PERFORMANCE ASSESSMENT IN AIR TRANSPORT: BUILDING A PORTUGUESE CASE STUDY

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1 PERFORMANCE ASSESSMENT IN AIR TRANSPORT: BUILDING A PORTUGUESE CASE STUDY Jorge Silva Beira Interior University, Aerospatial Sciences Department Covilhã, Portugal Rosário Macário Lisbon Technical University, Instituto Superior Técnico, CESUR TIS.PT Consultores em Transportes, Inovação e Sistemas, S.A. Lisbon, Portugal RESUMO Com base em dados publicados pela ICAO estima-se que em 2002, em todo o mundo, mais de 800 transportadoras aéreas tenham assegurado serviços regulares de transporte de passageiros, e que mais de 90 transportadoras aéreas tenham assegurado serviços regulares de transporte de mercadorias. Em 2002 o transporte regular das companhias aéreas pertencentes aos 188 Estados contratantes da ICAO foi estimado em milhões de passageiros e em 30 milhões de toneladas de mercadorias. Os principais 25 aeroportos mundiais registaram em 2002 uma capacidade total de milhões de passageiros. Muito embora este volume de tráfego represente apenas 33% do total de passageiros transportados em todo o mundo, ele traduz uma assinalável média diária de passageiros por aeroporto. No seu conjunto, estes aeroportos asseguraram cerca de 10.8 milhões de movimentos de aeronaves, isto é, uma descolagem/aterragem a cada 73 segundos por aeroporto. Entre 1991 e 2001 o transporte regular de passageiros assegurado pelas companhias aéreas europeias aumentou a um ritmo de 3,5% ao ano. Em 2002 as companhias aéreas europeias registaram milhões de passageiroquilómetro e milhões de tonelada-quilómetro (mercadorias e correio). As transportadoras aéreas e os aeroportos são dois elementos essenciais na cadeia de valor do negócio do Transporte Aéreo. Este trabalho apresenta e analisa o desempenho dos principais aeroportos portugueses, e identifica as eventuais lacunas e as possíveis soluções para as ultrapassar de forma, quer a melhorar a competitividade desses aeroportos quer a reforçar a sua posição nas redes europeias de transporte aéreo. ABSTRACT Based on figures published by ICAO, it is estimated that in 2002 more than 800 air carriers worldwide will provide domestic and/or international scheduled passenger services, and more than 90 air carriers will operate scheduled freight services. The total scheduled traffic carried by airlines of all (188) ICAO Contracting States in 2002 is estimated at about 390 billion tonne-kilometres. These airlines carried a total of about million passengers and 30 million tonnes of freight. The top 25 worldwide airports, in terms of total passenger s throughput, reported at about million passengers in Their passenger traffic represents 33% of the world total passenger throughput an average of passengers daily per airport. These airports combined handled about 10.8 million aircraft movements an average of one take-off/landing every 73 seconds per airport. Over the period, only scheduled passenger traffic (PKPs) of the European region airlines increased at an average annual rate of 3.5%. During 2002, European airlines carried thousands of passengers, while PKPs performed millions and freight/mail tonne-kilometres performed millions. Air carriers and airports are two key elements in the Air Transport Business value chain. Therefore, this work presents and analysis of the performance of the main Portuguese airports and identifies the performance gaps and possible solutions to overcome these problems improving the competitiveness of Portuguese airports and their position in the European Networks. 1. POSITIVE EFFECTS OF TRANSPORT 1.1. Introduction Any approach chosen to define its concept, the respective researchers reveals unanimous in affirming that the infrastructures are potentially influent in the economic performance of the regions, mainly because ( ) expanding the use of existing resources (labour, capital, etc.), attracting additional resources ( ), and making ( ) economies more productive, (Fox and Porca, 2001:104). But such enthusiasm does not let us loose the well sense concerning the matter. Izquierdo (1997:49) defends, even without to take in account the positives effects that indirectly impose in the national economy, that ( ) las infraestruturas ( ) no generan 49

