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Low cost air travel and regional co-operation

Low cost air travel and regional co-operation. Low cost air travel – Market growth. Share of European air travel market. 38 % of the inter-European/British market 500 destinations in Europe (+ 300% 2002-2004) 100% increase in Sweden 2002-2003. (est.). Low cost air travel – Profitability.

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Low cost air travel and regional co-operation

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  1. Low cost air travel and regional co-operation

  2. Low cost air travel – Market growth Share of European air travel market • 38 % of the inter-European/British market • 500 destinations in Europe(+ 300% 2002-2004) • 100% increase in Sweden 2002-2003 (est.)

  3. Low cost air travel – Profitability Ryanair easyJet

  4. Business concept – LCC demands • Low charges level at airports • Simple charge structure • Establishment grant of some sort Background - motives • 10-25% expenditure • Risk with new establishments. Who takes those risks? Opportunities for both parties. Establishment grant - shared responsibility • Demands vary between companies

  5. Catchment area • Airport role in the region • Passenger accessibility • Assessed passenger numbers • Proximity to large city Leads to high cabin factor

  6. Passenger volumes • LCC account for 15% of passenger volumes at Malmö-Sturup Aiport • Attractive to Danish travellers/expanding airport catchment area • Increase in commercial airport revenues

  7. Socio economic analyses ACI Europe – Economic Impact Study Kit • Direct effects • Indirect effects • Cause effects • Dynamic effects Effects on employment and tax revenues Källa: ACI Europe/York Consulting (2000). Creating employment and prosperity in Europe: An economic impact study kit. www.aci-europe.org

  8. Direct effects • Generated by the operations at the airport • Rule of thumb: 1,000 employees per million PAX MMX • 2003: 1.75 million PAX, 1,400 employees  Ratio: 0.8 employees per 1,000 PAX

  9. Indirect/cause effects • Generated by the operations who ”serve” the airport • Generated by those directly or indirectly employed • Multiplication effect – varies between 1.3 and 4.0 uncalibrated average 2.1 • MMX: multiplication effect between 1.3 and 2.1 Indirect and cause effects:400 – 1,500 employed

  10. Dynamic effects Generated by attractive, retaining and expansivie operations MMX • Proximity to Kastrup reduces effect • Inregias assessment from August 2004 • 20 % of the direct/indirect employment Dynamic effects: 400 – 600 employed

  11. Total effect Result of direct, indirect, cause and dynamic effects 2,200 – 3,500 employed 0.8 % - 1.3 % of those employed in the region Tax revenues between 175 and 280 M SEK

  12. Importance of international tourism Economic effect of tourists flying to MMX Calculations based on information from: • Ryanair, London-Stansted to MMX • British overnight accommodation in Malmö and Skåne • SCB’s consumer survey 2001-2003 • SCB’s salary statistics • Own calculations

  13. British overnight accommodation Overnight hotel accommodation in Malmö (1000’s) 35 30,5 30,3 30,4 30 25 24,4 24,4 23,6 20 18,4 From GB 15 13,2 12,4 10,9 10 8,6 5 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

  14. Tourism – Economic effects • Spend between 1,000 and 1,500 SEK per person and day • Average length of stay 4 days Regional total turnover 48 to 72 M SEK 45 to 70 job vacancies

  15. 1 Ryanair route 5 Ryanair routes 10 Ryanair routes Capacity/year 200 000 1 000 000 2 000 000 Cabin factor 0,85 0,85 0,85 Increased number of passengers 170 000 850 000 1 700 000 Total number of job vacancies 212 1061 2122 Increased tourist turnover 48 000 000 SEK 24 000 000 SEK 480 000 SEK Tourism employment 45 227 454 Tax revenue 16 930 000 SEK 84 651 000 SEK 169 303 000 SEK Economic effect of new airline routes

  16. Cause - Effect - Co-operation Visibility Accessibility Desirability Visibility: potential visitors are familiar with the region Desirability: wide regional choice Accessibility: simple and easy travelling within the region

  17. Potential forms of co-operation • Regional financing or subsidies • Nyköpings Municipality • Girona/Catalunya • Co-operation and joint projects • Strengthen existing co-operation • Suggested co-operation and projects

  18. Regional financing Neither interest nor understanding from interested parties • Lack of knowledge • Political and legal restrictions • Limited economic resources Increase knowledge through communication and co-operation. Use direct information such as employment estimates!

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