The Route Development Fund (RDF) ? Can We Sustain Air Transport in the Regions?



The Route Development Fund (RDF) ? Can We Sustain Air Transport in the Regions?

Authors

G Christodoulou, A Smyth, N Dennis, University of Westminster, UK; M AL-Azzawi, J Campbell, Scott Wilson Ltd, UK

Description

The paper will provide an overview of the findings of an independent evaluation of the RDF undertaken during 2008 and 2009, encompassing assessments of the impacts of the scheme and dilemmas/challenges faced by policy makers in similar circumstances.

Abstract

With the rising chorus of calls for policy makers to implement measures to reduce the demand for air travel it might appear perverse for Governments to be seen to promoting air transport. However, that has been a feature of policy in the UK for many years in relation to certain niche markets. Generally these have focused on socially necessary services. However, throughout the history of air transport, airports and public bodies have offered various incentives to encourage the launch of new air routes. These come in many forms both financial and non-financial. Financial incentives tend to be publicly funded. Provisions exist for governments to tender air services which are deemed to be socially necessary but are not provided commercially. Within the European Union these are subject to the rules of the European Commission on subsidies to air transport. However, public funding is not the sole source of financial support, although regulation increasingly restricts the opportunity for employing such support.

One of the more recent innovative initiatives is the Route Development Fund (RDF) model developed by the authorities in Scotland and replicated in other parts of the United Kingdom. The difference between RDF and other support mechanisms is its focus on underpinning the development of new routes. For instance the objective of Public Service Obligation (PSO) support is to sustain inclusion whereas the purpose of the RDF fund is to provide incentives through public funding from regional bodies to initiate new direct airline links that will benefit the overall economic development of the region, e.g. in-bound tourism, generation of new business links. The objective of the RDF is to promote establishment of new routes by facilitating the sharing of risk between airports and airlines.

This paper will provide an overview of the findings of an independent evaluation of the RDF undertaken during 2008 and 2009. The evaluation encompasses assessments of the impacts of the scheme for passenger flows; Transport Economic Efficiency (TEE); Gross Value Added (GVA); tourist and business trip spend; employment; social inclusion; connectivity and market efficiency issues and environmental impacts.

The study evidence is drawn in part from a major programme of surveys in Scotland: face-to-face passenger surveys; surveys at retail outlets at airports; airport operations and business staff; and airline surveys.

The evidence suggests that RDF has significantly increased passenger flows; successful in improving travel conditions for business and leisure passengers; increase in the total GVA impact (monetary estimates will be provided); increase in tourism, jobs; The surveys suggested that nearly two-thirds of the non-Scottish businesses interviewed see the RDF services they use as instrumental in maintaining connectivity and competitiveness in Scotland. The importance of RDF flights to business connectivity seems to be reinforced where nearly three-quarters of non-Scottish businesses stated that the RDF supported flights have reduced the feeling that Scotland is remote from the centres of business activity; social inclusion benefits experienced by users of these RDF services. These benefits include reducing the perceptions of the remoteness of parts of Scotland (especially rural areas and the islands). The study also shows the environmental impacts RDF services contributed over the RDF programme to date.

The paper goes on to address the dilemmas and challenges faced by policy makers in similar circumstances. Numerous studies have shown that there is a direct relationship between the provision of connectivity through transport networks and economic growth. Air transport is not only a substantial employer but is also an important contributor to enabling businesses to operate in an increasingly globalised marketplace. Access to air services is a key requirement for communities to preserve and enhance their economic standing. Air transport also drives and facilitates wider economic activity through connectivity. A significant factor influencing the propensity for travel is ?affordability?. Literature has identified that Low Cost Carriers (LCC?s) have widened inclusion, access and have created opportunities to travel. In some cases air transport is the only realistic means for a person from a small community to travel. Reconciling these claimed benefits with the challenges posed by climate change as well as the implications for competition posted by such policy interventions are ones that the paper will explicitly address. It includes a commentary on the sustainability of such an initiative and observations on it performance compared to other related policy levers in the air transport sector.

Publisher

Association for European Transport