ECONOMIC BENEFITS FROM AIR TRANSPORT IN BOLIVIA - IATA

ECONOMIC BENEFITS
FROM AIR TRANSPORT
IN BOLIVIA

EXECUTIVE SUMMARY
• GDP growth in Bolivia has accelerated since 2001, boosted by high gas and other commodity prices, government
spending and by large inflows of remittances from emigrant workers elsewhere in South America or in Europe. The
transport (including aviation) sector has played a significant role in supporting economic growth in Bolivia.
It is a key component of the economy, accounting for just under 9% of GDP in 2006. The transport sector has grown
at a similar rate to the overall economy since 1990.
• Bolivia is relatively isolated from major global markets in North America, Europe and Asia due to its geographical
location. Therefore, air transport provides an essential link between Bolivia and the global economy, creating
significant wider economic benefits that would not exist in its absence. Air transport provides crucial connections to
global markets for Bolivia’s businesses as well as greater access to Bolivia for global tourists.
• Since 2002, air traffic has grown at an increasingly faster rate than the rest of Bolivia’s economy. However, the
suspension of services at Lloyd Aereo Boliviano (LAB) in early 2007 due to financial problems is likely to see a decline
in traffic in 2007. This could negatively affect the significant benefits received directly by the Bolivian economy from
higher business and leisure traffic in recent years.
• The demand-side and supply-side benefits generated and supported by the air transport sector are shown in Table ES1.
Table ES1: Economic Benefits from air transport in Bolivia, 2006
Impact (US$m)
% of Bolivia’s GDP
Economic benefits to passengers (consumer surplus) $196 million 1.9%
Supply-side benefits from a 10% increase in connectivity/GDP $8 million 0.07%
Demand-side benefits to GDP from air transport $302 million 2.9%
- Air Transport direct impact $53 million 0.5%
- Air transport indirect and induced impacts $80 million 0.8%
- Air transport facilitated tourism $169 million 1.6%
Jobs supported by air transport (inc. tourism impact) 107,747 2.4% of employment
Wage income generated by air transport (inc. tourism impact) $92 million 3.1% of income
Tax revenues generated by air transport (inc. tourism impact) $64 million 2.8% of revenues
Export earnings generated by air transport (inc. tourism impact) $186 million 5.1% of earnings
Source: Oxford Economics and IATA estimates
• The market for passengers flying to, from and within Bolivia totals US$392 million. This is estimated to generate
economic benefits to passengers (consumer surplus) of $196 million, equivalent to 1.9% of GDP.
• Bolivia’s geographic location makes air transport connections to key markets vital for long-term economic development
and growth. In 2002, Bolivia’s international services were concentrated on Latin America but also had a couple of routes
to Mexico and the US. In 2007, the suspension of services by LAB has seen a rationalisation of available routes, with
fewer routes within Latin America, but other airlines have retained direct routes to Miami while a new direct service to
Madrid has been established.
• While the overall number of international routes has declined since 2002, the retention of connections to important hub
airports and key new routes has boosted connectivity by 45% since 2002. This rise in connectivity provides substantial
wider economic benefits for Bolivia from its connections to the global air network.
• Increases in connectivity, relative to GDP, can create significant wider economic benefits. Each 10% rise in connectivity,
relative to GDP, can increase long-term GDP by $8 million (0.07%) per annum.
IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN BOLIVIA
October 2007
01

• The connectivity of Bolivia (as a proportion of GDP) is
higher than some other South American countries but is
relatively low compared to small, well-connected countries
like Panama. This highlights the substantial economic
benefits that can be available through further increases
in Bolivia’s connectivity levels.
• Air transport has an important demand side contribution
to Bolivia’s GDP through the value-added it creates and
the demand and employment that flows from that activity
through its supply chain and other industries. Its direct
impact is estimated to be $53 million in 2006, with a
total impact of $133 million after indirect and induced
impacts created by the demand it generates in other
sectors are included. This total value-added has
increased by $18 million since 2001.