2 directamente, por sí mismas, desarrollo económico y en concreto desarrollo regional siendo necesario para ello contemplarlas como un elemento del sistema territorial, dentro del contexto más amplio de la ordenación del territorio. This position is also corroborated by the EIB - European Investment Bank, when it underlies that the objective of the politics of regional development is to create the conditions for an autonomous and supported growth of the per capita income of the less favoured regions, allowing it to approach the one of the European average; adding that the infrastructure ( ) contributes only indirectly to this aim: in itself, it has only a marginal multiplier effect, as infrastructure use does not contribute significantly either towards increasing the national product, the creation of permanent jobs or the transfer of technology, nor does it have an impact as a purchaser on the other regional industries or services. ( ) [I]nfrastructure may, though, act as a catalyst in promoting development, (EIB, 1998:9). The debate around the relationship between regional development and, specifically, the infrastructures of transport is not recent and has been one of all the preferred themes, either among the specialists in this matter, or among the public in general. For some of them, such link became so obvious that already does not deserve a special reference allowing, this way, not only to create the illusion that the transport is simply a consequence of the demand, but also to minimize the impact of any empirical evidence to this respect. In fact, it is possible to evidence, empirically, the remarkable regularity verified in the last years, in a lot of countries, in the relationship between the growth of the transport and the economic growth, which it is as relevant as we know the successive changes mainly technical ones, that the several modes have imposed to the sector. In this context, in the possibility that the transport were only one way to reach certain purpose, ( ) if it can be economised then we should expect to see a reduction in the amount of transport necessary to achieve a given level of welfare, (Vickerman, 2000:2). In the opinion of Vickerman (2000:2) ( ) it appears that transport faces both a strong positive income elasticity of demand and an overall price elasticity not far from unity. There is a suggestion that in terms of both money and time budgets there are a given (proportional) allocation to transport. In fact, as it became more accessible and proportionally cheaper, now it is possible to go even more far away in the same space of time and - also proportionally, with the same budget. As society evolves it is more common to inhabit in a place far away from that of work; ( ) even the telecommuter spends about the same time in the week travelling as the daily commuter, taking the benefits of the telecommuting freedom to live in a better area, (Vickerman, 2000:2). Similarly, while in a recent past the vacation and leisure places were restricted to a set of options, necessarily delightful but also relatively close to those of residence, nowadays the destinations not rare are offered / choosed outside the respective countries, inclusively in other continents. Simultaneously, also the transport of goods faces remarkable changes on account of the companies which look for to wide the markets, not only those for the supply of the raw materials but also those for the transaction of the manufactured items. In this context - and even weighing all the arguments, it is not easy to establish the true essence of the relationship between the infrastructures of transport and the regional development, mainly because we are facing two types of impacts, which Vickerman (1996) thus classifies: non-spatial impacts - those occurring as an imposition in the economic activity - in general, by the investment in infrastructures; spatial impacts those occurring as a consequence of different performances, in different places too, by the infrastructures itselves. 50

3 1.2. Non-Spatial Effects Investment and Productivity The approach to the relationship between the infrastructures and the development on the basis of the analysis of the effects imposed for such investments in the economic activity is, perhaps, the most generalized and the most argued during the last years, mainly since the arguments presented about this matter for Aschauer (1989, 1990). In the opinion of this author, the impact of the infrastructures - acting in this particular as public goods, reflects itself directly into the economy, raising the level of the economic activity and stimulating the productivity of the private capital; and so, it must be modelled as an additional factor in the general function of production. However, several critics emerge on account of the role played, in this particular, by the public infrastructures, mainly because the respective initial impacts ( ) would be to crowd out private investment by raising either or both the level of taxation and the interest rate, (Vickerman, 2000:7). For the same author this was, precisely, the main reason of the softening of the public investment in infrastructures verified in many countries in the decades of 70 and 80 of the XX century, which consequences re-echo itselves, still today, in the quality of the services given for many of them. However, when Aschauer (1989) used the function of production of Cobb-Douglas to esteem the elasticity of the infrastructure - ( ) as an additional input to labour and private capital ( ), he found figures between 0.4 and 0.5, so high ( ) that the social rate of return would be in excess of 100% on such investment, (Vickerman, 2000:7); results that - even arguables, seem to show how an investment of this nature can be itself an important source of economic growth, exceeding in the long run any difficulty which, in the moment, can persist. In this context, the attempts of restriction of the investment in infrastructures justified simply as measures of budgetary control of the public sector can be, not only unproductives, but also inconsequents in the attempt to mitigate eventual difficulties; in alternative, a wise forecast in the public investment can induce the economic growth and the productivity of the private sector ( ) and more than pay for itself in higher long run growth levels, (Vickerman, 2000:8). But an approach like this one is not without critiques (Holtz-Eakin, 1993; Holtz- Eakin and Schwartz, 1995; Holtz-Eakin and Lovely, 1996; Lau and Sin, 1997; Izquierdo, 2003) and at several levels: on the formulation of the model structure, variables and parameters, on the significance of the correlations, on the evaluation of the real value of the public infrastructure, etc.. For Izquierdo (2003:13) the results obtained in Spain - and, according to this author, confirmed in other countries, not only show that the elasticities estimated by Aschauer (1989) are too much high, but also that ( ) although significant, the impact of infrastructure investment on productivity and economic growth is therefore not as high as previously thought. Therefore, ( ) the best that can be said with any confidence is that infrastructure investment will have a modest positive contribution on economic growth, but that the more accurately the opportunity costs are measured, the less attractive return infrastructure investment offers than other types of public investment expenditure, especially education and training to enhance human capital, (Vickerman, 2000:8). This means that economic estimation of benefits either are the result or impact stage will always be dependent on which strategic objectives we are targeting and the opportunity costs of that choice. Quantitative cost benefits approaches despite their rigour seem to fall short to support political decisions, although they can be thought as sufficient to support the engagement of private investors. 51

