GDP; 6011 thousand jobs.
UAE: 11.3m visitors; US$32b to GDP; 497 thousand jobs.
Yemen: 906,000 visitors; US$3.1b to GDP; 384 thousand jobs.

It is a truism that a country’s or region’s competitiveness, including in tourism, is directly related to its connectivity.

It is therefore simply senseless and counter-productive for anyone trying to stimulate socio-economic growth and jobs to fail to effectively promote connectivity.

WTO estimated in 2008 that replacing the most restrictive bilateral air services agreement with the most liberal agreement might increase traffic by over 75%.

The UNWTO Executive Council also concluded recently that lack of air connectivity is a central hindrance to a stronger tourism growth.

A June 2006 InterVistas Report found that traffic growth subsequent to air transport liberalization typically averaged between 12% and 35% and reached almost 100% in some cases.

A December 2006 InterVistas study estimated that each 10% increase in international air services led to a .07% increase in GDP which Oxford Economics estimates to be over US$ 200b.

The July 2009 Intervistas Report on India forecasted that liberalization of market access would increase international traffic to and from India by 11.8 million passengers, reduce air fares by an average of 31%, create 584,400 jobs and increase GDP by between INR145 Billion and INR405 Billion.

The July 2009 Intervistas Report on Mauritius forecasted that liberalization of market access would increase international traffic to and from Mauritius by 979,000 passengers, reduce air fares by an average of 31%, create 10,400 jobs and increase GDP by MRU 1.26m.

A 2011 Oxford Economics Report showed that aviation and tourism have a significant footprint in the economies of the Indian Ocean Islands of Seychelles, Mauritius and Maldives, supporting 27.2% of GDP and 187,000 jobs.

According to a recent report published by the Confederation of British Industries, an extra £1 billion in trade per year could be brought into the UK if one daily direct flight to each of the eight major emerging economies - Brazil, China, India, Mexico Indonesia, Russia, South Korea and Turkey - was added.

The liberalization of the air services agreement between Malaysia and Thailand led to 370,000 additional passengers, 4,300 more jobs and US$ 114 million in GDP.

In short, an international air access policy that promotes connectivity leads to increased air service levels and lower fares, which in turn stimulate tourism and bring about increased economic growth and employment.

Please note that Air transport has got ever more inclusive over time unit cost of flying (on a $ per km basis) has halved in real terms since 1980, and is roughly 1/7 of what it was in 1950.

The 2012 G20 meeting in Mexico adopted a Leaders Declaration in which they recognized for the very first time “the role of travel and tourism as a vehicle for job creation, economic development” and, while recognizing the sovereign rights of States to control entry of foreign nationals, committed “to work towards developing travel facilitation initiatives in support of job creation, quality of work, poverty reduction, and global growth.”

A restrictive national policy on air access is indeed a key impediment to travel and tourism whereas a liberal national policy on air access will enable more airlines to deliver on their real promises of socio-economic growth and jobs.

The case for liberalizing air transport is most compelling for most but sadly not for all.

Some still focus exclusively on the narrow interests of national carriers rather than promote the wider national interest and end up undermining both.

Some are still unable to appreciate that an ailing national airline can never be a source of national pride.
Likewise, lack of challenging competition makes an airline uncompetitive.

Those who pretend not to understand this leave their national airlines with a false sense of security until it is too late for both the airline and the country.

Quite clearly a viable and competitive national airline both contributes to and is dependent on the success of the tourism sector of the country.

Consideration of the national airline interest is thus legitimate but cannot be at the expense of foreign airlines interest or the national interest.

Hence the need for an intelligent and dynamic air access policy to promote the long-term interest of the country.

We must, however, understand that traffic rights are entitlements which airlines will not use if it is not viable to do so.

Likewise, a customer entering a shop may choose to buy or not to buy anything. But limiting the number of customers who can enter the shop will mean fewer customers and even fewer opportunities for sales.

Countries seeking connectivity, socio-economic growth and tourism therefore grant unrestricted traffic rights and let the foreign airline focus only on the viability question.

Some unfortunately put all their eggs in one basket and increase airport and hotel capacity without liberalizing air access.

The 2013 Travel and Tourism Competitiveness Report of the World Economic Forum rated against 140 States the following 19 IORA Members:

Australia: overall 11 and 14 under Policy Rules and Regulations which include visas and air access.

