Subsidies in Aviation

Abstract

Abstract:Relatively little attention has been paid to the existence of subsidies in aviation. As the sector's importance for economic development is often highlighted, this paper seeks to provide a conceptual overview of the various forms of subsidies in aviation, as a contribution to a more holistic understanding of economic interrelationships. Based on a purposive sampling strategy, existing forms of subsidies are identified and categorized along the value chain. Focus is on industrialized countries, for which more information is available. Results indicate that significant subsidies are extended to manufacturers, infrastructure providers and airlines. These contribute to global economic growth related to aviation, but they also influence capacity in global aviation markets, strengthen the market position of individual airlines, and create conflicts between airlines and the countries they are based in. While the actual scale of subsidies cannot be determined within the scope of this paper, it provides a discussion of options to empirically assess the effects of aviation subsidies on market outcomes. Finally, general conclusions regarding the impact of subsidies on the overall sustainability of the air transport sector are drawn: These include rapidly growing capacity in the aviation system, economic vulnerabilities, and negative climate change related impacts. Results call for a better understanding of the distribution, character and implications of subsidies.

Overtourism, optimisation, and destination performance indicators: a case study of activities in Fjord Norway

“…Last, shorter stays incur a cost that should be considered. For instance, more arrivals require additional transport infrastructure, which is usually subsidised (G€ ossling, Fichert, & Forsyth, 2017), or additional staff, for instance to handle a greater number of room changes and cleaning. Long-distance visitors, if spending more time in Norway, may shorten their LOS in other destinations, which will be unfavourable for these destinations.…”

Short‐run impact of the flight departure tax on air travel

“…Despite the threat of increased CO 2 emissions and global warming, airline ticket prices do not reflect such negative external effects (Duval, ; Dwyer, ). Instead, air travel is exempted from VAT and tax on aviation fuel (Gössling, Fichert, & Forsyth, ), and flight prices have declined since the deregulation of the European flight market that began in the late 1980s.…”

Development and implementation of an emission optimization model for passenger flight bookings

“…A major reason that flying is "cheap" is that the airlines pay very little towards their emissions of greenhouse gases, due to a wide range of subsidies. For example, a motorist pays more than 10 times as much for the emissions from their car [13,15]. A policy instrument such as a carbon dioxide tax covering airline would need to be introduced, but this requires international agreement which could be delayed until after 2020.…”

“…Compared with driving a car, airlines pay just 1/10th of their cost in emissions, i.e., they do not pay any tax on aviation fuel [13,14]. Furthermore, a wide range of other subsidies are also used, including grants (research and development, exports, investments, loss coverage), equity infusions, loans and loan guarantees, public service obligations, hidden subsidies (reduced infrastructure fees, cross-subsidization, monopoly rights) [15].…”