1. The Chicken and the Egg: Tourism and Air Transport Linkages Chris Lyle Representative of the World Tourism Organization to ICAO ICAO/McGill Worldwide Conference Air Transport: What Route to Sustainability? Montréal, 26 September 2010

2. International tourism and air passenger transport: Locked at the hip  International air passengers are predominantly tourists (business and leisure travellers)  Over half of international tourist arrivals are by air (increasing yearly, with much higher proportions for long-haul destinations)  International tourism and air passenger transport traffic and revenues tend to move in lockstep, with tourism being more resilient in times of uncertainty when tourists stay closer to home

3. Some current trends in tourism impacting on air transport  Travel to destinations closer to home (“staycations”) and mode transfer away from aviation at short-haul  Decline in average length of stay (“breakneck breaks”)  “Hypermobility”  Later booking  Segments such as VFR, repeat visitors, special interest and independent travelers more resilient

4. Some current trends in air transport impacting on tourism  “Front end” traffic and yield – cyclical or slowing (increased use of videoconferencing, etc)?  Legacy carrier focus on consolidation and primary routes, with potential loss of service on “thin” routes  Strengthening market share and generation of new tourism streams by LCCs in short- and medium- term, but lesser advantage at long-haul and particular susceptibility to low margins, returning high fuel prices and withdrawal of “subsidies” (eg low airport charges)

5. Current central challenge common to tourism and air transport Economic instability

6. 2009: An exceptionally challenging year

7. International Tourist Arrivals, monthly evolution (% change) Source: World Tourism Organization (UNWTO) © -15 -10 -5 0 5 10 15 200820092010 Return to growth at end of 2009

9. 2010: Forecast maintained *Preliminary results Forecast 2010: Between 3 and 4 %

10. Evolving drivers  Discretionary income and Demographics  Motivations and Activities  Cybernetics (age of the ePurse)  Competition and Consolidation

11. Everybody chasing the Chinese tourist … UNWTO/European Travel Commission report on ‘Demographic Change and Tourism’ just released

12. Sustainability challenges for tourism and air transport  Fuel prices and economic cycle  Security and Facilitation  Climate change  Economic liberalization

13. Economic liberalization  Tourism sector well advanced and functional  Air transport stalled and isolated:  Bilaterals and blocs  Air carrier ownership and control  Institutional self-interest Same game Different rules

14. Progressive liberalization  Bilateral “Open Skies” agreements (mostly in small markets), but “traditional” bilateralism still prevails between regions  Regional liberalization agreements including “Open Aviation Areas” (with “cabotage” and regional air carrier ownership, some more effective than others)  EU-US “Open Skies” agreement (stalled on air carrier ownership and control)

15. Liberalization snapshot  Pace has slowed, with detriment to tourism and more general economic and social development  Economic environment has produced:  For the nervous - retrenchment to focus on 3/4 freedom traffic and protection of “national” carriers  For the bold – use of aviation as a successful stimulus to economic recovery

16. A plurilateral approach?  Waiver of national ownership and control provisions in bilaterals  Agreement amongst two or more parties automatically extended to another party upon adherence to the agreement

17. Air carrier ownership and control  Well-crafted liberalization would:  Open doors to investment  Reduce the need for indirect means of obtaining market access (alliances/code-sharing, etc)  Improve safety and security regulation  Limit uncertainty regarding liability, and….. Produce substantial economic benefits for air transport, tourism and the economy at large

18. Ways forward  US draft discussion document on a “Multilateral Convention on Foreign Investment in Airlines”  IATA’s “Agenda for Freedom”  ICAO’s Air Navigation Services Conferences – from bilateral to plurilateral?  GATS Annex on Air Transport Services

19. 2020  1.6 billion international tourists, spending $5 billion per day “Level of penetration of the ‘real’ potential population in tourism in 2020 can be seen to be 7 per cent – truly an industry still in its infancy.” UNWTO: Vision 2020

20. Further information: www.unwto.org clyle@airtransporteconomics.ca