4 Transport and Market Integration For an evaluation of the global impact of the transport in the market integration, we assume that a reduction of the transport costs means, not only the incentive to exportation - and, necessarily, the perspective of an increase of the income, but also the other face of the same coin, e.g. the threat of more competitive imports, as accessibility is indeed a two way road - imposing thus to the (local) industry a reorganization, an increase of efficiency, and a reduction of the production costs. So the process described is absolutely similar to the one verified when reduction - or elimination, of certains barriers between economic spaces occurs. In both cases, the most optimistics forecasts collide with the reality: a reduction of the transport costs transforms each territory in a positive way but leaving it eventually more vulnerable to the exterior. To this respect Vickerman (2000:9) underlines some ( ) important feedback effects in the system : first, it is necessary to take in mind the impact of the increase of the production in the markets - in case that these evidence bottlenecks; and second, the increment of the economic activity by the reduction of the transport costs can lead precisely to contrary effects of those initially desired - the inherent increase of the demand of transport can lead to the congestion of some parts of the network justifying, in turn, the increase of such costs (the effect of traffic inducement (Viegas, 2002) comes in support of this argument) Transport and Endogenous Growth Many of the authors who mention the endogenous growth (Lopes, 1984; Paelinck and Kuiper, 1995; Reigado, 1998; Matos, 2000) admit that certain changes into this level can contribute for the growth of the economy, ( ) rather than a shock to the system which shifts the level upwards but ultimately leads to a return to an exogenously given underlying rate of growth, (Vickerman, 2000:9). So, the investment in infrastructures of transport will have a rebound effect into: the processes of industrial reorganization - through, either the entrance and the exit of companies, or the search of widened markets; the rhythm of transference of the innovation and the technology - following up that of the exchange of information flows; the increment of the factors which, in its set, concur for the competitiveness index. However, a word of caution is also required here since underlying this rational is the presumption that sectors using transport as productive factors are perfectly competitive and thus almost immediately incorporate in price the variation of transport costs, which does not happen always. The real value for the economy of any investment in transport infrastructures can be directly measured ( ) by the willingness to pay for use of the transport system. Thus appraisal of any transport improvement has only to measure accurately the transport demand function and these transport benefits will be a complete and accurate measure of the full economic value, (Vickerman, 2000:10). However, there is more to it. In each industry the willingness to pay for transport varies among the segments and cross subsidization of transportation costs or of other productive factors by transportation costs exists. Calculation of real effects of transport infrastructure is not as straightforward as presented by some authors Spatial Effects Companies Competitiveness Rietveld and Bruinsma (1998:360) argue that ( ) in the regional economic dynamics, transport infrastructure improvements can have different impacts in firms. First, existing firms might grow or decline; second, new firms may emerge; third, infrastructure improvements may influence the relocation decision of existing firms. Other authors (Forkenbrock and 52

5 Foster, 1996; Cairncross, 1997; Banister and Berechman, 2000) argue that transport infrastructures do not represent anymore a so important factor of localization as in the past, due to in one hand the low costs of transport and, on in the other hand, the increasing participation of information flows to the detriment of physical flows. Still others (Leitham, McQuaid and Nelson, 2000; Preston, 2001; Holl, 2001), underline that the current industrial reorganization - based in a competitiveness where the time factor is of capital importance, made the distribution and the production systems more dependent of the transports and, therefore, of the access to such infrastructures, mainly those of high quality standard. For example, Smith and Florida show in 1994 that the Japanese companies of the automobile sector which fixed itselves in the USA elected, as main factor of localization, precisely the access to the highway. To understand the rational at the core of this debate it is necessary to take in account the set of effects through which the transport infrastructures impose themselves the organization of the companies and in the respective space distribution and, therefore, in the standards of development of the regions where they are implemented (Holl, 2004): of the location decision - the choice of the localization is one of the strategic decisions of the companies. The economic approach based on the demand argues that, in general, companies choose a localization from which they can reach the widest possible market. Weber (1929), thinking about imperatives of minimization of the costs, defends that the companies choose a localization according to the relative cost to carry raw materials and manufactured items to a certain (central) market. There are of course other influencing factors, such as the acquisition and the storage of stocks, or taxes and lower costs of installation, cheaper or specialized man power; of the area of market and the level of competitiveness - ( ) a reduction in transport costs can enable firms to increase their competitiveness and to expand their markets, by lowering prices or profitably serving markets at greater distance where they were formerly excluded on cost grounds, (Holl, 2004:538). This can also induce companies to widen the area where they traditionally operate. The emergent reactions being dependent on the company and market maturity degree. Very dynamic and specialised firms and those with potential to exploit economies of scale may be the most likely to benefit from transport improvements by increasing their ability to sell over a larger market area, (Holl, 2004); of the organization of the production and the structure of the supply - not rarely transport is considered as ( ) an input factor in the production process ( ),(Holl, 2004:539); in this particular, a reduction of the transport costs can reflect itself, directly, in the planning of the production. As an example of the substitution effect, Holl (2004:539) underlines the ( ) outsourcing, where lower transport costs can make it economical for the firm to buy-in intermediate inputs that were formerly produced in house ; of the logistic in general, the studies directly related with economic impacts of the infrastructures of transport pay a special attention to the costs. Diamond and Spence developed in the UK, in the year of 1989, a research in the theme of industrial location, concluding that for some companies of this sector the transport costs represented, only, a small ratio of the total devaluating costs. However, ( ) traditional cost estimates do not take into account attributes like flexibility and reliability, nor indirect effects of how increased speed, flexibility and reliability affect the scheduling and organisation of activities ( ), (Holl, 2004:539). 53