Bangladesh: overall 123 and 108 under Regulations.
India: overall 65 and 125 under Regulations.
Indonesia: overall 70 and 93 under Regulations.
Iran: overall 98 and 124 under Regulations.
Kenya: overall 96 and 95 under Regulations.
Madagascar: overall 131 and 112 under Regulations.
Malaysia: overall 34 and 9 under Regulations.
Mauritius: overall 58 and 28 under Regulations.
Mozambique: overall 125 and 90 under Regulations.
Oman: overall 57 and 38 under Regulations.
Seychelles: overall 10 and 1 under Regulations.
Singapore: overall 65 and 125 under Regulations.
South Africa: overall 64 and 29 under Regulations.
Sri Lanka: overall 74 and 62 under Regulations.
Tanzania: overall 109 and 74 under Regulations.
Thailand: overall 43 and 77 under Regulations.
UAE: overall 28 and 13 under Regulations.
Yemen: overall 133 and 140 under Regulations.

Air transport is the strongest link in the job creation and economic development chain but it remains the weakest link in the travel and tourism value chain.

We simply cannot promote connectivity if we ignore profitability and we cannot promote profitability if we ignore all that undermine it.

Inefficient national and regional air space management, misguided national or regional regulation of the commercial and operational aspects of international civil aviation and unreasonable taxes, fees and charges, poor Facilitation or rather excellent Complication of air travel with frustrating security and border controls and visa regimes undermine both connectivity and profitability. They also penalize consumers but are conveniently ignored by passenger rights regimes.

UNWTO-WTTC research shows that visa facilitation will bring US$ 206m extra receipts and 5.1m additional jobs in G20 economies by 2015 and US$ 89b extra receipts and 2.6m additional jobs in APEC countries by 2016.

States should limit the instances where visas are required and agree to deliver those electronically or on arrival in a simple and efficient manner. States should streamline the embarkation and disembarkation forms or even better eliminate them altogether.

Governments must recognize that as a general rule an aviation or tourism tax revenue will be offset by losses to the economy and jobs whereas an initial loss in revenue from abolished aviation and tourism taxes will be offset by an increase in trade, travel and tourism.

A WTTC study has, for example, shown that removing UK’s APD would result in an additional 91,000 British jobs being created and £4.2b added to the economy in just 12 months.

Air transport and tourism promote peace, friendship, good fellowship and mutual understanding amongst the peoples of the world by allowing us to experience first-hand the formidable value of what we have in common and what we can learn from each other.

The obvious interdependency, synergies and vital importance of both tourism and air transport militate against having separate and often conflicting sectorial policies on air transport and tourism.

The 131 Member States of ICAO participating in the 2013 Worldwide Air Transport Conference recommended that States should consider the creation of mechanisms that allow for closer co-operation and co-ordination between their tourism and air transport authorities.

The 120 UNWTO Members States participating in the UNWTO Assembly of 2103 also called for closer collaboration between tourism and air transport policies.

I am therefore delighted that the first UNWTO-ICAO Ministerial Conference will be held here in Seychelles from 22 to 24 April 2015.

That the formidable success of tourism in any country is the result of the cooperative efforts of all the tourism stakeholders is another truism we tend to forget.

The aspirations of the various stakeholders are divergent: travelers want the best service at the lowest price; hoteliers want more seats when they require and more destinations at lower fares; tour operators look for the best deals and allocations from airlines and hotels; airlines look for minimum competition, highest load factors and fares as well as more and cheaper hotel rooms; national and local authorities and communities look for environmentally friendly but growing trade and tourism, cheaper and more direct flights and, of course, more jobs.

Despite such natural divergences we represent together much more than the sum of our respective contributions.

Travel and Tourism will flow smoothly if and when all the stakeholders develop the necessary synergy and work in harmony in the pursuit of a shared vision.

Enlightened self-interest should make us realize how better off we all will be if we work intelligently together.

As States, as provinces, as cities, as communities, as national and foreign airlines, as consumers, as airports, as trade and tourism professionals, we need each other and we depend on each other. We argue, we often agree to disagree, we pursue different if not opposing goals, but we do all this as a community of linked interests.

And I put it to you that this community of linked interests is the foundation on which rests the future prosperity of the members of the Indian Ocean Rim Association.

As pointed out in the 2009 Travel&Tourism Competitiveness Report of the World Economic Forum, I quote:

“Governments can have an important impact on the attractiveness of developing the travel and tourism sector, depending on whether the policies that they create and perpetuate support or hinder its development.”

End of quote

Governments of the Indian Ocean Rim Association Member States must now do what it takes to boost a more competitive national and regional travel and tourism sector by developing a strategic and holistic approach to both.

Aviation and tourism are two sides of the same coin whose value is dependent on having its two sides.

What is urgently required is a resolutely pro-Travel and Tourism paradigm shift from national leaders to ensure that policies, processes and attitudes make it easy for tourists to visit our beautiful countries and make them feel welcomed as guests when they do.

PHOTO: Vijay Poonoosamy, the Vice President, International and Public Affairs, Etihad Airways


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