SE Lithuanian Airports: what is seen as the result of our operations is merely the tip of the iceberg

What is the real impact of transport on Lithuanian economy: 86, 205 or 869 million euros? The role of aviation sector in the context of national economy is underestimated. Often only the assessment of direct impact is taken into account. Namely, the added value and jobs generated by airports, airlines and companies operating in airports is estimated. However, in the economy two plus two seldom equals four. Thus, straightforward 'accounting' often leads to misguided results.

'If we wish to detect the real impact of airport operations on the economy, we must evaluate both, direct and indirect impact thereof. Even this, however, is merely the tip of the iceberg compared to the degree of the economic value gained by the state. One of the main values that we are striving to create is the increased accessibility of the country — so that we were visible and would attract more tourists. It is indeed a difficult and complex task since our communication options are limited", said Gediminas Almantas, CEO at SE Lithuanian Airports.

In comparison to our closest neighbours Lithuania has a great potential in becoming a centre of air transport. Total impact of air transport sector on Lithuanian GDP is 2.5 percent, while in Latvia it reaches 3.3 percent. Clearly, Latvia is a winner in this competition.

According to Žygimantas Mauricas, senior economist at Nordea bank, the impact of air transport sector in Estonia barely reaches up to 2.2 percent of GDP; however, Estonia has a reasonable excuse – Finland. 'Estonia is constantly visited by Finnish tourists (as much as 44 percent of Estonian income from tourism export services come from Finland), on the other hand, Tallinn airport can hardly compete with Helsinki, thus, Estonian air transport sector is forced, in a way, to stay in the shadow of Finland'', said Mr. Mauricas.

However, in the region Lithuania does not have any strong competition except Latvia with Riga airport which steers away our potential tourism income. It is no surprise that direct impact of tourism sector alone in Latvia reaches 3.1 percent, while in Lithuania — barely comes up to 1.9 percent of GDP. Therefore, if Lithuania wishes to fully benefit from the present tourism infrastructure, it has to be more like Riga, or better yet, Helsinki, and become a regional transport centre so that air transport impact on the economy overpasses its 2.5 percent and Latvian 3.3 percent and soars up to the level of Finland — 4.2 percent.

Additional information

Air transport: indirect impact. Direct economic impact of air transport sector in Lithuania in 2013 reached up to 86 million euros (or, barely 0.25 percent GDP), however, including the indirect impact (72 million euros), the total impact constituted 158 million euros (0.46 percent GDP). In addition, air transport sector employees' salary significantly exceeds the national average. According to SoDra (The State Social Insurance Fund Board), flight operators and aircraft pilots earn the most in Lithuania with their average salaries being 2470 and 2400 euros, accordingly. People of this profession are not bound to Lithuanian soil and thus, having such a universal education, they are part of the world-wide labour market. If these people failed to find employment in the Lithuanian air transport sector, they would be forced to emigrate or seek less-paid jobs which in turn would cause an additional blow to the Lithuanian economy. This is the so-called induced impact and is often included into impact assessment studies. In the case of Lithuania, said impact reaches up to 47 million euros annually, thus, the total of impacts combined soars up to 205 million euros (0.6 percent GDP).

Air transport: wider economic benefit. Nonetheless, 205 million euros is still only the tip of the iceberg. When assessing the impact of air transport sector on the economy it is important to go beyond assessing direct impact of said sector and other sectors participating in the supply chain. The air transport sector is a part of the infrastructure and its function is to carry people and cargo to the country. Without the transport there are no passengers or cargo. Without these the country loses income from tourism and trade. In Lithuania the wider economic development of air transport reaches 665 million euros (1.9 percent GDP). The total air transport impact (direct, indirect and induced effect and wider economic benefit combined) constitutes 870 million euros (2.5 percent GDP).