6 Transport and Labour Market Holl (2004:540) underlines that ( ) there are potentially important effects from transport improvements regarding the size of the regional labour market area and firm s access to specialised labour skills ( ) ; an interaction that Vickerman (2000:15) verifies in two distinct levels: ( ) first, labour is a major input to all activities and is, in most cases, locationally specific in that it has to be physically present for the activity to take place. Secondly, transport affects labour both as an input to production (commuting), and as an input to other activities (social, leisure, etc.) which constitute the final demand for activities. In a first reaction, the area of work market increases: with the reduction of such costs, the workers can now move themselves more far, at the same (total) cost. This mechanism induces, in general, a bigger competitiveness in the local work market by the forces of other regions making - not rarely, a reduction of the wages and/or an increase of the unemployment. But also it allows the local workers the possibility to reach other markets, in other regions, ( ) which could have the effect of bidding up wages as firms seek to retain staff, (Vickerman, 2000:15). Besides, the negative impacts of such mechanism into the job levels and wages are ambiguous and depend on the specific characteristics of the job and of the man power in each region. In a second reaction, it is expected the appearance of migration (residence speaking) phenomenons: a decreasing of the costs of the commuting movements can transform the region in appraisal more attractive for all of those who, even working outside it, look now to install themselves there. In this particular, also the unexpected increment of the supply of man power can imply, locally, some problems at the level of the wages and/or of the job; counterbalanced however - and eventually, by emigration movements Transport and Real Estate Market The impacts which a reduction of the costs of the transports, in general, and of the commuting movements, in particular, can entail, allows the evidence on the complexity of the underlying phenomenons: any action in that direction origins a set of reactions; which, in turn, interact with the original actions generating new reactions; and thus successively - as in any dynamic system (Rietveld, 1994). This justifies the answers given - and almost in simultaneous, for the work and the housing markets, as a result of the implementation of a new infrastructure, despite its dependency ( ) on the degree of slack in both of these markets which will determine whether prices change rapidly or slowly, (Vickerman, 2000:16). It is largely recognized that the work market cannot be dealt independently from any others mainly that of the housing - besides it appears, nowadays, each time more overlap with the increasing importance imputed to the families where more than one of its elements works externally. On the other hand, it is recognized the close relationship between the housing market and the infrastructures of transport - evidencing the direct advantages which this market gathers from there, perhaps even more than from that one of work. In this context, it is not difficult to understand the correlation between both markets, neither the advantages / disadvantages that balance / unbalance situations that can be produced between both. According to Vickerman (2000), even it may happen that in the long run the restrictions to the housing market, more than the migratory movements, transform itselves into the main drivers for the commuting movements. In the opinion of Vickerman (2000) the UK study by Cameron and Muellbauer, in 1998, underlines the influence that housing market has in the migratory movements between regions and provides evidence that ( ) differential labour market effects in contiguous regions lead to commuting being substituted for migration, and for nearby regions there is a stronger labour market effect on commuting decisions and a 54