• Air transport also facilitates and supports the tourism
industry. Over 500,000 tourists arrived in Bolivia in 2006,
of which 45-50% arrived by air. The impact from tourists
is estimated to have boosted Bolivia’s GDP by a further
$169 million in 2006, equivalent to around 1.6% of
its GDP
• Adding the demand-side contributions from air transport
to those facilitated in tourism gives a total demand-side
value-added of $302 million, equivalent to 2.9% of
Bolivia’s GDP. It also supports over 107,000 jobs in
Bolivia and supports between 2.4% and 3.1% of Bolivia’s
wage income and tax receipts as well as a high 5.1% of
exports.
• The importance of investing in improved connections
to major overseas markets is shown by an analysis of
the addition of a new service from Santa Cruz to Madrid
airport. Based on only a half-year of operations in 2006,
this new service generated over 17,000 passengers
each way in 2006, representing around 1.7% of departing
passengers from and within Bolivia. This service is
estimated to generate at least $3 million in consumer
surplus for passengers, $2 million for GDP and supports
at least 500 jobs. It also generates at least $1 million in
wage income and $0.5 million in additional tax revenues
for the government. This contribution is expected to more
than double in 2007 with a full-year of operation.
• The importance of keeping airport charges and taxes
in line with efficient costs is shown by estimating the
impact of a hypothetical 50% increase in departure
charges from their current average level of $11.6 per
departing passenger. It is estimated that this would add
1.5% to the average return fare, reducing passenger
numbers each way by over 16,000. This would cause
economic costs to passengers, due to higher travel
costs, totalling $3.2 million. There would also be wider
costs for the Bolivian economy, with GDP down $2.2
million, a loss of 479 jobs, wage income down $0.7
million and tax revenues down $0.5 million.
• Looking forward, the suspension of services by LAB
is likely to see a reduction in the economic contribution
in 2007. However, the air transport and tourism sectors
remain key potential drivers of future growth in the
Bolivian economy. With underlying demand for air
transport services still expected to grow, we would
expect investment in new and replacement air transport
services to increase and the contribution of the sector
to the economy to grow over the medium to long term.
IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN BOLIVIA
October 2007
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ECONOMIC GROWTH IN BOLIVIA
BOOSTED BY GAS EXPORTS
GDP growth in Bolivia has accelerated since 2001,
boosted by high gas and other commodity prices, government
spending and by large inflows of remittances from
emigrant workers elsewhere in South America or in Europe.
An expansion of gas exports should help to keep growth
around 4.5% per annum in 2007 and 2008. However,
economic policy retains a degree of uncertainty under the
current government, with further nationalisation possible
in the energy and other key sectors.
The transport (including aviation) sector has played a
significant role in supporting economic growth in Bolivia.
It is a key component of the economy, accounting for just
under 9% of GDP in 2006. Bolivia’s economy is dominated
by the primary and manufacturing sectors, both of which
have been key drivers of growth in the economy in recent
years. However, the transport sector and other service
sectors are also growing and provide the potential for
future growth, moving the Bolivian economy away from
manufacturing and mining towards a more service based
economy. The transport sector has grown at a similar rate
to the overall economy since 1990. Investment in the sector,
particularly in aviation, would create the potential for a
further boost to GDP.
Source: EIU
Table 1: Bolivian GDP by Sector
Sector Share of GDP, 2006 % growth 1990-2006 (real) % growth 2005-2006 (real)
Agriculture and Fishing 11.6 79.1 4.6
Mining 9.9 120.1 4.3
Manufacturing 30.3 94.2 7.2
Electricity, Gas and Water 1.8 126.5 3.7
Construction 3.8 66.8 4.2
Retail, Restaurants, Hotels 11.6 64.7 2.8
Transport 8.8 83.1 4.0
Communications 2.6 304.4 3.6
Financial Services 2.7 203.7 10.5
Real Estate 2.8 37.4 2.0
Public Administration 7.2 60.9 3.4
Other 7.1 101.7 3.6
Total 100.0 88.8 5.0
Source: INE Bolivia
IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN BOLIVIA
October 2007
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AVIATION PROVIDES AN ESSENTIAL
GLOBAL LINK FOR BOLIVIA
Bolivia is relatively isolated from major global markets in
North America, Europe and Asia due to its geographical
location. Therefore, air transport provides an essential
link between Bolivia and the global economy, creating
significant wider economic benefits that would not exist in
its absence. Air transport provides crucial connections to
global markets for Bolivia’s businesses as well as greater
access to Bolivia for global tourists.
