The Importance of Air Transport to Global Trade

1 The Importance of Air Transport to Global Trade Introduction Air transport, directly or indirectly, affects global trade because it comprises all air transportation services carried out by residents of an economy. This involves the carriage of people, movement of cargo, rental of carriers and crew and all the associated, supporting, and supplementary services. A major source of growth over the previous century has been the ever-rising international trade. The obvious result of trade is growth, which in turn spurs increase in the living standards. Air transportation has had a leading role in the processes through which global trade elevates growth and the standards of living. Air transport plays a very pivotal function in international trade.

Air transport, just like any other service of transport, is linked to global trade in two perspectives. First, it can be traded as a service per se. Second, it is a highly crucial intermediary for the rest of other forms of trade, both in the domain of services (as in tourism) and goods. The main purpose of this essay is to describe the importance of air transport in the global trading.

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One of the major importance of air transport on global trade is attributed to its fast (speedy) delivery of goods, services and passengers across distant and remote areas. As defined above, global trade takes place between two or more economies. It is extremely difficult, if not impossible, to transact many businesses globally without air transport. One of the modern technologies that have enabled the realization of a global village is air transport. International trade is, therefore, effective and efficient only in a global village. It goes without saying that air transport is indispensable in global trading (Air Transport Action Group, 2003).

Passenger airline services are particularly crucial for opportunities of trading.

With air transport, companies are able to meet their customers face-to-face and enable them promote their goods and services globally with much ease, speed and convenience. By permitting better personal interaction and communication that is more effective between consumers and the sellers, air transport contributes significantly both to the companies establishing new sales as well as meeting the desires of their existing clients. A survey was conducted in Chile, China, Czech Republic, France and the United States of America, focusing on the advantage of air transport for their undertakings (Borenstein, 1990). It was found out that approximately 65% of businesses value passenger airline services as particularly pivotal in servicing and meeting the clients. Chinese companies, for instance, attach great reliance on passenger airline services for meeting and servicing customers, where about 90% of the firms reported that passenger airlines are vital. In general, about 85% of business firms state that passenger airline services are at times very crucial on their sales; about 70% consider

3 them as very important. This then explicitly implies that business firms have to locate their undertakings in vicinities of airports. In as much as modern technology, for example, video-conferencing, can be helpful, numerous finance and business companies still value face-to-face meetings as necessary for attracting new businesses and improving customer relations (Borenstein, 1990).

Most airfreight consists of products that have been manufactured or those that can be used to further manufacturing. Therefore, most of the world trade growth has come into being wing to the increased business of manufactured goods. Almost half (40%) of the cost of inter-regional trade in the goods that are manufactured is transported by air (Air Transport Action Group, 2003)..

Air transport can help to broaden the range of customer choices as well as increase the opportunities of visiting other states and experience new and vast cultures.

Air transport has enabled delivery in the same-day service and transportation of urgent goods like packages and posts. Perishable goods like seasonal fruits, vegetables, and flowers are now readily available all through the year, even in distant and remote areas that do not produce them. For example, fresh and dried fruits and fish are crucial export products for almost all Caribbean economies. Columbia is the biggest exporter of cut flowers, vegetables and clothing to North America. It is estimated that about 16% of the value of commodities from Columbia is by air transportation. In Kenya, exports of agricultural products like fresh vegetables as well as cut flowers, by air transport, mostly to Europe, makes up one of the country’s biggest industries as well as the second largest foreign exchange earner (Air Transport Action Group, 2003).

4 The fact that almost all kinds of goods and services from all over the world can be delivered to anywhere in the world creates competition that will apparently lead to price reduction. It provides contact to areas that are remote where other modes of transport cannot access. This opens the remote areas up for contact and interaction with other communities. This also can be a major means through which essential supplies can be delivered to areas that cannot produce them. Numerous and essential services, for example, hospitals and education would possibly not have been available in remote locations in the absence of air services.

Labor market can be considerably improved by air transport, by making it possible for business firms to win high quality workers from anywhere around the world.

A survey conducted in 2005 suggests that this can be particularly valuable for senior workers and professionals, whose decisions on where to reside and work are influenced by better international links. This was supported by 43% of the companies that were being surveyed (British Airways, 2004). On the other hand, high quality workers may find it easy and convenient to commute by air on a regular basis, like weekly, or even be able to work in more than one location. This results in general improved access to a larger pool of suitable workers, which ultimately leads to greater employment locally (Kupfer & Lagneaux 2009).

The global delivery chain is increasingly getting dependent on quick and dependable exchange of high-value low-weight products like computer hardware. It provides a rapid and dependable delivery of high quality products particularly pertinent to modern ever changing industries, like pharmaceutical and biotechnology and telecommunication equipment. It also increases the variety of product markets;

5 development of e-business assists the companies to identify suppliers with low-costs.

Air transport connects the two parties; buyers and suppliers (Button, 1990). The handling of returns and even complaints by business firms can also be improved considerably by air transport; for example, permitting a rapid turnaround of repairs or replacement parts delivery.

E-commerce has greatly developed due to air transport. It is also arguable that it would not be possibly efficient in the absence of air transport. Business transactions across networks are the new area where global trade is thriving. Products can be purchased online without having to move to the suppliers individually. This implies that one can make an order and pay for products across economies without necessarily having to move to those particular economies. This is because the suppliers, upon receiving the order will take it upon themselves to transport the goods ordered to the buyer. This is enhanced markedly by air transport since goods ordered for can be promptly and reliably delivered across countries. This, in turn, allows storage of products in large warehouses, thereby reducing retail and distribution costs. Besides, air transport helps to facilitate production and stock-management that is improved; this is because it reduces storage costs of a company, losses that are incurred due to stockoutages and disruptions that are normally triggered by machinery failure on lines of production (Borenstein, 1990).

Conclusion Air transport and global trading are so much intertwined that the benefits that are presently enjoyed because of the introduction international trade would not be experienced were it not for air transport. It is because of air transport that goods can be

6 transported from one part of the globe to the other with a lot of ease and speed. This has spurred economic growth globally. Business people are able to traverse the world and conduct business at a much faster rate due to availability of air transport. Air transport has also enhanced e-commerce by acting as quick transport mode for shipping goods from a remote seller to a remote buyer. It is correct, therefore, to say that there is no global trade without air transportation. As discussed above, the advantages that are experienced in global trade from air transport are almost all the advantages that are enjoyed from international trade.

7 List of References Air Transport Action Group (ATAG) 2003, The contribution of air transport to sustainable development in Africa, Study Prepared for ATAG by Oxford Economic Forecasting, Geneva.

Borenstein, S 1990 ‘Airline mergers, Airport dominance and market power’, American Economic Review vol 80, no. 2, pp. 400-404.

British Airways 2004, First Regional BA-AA Codeshares, Press Release, January 15.

Button, KJ 1990, Airline deregulation: An international perspective, David Fulton, London Kupfer, F & Lagneaux, F 2009, Economic importance of air transport and airport activities in Belgium, NBB Working Papers, No. 158, 10 March 2009.