7 stronger housing market effect on migration decisions, (Vickerman, 2000:16). Furthermore, this author (Vickerman, 2000:17) suggests that ( ) from the early work of von Thünen (1826) this trade-off approach shows how the increased costs of access as one moves further from a market centre lead to a reduction in the price which potential users will bid for the use of land at a particular location. In equilibrium the total value of land rents in a market will equal the sum of all the transport costs such that there is a clear link between the quality of an area s transport and the local price land, which represents an important insight for the valuation of soils. 2. NATIONAL AIRPORTS PERFORMANCE AND REGIONAL DEVELOPMENT 2.1. Introduction The Principal Network of Portuguese Airports consists of those international aeronautical infrastructures which most contribute to air transport figures: Lisbon (Portela), Oporto (Francisco Sá Caneiro), Faro, Madeira, Porto Santo, Ponta Delgada (John Paul II), Santa Maria and Lajes. In turn, the Secondary Network consists of those airports and aerodromes, smaller and therefore which less contribute to those figures. To characterize the Air Transport in Portugal we divided our research into the following three steps: first, we analyzed data gathered by INAC, between 1950 and 2000, on aircraft movements (landings and take-offs) passengers (embarking and disembarking) cargo and mail (embarking and disembarking) in all the aeronautical infrastructures under the jurisdiction of ANA (Lisbon, Faro, Oporto, Ponta Delgada, Santa Maria, Horta and Flores) and ANAM (Madeira and Porto Santo); second, we analyzed the same data gathered simultaneously by INAC and NAV, between 2001 and 2005, not only in all those mentioned aeronautical infrastructures but also in Municipal Aerodromes of Cascais and Bragança, Aerodromes of Corvo, Graciosa and São Jorge, and Airport of Pico; third, and with such data collected from 1950 to 2005, we forecasted the total of aircraft movements, passengers, cargo and mail for a 10 years period, e.g. from 2006 till Air Transport between As mentioned above we started to analyse data collected by INAC between 1950 and 2000, concerning the total of aircraft movements (landings, followed by take offs) passengers (individuals transported - excluding crew members and passengers in transit) cargo (goods transported - including express freight and diplomatic bags, but excluding equipment for flight completion, supplies, mail in general and luggage) and mail (all sealed bags sent by CTT or any other authorized dealer, whatever its content) on all the aeronautical infrastructures under the jurisdiction of ANA and ANAM, (Miguel and Silva, 2005). Figure 1 shows that the total of aircraft movements increased from 15,655 in 1950 to 227,137 in 2000, e.g times; figure 2 shows that the total of passengers in the same period increased times, e.g. from 94,135 to 19,650,520; figure 3 shows that the total of cargo increased from 607 tons in 1950 to 163,404 tons in 2000, e.g times; and figure 4 shows that the total of mail increased 63.6 times in the same period, e.g. from 297 tons to 18,873 tons. For each item the most remarkable increase appeared in % for the total (tons) of mail, in % for the total of aircraft movements, and in % for the total of passengers and 45.0% for the total (tons) of cargo. 55

8 Figure 1: Total of Aircraft Movements, Figure 2: Total of Passengers, Figure 3: Total (Tons) of Cargo, Figure 4: Total (Tons) of Mail, During this period (1950 to 2000) there were some values which particularity we want to underline. Thus, so figure 1 shows that in the beginning of the 60s there was a slight decline of the aircraft movements due to the start of the Colonial War (in 1961); however, the same conflict probably gave an important contribution to the increase of air transport figures in later years. Both figures 1 and 2 show the increase of aircraft movements and passengers until 56

9 the year of April Revolution, date from which those indicators dropped again. Since 1975 air transport figures grew again due to the ongoing process of decolonization too. Surely in the 80s air transport benefited from the exploitation of new markets offered by the accession of Portugal to the European Union (1986). In the 90s it should be noted that the fruition of the Expo'98 in Lisbon led to increases of 14.3% of the total of aircraft movements and 12.4% of the total of passengers. It s also necessary to emphasize that the development of the tourism industry is assuming each year a growing importance for the improvement of air transport performance. In fact this is one of the strongest sectors of the Portuguese economy in general, and of some regional economies too. Really, Portugal has enjoyed either from the abundance of natural resources or the excellence of it geographical location to attract even more tourists - as Faro and Funchal Airports are (just) two examples. In turn, cargo and mail transported by air have not been growing so regularly, as evidenced by some oscillations in both figures 3 and 4 - mainly concerning the cargo case. In fact, air transport is not the main responsible in Portugal for either imports or exports of goods. One expects that not only the perception of air mode competitive advantages but also the synergies resulting from the inclusion in multimodal networks may contribute to consolidate the image and importance of air freight transport in the global economy markets The Case for Period Afterwards we analysed data collected simultaneously by INAC and NAV, between 2001 and 2005, concerning the total of aircraft movements, passengers and cargo not only on all the aeronautical infrastructures under the jurisdiction of ANA and ANAM mentioned above, but also in Municipal Aerodromes of Cascais and Bragança, Aerodromes of Corvo, Graciosa and São Jorge, and Airport of Pico, (Miguel and Silva, 2005). Figure 5 shows that the total of aircraft movements, despite a slight slowdown in 2002 ( ), increased from 253,838 in 2001 to 322,909 in 2005, e.g. 27.2%; figure 6 shows that the total of passengers, although a decrease in 2002 ( ), increased from 20,658,762 in 2001 to 23,707,784 in 2005, e.g. 14.8%; and figure 7 shows that the total of cargo fell from 139,386,818 tons in 2001 to 126,422,303 tons in 2003 (-10.3%), but increased subsequently reaching 136,012,950 tons in 2005 (7.6%) - however, this means that on the whole ( ) the total of cargo fell from 139,386,818 tons to 136,012,950 tons (-2.5%). Figure 5: Total of Aircraft Movements, Figure 6: Total of Passengers,

