Philippine air transportation: Impact and challenges

• Main Authors: Yu, Krista Danielle S., Castillo, Paulynne J., Rufino, Cesar B., Rapada, Maria Zunally E., Tullao, Tereso S., Jr.
• Format: text
• Published: Animo Repository 2019
• Subjects: Aeronautics, Commercial—Philippines; Aeronautics, Commercial—Economic aspects—Philippines; Transportation
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/11052
• Institution: De La Salle University

With the Philippines’ archipelagic geography, air transport is the most efficient way to connect its islands and boost economic activities. Using the latest Philippine input-output tables (National Statistical Coordination Board, 2006; Philippine Statistics Authority, 2014, 2017), the air transport sector proves to be the leading driver of economic activities. Ranking first relative to all other sectors in the economy, in terms of backward linkages, indicates its general dependence on the rest of the economy for inputs to the services that it provides.Significant links of the air transportation sector have been traced to various economic sectors going as far as three steps in the production chain, although its forward linkages are not as strong. To be more specific on its backward linkages, an increase in demand for air transportation sector’s output will have a direct and positive effect on the construction sector, land transportation sector, other transportation sector, communication and storage sector, finance sector, and other private services sector. In addition, an increase in demand for the sector’s output will have a positive but an indirect effect (two-step demand-pull effect) on the manufacturing sector and trade sector. A three-step demand-pull effect has been tracked on the agriculture, fishery, and forestry sector; mining and quarrying sector; electricity gas and water sector; and tourist buses and cars sector. These sectors benefit from demand-pull indirect effects that pass through the primary sectors that are directly linked with the air transportation sector. Meanwhile, a price increase in the output of air transportation sector will have a direct cost-push effect on the land transportation sector, other private services sector, and government services sector; but a two-step cost-push effects will be experienced in the manufacturing sector and the finance sector.In addition, it is the top contributor of economic output resulting from the same level of investment made in other sectors as evidenced by its output multiplier of 2.4621 which accounts for the direct and indirect effects to the Philippine economy. Furthermore, its activities generate the highest amount of net indirect tax revenue for the government with an indirect tax multiplier of 0.0842. In terms of job creation, there are two jobs created for every million pesos invested in the air transportation industry. The capital-intensive nature of the industry ensures that billions will pour into the country once it is liberalized, thereby promising thousands of jobs for the Filipino people.