FACTSHEET
Economic Benefits of Philippines Aviation
The International Air Transport Association (IATA) had commission Oxford Economics to carry out a study of 54 countries to better quantify the benefits of aviation at the national level. These are the findings for the Philippines.
· Contribution to Philippine GDP - The aviation sector contributes PHP 35.5 billion or 0.4% of the Philippine GDP. This is done through the output of airlines, airports, ground services, their supply chains and the spending of those employed in the sector and the supply chain.
o Additional contribution to tourism: When taking into account aviation’s support for tourism, it raises the overall contribution to PHP 192.2 billion or 2.4% of GDP.
· Major employer of highly productive jobs in Philippines - The aviation sector supports 123 thousand jobs in the Philippines. This includes jobs at airlines, airports, ground services, their supply chains and the jobs created as a result of the spending of those employed in the sector and its supply chain. The study found that in the Philippines the average air transport services employee was approximately 3.8 times more productive compared to the Philippine average.
o Additional contribution to tourism: There are a further 751 thousand people employed in the tourism industry and a further 2.75 million jobs in the tourism supply chain. In addition, there were 794 thousand people that were supported through the household spending of those employed in the tourism industry and its supply chain.
· Philippines tourism relies on aviation – Over 98% of foreign visitors arrived in the Philippines by air. Among the 54 countries included in the study, the Philippines ranks among the highest for reliance on air transport for its foreign visitor arrivals.
· Contribution to public finances – Aviation makes a substantial contribution to public finance with a total tax attributed by the aviation sector’s economic footprint of over PHP26 billion.
· Generates significant consumer benefits and facilitates trade and investment – From visiting family and friends to shipping high value products, 27 million passengers and 596,000 tonnes of freight travel to, from and within the Philippines. The value placed on these services is likely to significantly exceed the expenditure. Oxford Economics estimates that the benefit to travelers is worth around PHP 575 billion and the estimated benefit to shippers is about PHP 34 billion.
Excessive Taxation
Excessive tax burdens on air transport will limit the full potential of aviation’s contribution to the Philippine economy. The impact of taxation on aviation would most adversely impact leisure travelers given their high sensitivity to changes in price. The removal of taxes could create “win-win” opportunities by boosting economic growth through promoting air transport.
o Elimination of both the Common Carrier Tax (CCT) and the Gross Philippine Billings (GPB) would lower the total cost of international passenger travel in the Philippine market by 2.5%.
o This would increase the number of international arrivals and departure in the Philippines by 1.9%.
o Removing the CCT and the GPB taxes would mean a potential gain of between US$38-78 million for the wider Philippine economy from increased tourism. Lower cargo transport costs could give a boost to export earnings in the order of US$1 billion.
The way forward
The Philippine authorities should recognize aviation is a key enabler of travel and tourism, and contributes substantially to the Philippine economy and employment. The government should institute policies that support aviation by reducing the burden of taxes and charges imposed by various government agencies.
Failure to address the current myopic policies will see neighboring countries having a competitive growth advantage with negative consequences for the Philippines.