10 Figura 7: Total (Tons) of Cargo, Possible Scenarios between Finally, and using data available from 1950 till 2005, we forecasted the total of aircraft movements, passengers, cargo and mail for a 10 years period, e.g. from 2006 till 2015, (Miguel and Silva, 2005). There are several techniques for data forecast. However, but mainly because of the simplicity of the method, we used the Analysis Tools Application for Microsoft Office Excel under Windows XP to submit data concerning the total of aircraft movements, passengers, cargo and mail, between 1950 and 2005, to several trend lines: linear, 2nd order polynomial and exponential. To validate the line or the curve with the best fit thus obtained, we used the variance explained proportion, e.g. the (highest) value of R 2 (table 1). Table 1: Values of R 2 Aircraft Movements Passengers Cargo Mail Linear 0,8516 0,8780 0,9432 0,9501 2nd Degree Polynomial 0,9669 0,9896 0,9551 0,9763 Exponential 0,9769 0,9258 0,8681 0,9159 According with the values of R 2 shown in table 1, the trend lines we got for the total of aircraft movements, passengers, cargo and mail, between 1950 and 2005, are those represented in figures 8, 9, 10 and 11. Figure 8: Exponential Trend Line for the Evolution of the Total of Aircraft Movements,

11 Figure 9: 2nd Degree Polynomial Trend Line for the Evolution of the Total of Passengers, Figure 10: 2nd Degree Polynomial Trend Line for the Evolution of the Total (tons) of Cargo, Figure 11: 2nd Degree Polynomial Trend Line for the Evolution of the Total (tons) of Mail, However, we verified experimentally that some values forecasted through equations previously indicated the cases of the Evolution of the Total of Passengers (trend line 2 nd degree polynomial) and of the Evolution of the Total (tons) of Mail (trend line 2 nd degree polynomial), were not compatible with the reality; for example, in 2006 the figures so forecasted were - 612,903,086 (negative) and 4,300,280 tons (very high) - respectively. 59

12 In the case of the Total of Passengers, and according to the (decreasing) values of R 2 in table 1, we tried one after another firstly the exponential and secondly the linear trend lines - without any improvement too. Therefore, in this particular we decided to use the FORECAST function of the Analysis Tools Application for Microsoft Office Excel under Windows XP, with data set covering the period between 1995 and In the case of the Total (tons) of Mail, and also according to the (decreasing) values of R 2 in table 1, we thought about to try one after another firstly the linear and secondly the exponential trend lines. However, as we obtained just for the first mentioned essay a set of acceptable results, in this particular we choose precisely the linear trend line - as shown in figure 12. Figure 12: Linear Trend Line for the Evolution of the Total (tons) of Mail, In summary, the equations (techniques) used to forecast values of the total of aircraft movements, passengers, cargo and mail, between 2006 and 2015, were the following: Aircraft Movements: y = 2E-43e (0,0554x) (R 2 = 0,9769) Passengers: FORECAST (Analysis Tools, Microsoft Office Excel, Win XP) Cargo: y = 24,608x x+9E+07 (R 2 = 0,9551) Mail: y = 365,61x (R 2 = 0,9501) Thus, so we built not only table 3 correspondent to the Forecast of the Total of Aircraft Movements, Passengers, Cargo and Mail, from 2006 to 2015, but also figures 13, 14, 15 and 16 correspondents (in that order) to the Total of Aircraft Movements, Passengers, Cargo and Mail, Effectives and Forecasted, from 1950 till Table 3: Forecast of the Total of Aircraft Movements, Passengers, Cargo (tons) and Mail (tons), Year Aircraft Movements Passengers Cargo (tons) Mail (tons)

13 Figure 13: Total of Aircraft Movements, Efectives and Forecasted, Figure 14: Total of Passengers, Effectives and Forecasted, Figure 15: Total (Tons) of Cargo, Effectives and Forecasted, Figure 16: Total (Tons) of Mail, Effectives and Forecasted, AIR TRANSPORT SERVICES AND NEW ECONOMY ACTIVITIES 3.1. Introduction Perhaps a good criterion for measuring the success of an air transport system should be the ability to use air travel as a competitive advantage in a global economy, (Button and Taylor, 2000). 61

