Airport Operators Association plucks benefits out of the ether


The Airport Operators Association has just whacked out a report claiming that the UK would lose £30 billion a year if we don't sign a global aviation deal at Copenhagen, as well as putting 700,000 jobs at risk. It seems maths is not the airline industry's strongest point.

The report concludes that the UK aviation industry contributes £18.4 billion to the UK economy, and employs 234,000 people. Now I'm not the best at sums, but £30 billion doesn't equal £18.4 billion, and 700,000 is not the same as 234,000. So where's the extra jobs and cash coming from?

This is all a bit complicated, so bear with me while I try and explain my confusion.

  1. The industry is currently supposed to be worth £18.4 billion and employing 234,000 people. These figures are pretty huge, and have historically been arrived at using all sorts of fiscal gymnastics, such as including anyone employed near an airport doing things vaguely related to the industry as directly employed by them. But let's take the figures at face value for a second.
  2. No global deal means we lose £30 billion and 700,000 jobs - figures far greater than the industry is supposed to be worth to the economy. These figures are forecasts: i.e. they are numbers made by projecting current earnings and employment levels into the future.
  3. They have to do this calculation twice: once for 'what the industry would be worth with a deal' and once for 'what the industry would be worth without a deal'. In the former, the rate of annual growth must be higher: i.e. there must be more planes and more airlines making more profit with a global deal than without (otherwise the global deal would lose the industry money).
  4. Both scenarios assume a particular rate of growth. This rate of growth is basically the multiplier you apply to the present figure to work out what the given value for the industry's output in year 20XX will be. Both growth rates, and I cannot stress this enough, are chosen by the consultants (normally based on past trends) and cannot account for real life factors, like the massive recession we're currently in, or the impact of CO2 limits on airlines.
  5. The industry would need to be worth substantially more than £30 billion at this arbitrary point in the future from which they are measuring. It has to be worth more than £30 billion because otherwise there wouldn't be an industry left - which is too far-fetched for even a report of this poor quality.
  6. Both valuations are fictional because they are entirely based on forecasts. The industry might be worth X in the future, and it might also be worth Y, but neither scenario is guaranteed.
  7. In other words, the report's authors have picked two numbers from the ether, declared one to be the value of the industry without a global deal, and one to be the value of the industry without a deal. They've then announced the difference between the two as the impact of the deal on the UK economy. (Ditto for job creation.)

This is a very long-winded way of saying that this report is a pile of nonsense, littered with completely insane predictions and madcapped ideas of what the future will look like. Back of a fag packet doesn't really cut it: whichever analyst cobbled this together should be held up as a shining example of how economics doesn't work, and barred from ever writing a economic analysis ever again.

I should also point out that the industry enjoys a £10 billion subsidy because it pays no fuel duty or VAT, and that we have a £20 billion tourism deficit. So an industry worth £18.4 billion (if we take those vested intrests' word for it) is already costing us £30 billion each year - global deal, or no deal.