14 On one hand, air transport is an important issue for the success of tourism in a lot of regions, mainly for two reasons: changes in technology affect both size and speed of aircrafts, and the real cost of travel fell through low cost packages and tourist discounts. Thus, so ( ) as market demand is highly elastic at the lower price level, this has led to a large increase in demand ( ), (Cole, 1998:430). On the other hand, air transport is also an important input for the development of non-leisure-based industries all over the world, mainly for those which promote interpersonal linkages. In fact, not only passenger air transport is crucial to some of those industries, but also many of ( ) such firms also rely on a range of air freight services to provide quality service to customers and to operate just-in-time production management, (Button and Taylor, 2000:209) New Economy and Air Services Air transport is commonly used by all categories of business, but it became particularly important for those categories engaged in what Button and Taylor (2000) call new economy activities, e.g., business categories requiring for those companies involved easy inter-personal contacts only possible with high-quality transport services. Thus, so these authors listed 125 new activities in the following 11 groups: IT Software, IT Services, Telecom Services, Advanced Materials, Aerospace, Biotechnology, Energy and Environment, Electronics, Transportation, Management and Services, and Technology Industrial Manufacturing. The impact evaluation of these new services over the territories is not an easy task, (Barros, 2008; Halpern and Pagliary, 2008; Tapiador et al, 2008) mainly for two reasons: services themselves may interact in several combinations, and territories themselves may react in several ways too accordingly to its own endogenous characteristics, (Cole, 1998). However, Button and Taylor (2000) consider these spatial and non-spatial impacts in terms of four mainly effects: Primary effects: these are the direct and immediate benefits to a region for the creation of new services and / or the expansion of others still existing. They may include the need for some physical improvements over the local air infrastructure but they may bring some local benefits too on account of the wages and incomes the workers and companies consequently spend in the region. Although these are gains to the local economy, they are of short term and usually limited in their order of magnitude; Secondary effects: these are the longer term effects. Usually they are linked with the local economic benefits of the air service operations mainly due to the employment involved directly with handling the aircraft, passengers and cargo. There are also very important indirect secondary effects over the local economy concerning the on-going income flow of air service operations in terms of employment and income in general and taxation revenue for local authorities in particular. The secondary effects size over the territories depends upon airport operations volume and nature; Tertiary effects: these are the effects over the local economy resultant of air transport services at the disposal of both, individuals and companies. Usually, the development of business activities require the use of transportation in general, but those engaged with the new economy are surely involved with the air mode in particular, because they need easy inter-personal contacts only possible with high-quality transport services. Usually, these companies sets act as the basis for local economic development, mainly for two reasons: they present a considerable geographical 62

15 mobility, and they belong to an important growth sector; Perpetuity effects: as Aschauer (1989, 1990) underlines there are empirical evidences that infrastructure investment reflects itself into the regional economy, by raising the activity level and stimulating the productivity, thus acting as a catalyst for higher economic growth in the appraisal area. Also some growth theories, like the endogenous one, sustain that the regional economic growth, once started, becomes self-sustaining and may inclusively accelerate. Thus, so the air transport services development acting as a kick-start mechanism may set in progress larger and longer term crossed regional economic development processes of wide scope and density, leading no doubt to profitable scale economies. Button and Taylor (2000) mention that a few empirical works has been conducted on the linkages between the new economy activities and air transport services, much of them involving interviews with local business agents In general, the associated results underline the eventual existence of those services in the vicinity as an important decision factor in the localization of the companies. However, that approach based on interviews may experiment some practical difficulties, mainly because many respondents often fell themselves free to prior support the idea of a positive link between the new economy activities and air transport services as they have no direct costs to bear if these services appear or are expanded, but only benefits. An alternative is to use numerical methods and to focus purely on the more direct effects of air services on a local economy, namely those associated with the airline service per se and the multiplier implications of this for the local economy, (Button and Taylor, 2000:215). In conclusion, some authors reveals unanimous in stating that infrastructures are potentially influent in the economic performance of the regions, mainly because the opportunities for ( ) expanding the use of existing resources (labour, capital, etc.), attracting additional resources ( ), and making ( ) economies more productive, (Fox and Porca, 2001:104). However, Izquierdo (1997:49) underlines that ( ) las infraestruturas ( ) no generan directamente, por sí mismas, desarrollo económico y en concreto desarrollo regional siendo necesario para ello contemplarlas como un elemento del sistema territorial, dentro del contexto más amplio de la ordenación del territorio. Also the EIB (European Investment Bank) argues that ( ) itself, it has only a marginal multiplier effect, as infrastructure use does not contribute significantly either towards increasing the national product, the creation of permanent jobs or the transfer of technology, nor does it have an impact as a purchaser on the other regional industries or services. ( ) [I]nfrastructure may, though, act as a catalyst in promoting development, (EIB, 1998:9). 4. CONCLUSIONS For a long time that attention is paid to the economic impact of transport systems over the regional development, air infrastructures in particular. In general, the regional impacts generated by the existence of an infrastructure, such as an airport, will be greater the more services it offers and the wider the range of destinations it allows. However, this relationship may be non-linear, mainly because from a commercial point of view airlines will provide prior flights to the most attractive destinations than to the ones less important, (Silva, 2005). The size and the endogenous characteristics are important too, as new economy activities will be attracted easier to larger regions with a significant population amount and an important 63

16 market area than to smaller ones sparsely populated and with a weak entrepreneurship dynamic. Indeed, those territories not only offer a wider potentially suitable labor market but also provide a larger one for goods and services produced. So the overall conclusion is that, within limits, air transport stimulates further growth in the economy but it is also fostered by the dimension of the hinterland itself, which adds to airport management a requirement of strategic marketing, (Silva, 2005). REFERENCES Aschauer, D. (1989) Is Public Expenditure Productive?, Journal of Monetary Economics, 23, Aschauer, D. (1990) Why Infrastructure is Important?, in A. Munnell (ed), Is there a Shortfall in Public Capital Investment?, Conference Series No 34, Boston, Federal Reserve Bank of Boston. Barros, C. (2008) Technical Efficiency of UK Airports, Journal of Air Transport Management, 14, Banister, D. and J. Berechman (2000) Transport Investment and Economic Development, London, UCL Press. Button, K. and S. Taylor (2000) International Air Transportation and Economic Development, Journal of Air Transport Management, 6, Cairncross, F. (1997) The Death of the Distance. How the Communications Revolution Will Change Our Lives, Harvard, Harvard Business School Press. Cole, S. (1998) Applied Transport Economics. Policy, Management and Decision Making (2 nd Edition), London, Kogan Page Limited. Diamond, D. and N. Spence (1989) Infrastructure and Industrial Costs in British Industry, London, HMSO. EIB (1998) Contribution of Major Road and Rail Infrastructure Projects to Regional Development, Luxembourg, EIB. Forkenbrock, D. and N. Foster (1996) Highway and Business Location Decisions, Economic Development Quaterly, 10, 3, Fox, W. and S. Porca (2001) Investing in Rural Infrastructure, International Regional Science Review, 24, 1, Halpern, N. and R. Pagliary (2007) Governance Structures and the Market Orientation of Airports in Europe s Peripheral Areas, Journal of Air Transport Management, 13, Holl, A. (2001) Transport Infrastructure in Lagging European Regions, Ph.D. Dissertation, Sheffield, University of Sheffield. Holl, A. (2004) The Role in Firm s Spatial Organization: Evidence from the Spanish Food Processing Industry, European Planning Studies, 12, 4, Holtz-Eakin, D. (1993) State Specific Estimates of State and Local Government Capital, Regional Science and Urban Economics, 23, Holtz-Eakin, D. and A. Schwartz (1995) Infrastructure in a Structural Model of Economic Growth, Regional Science and Urban Economics, 25, Holtz-Eakin, D. and M. Lovely (1996) Scale Economies, Returns to Variety, and the Productivity of Public Infrastructure, Regional Science and Urban Economics, 26, Izquierdo, R. (1997) Gestión y Financiación de las Infraestruturas del Transporte Terrestre, Madrid, Asociación Española de la Carretera. Izquierdo, R. (2003) Economic Impacts of Infrastructure Investment: the Spanish Infrastructure Plan , in ECMT (ed), 16 th International Symposium on Theory and Practice in Transport Economics, Budapest, ECMT. Lau, S. and C. Sin (1997) Public Infrastructure and Economic Growth: Time Series Properties and Evidence, Economic Record, 73, Leitham, S., R. McQuaid and J. Nelson (2000) The Influence of Transport on Industrial Location Choice: a Stated Preference Experiment, Transportation Research A, 34, Lopes, A. (1984) Desenvolvimento Regional. Problemática, Teoria, Modelos, Segunda Edição, Lisboa, Fundação Calouste Gulbenkian. Matos, F. (2000) Ordenamento do Território e Desenvolvimento Regional, Tese de Doutoramento, Covilhã, Universidade da Beira Interior. Miguel, R. and J. Silva (2006) Transporte Aéreo em Portugal, Trabalho Final de Licenciatura em Engenharia Aeronáutica, Covilhã, Universidade da Beira Interior, Departamento de Ciências Aeroespaciais. Paelinck, J. and J. Kuiper (1995) Regional Development in Portugal, in Universidade da Beira Interior e Centro de Estudos e Desenvolvimento Regional (eds), Seminário Investigação, Inovação e Desenvolvimento Transfronteiriço III, Covilhã, UBI. 64

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