Bolivia’s geography makes air transport essential for fast,
efficient and reliable connections within the country and
to neighbouring countries. Bolivia is landlocked, while its
capital, La Paz, is situated at high altitude with road and rail
links that can be subject to closure. As such, air transport
is vital for domestic and international connections for many
businesses and individuals.
Bolivia is not a well-known tourist destination, but its
natural attractions offer significant potential for expansion
in areas such as eco-tourism. Bolivia has already seen
a large increase in international tourists from 314,000 in
2002 to 515,000 in 2006 (see Figure 2). The majority of
these tourists come from neighbouring Andean countries,
though there has also been an increase in high-spending
tourists from Europe in recent years. International tourist
arrivals provide a significant boost to the economy, with
tourist receipts estimated to be over US$265 million.
AIR TRAFFIC HAS GROWN STRONGLY
THOUGH MAY DECLINE IN 2007
The number of international air passengers to and from
Bolivia increased sharply in the mid-1990s as air services
were expanded at a rapid rate, but then decreased sharply
between 1998 and 2002 as airline financial problems and
the weakness in the Bolivian economy forced services to
be cut back. International air traffic has resumed a strong
rate of growth since 2002, boosted by Bolivian GDP
growth but also increasing at a faster rate (see Figure 3).
However, the suspension of services at Lloyd Aereo
Boliviano (LAB) in early 2007 due to financial problems
is likely to see a decline in traffic in 2007. The suspension
of services by LAB has been partly offset by capacity
expansions from other airlines, but the overall available
seat capacity is likely to fall by 15-20%. This could
negatively affect the significant benefits received directly
by the Bolivian economy from higher business and leisure
traffic in recent years.
Source: EIU, ACI
Source:UN WTO
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October 2007
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SIGNIFICANT ECONOMIC BENEFITS
TO AIRLINE PASSENGERS
The key economic value from air transport is the benefit
received by airline passengers and shippers themselves.
Passengers are obviously willing to pay their air fare. But a
large number of passengers will also value the trip far more
than the cost of the fare, for the pleasure of the tourist visit
or for the value of the business contact achieved through
the trip. Economists call the value received, over and
above the cost of the fare, consumer surplus.
The market for passengers flying to, from and within
Bolivia is estimated to total US$392 million, with an
average one-way fare of $198 and 1.98 million passenger
enplanements. Using an average price elasticity for passenger
demand of –1, the consumer surplus for passengers
is estimated to be worth $196 million (see Figure 4).
SUPPLY-SIDE BENEFITS
FROM CONNECTIVITY
Source: EIU, ACI
Bolivia’s geographic location makes air transport connections to key markets vital for long-term economic development
and growth. As such it is important to introduce or expand routes to major destinations within the global air transport
network.
In 2002, Bolivia’s international services were concentrated on Latin America but also had a couple of one-stop routes to
Mexico and the US (see Figure 5). In 2007, the suspension of services by LAB has seen a rationalisation of available
routes, with fewer routes within Latin America, but other airlines have retained direct routes to Miami while a new direct
service to Madrid has been established (see Figure 6).
Figure 5: International Routes from Bolivia, 2002 Figure 6: International Routes from Bolivia, 2007
IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN BOLIVIA
October 2007
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With the suspension of LAB services, the overall number
of international routes has declined by 18% between 2002
and 2007 and the overall frequency of international flights
has declined by 6% over the same period. The number of
available seats has decreased, in particular, on secondary
routes within South America. However, connections to
some of the more important hub airports in South America
and also to Miami and Madrid are still available (with
airlines from those countries still flying in to Bolivia). These
destinations are not only economically important but also
provide significant onward connections within the global
airline network, providing greater access to a large number
of new destinations and markets.
As such, in terms of connectivity, i.e. weighting the
number of available seats by the importance of the
destination within the airline network, Bolivia has actually
seen a 45% improvement since 2002 (see Figure 7).
Recent research has shown that there is a significant
link between air connectivity and business productivity
and economic capacity, which drives long-term GDP. It is
important for Bolivia to retain good connections to key hub
airports within the network to support and expand the
long-term benefits to GDP that this can provide.
Source: SRS Analyser, IATA
While not as high as that of Panama, the overall level
of connectivity (as a proportion of GDP) of Bolivia is still
relatively higher than some other South American countries
(see Figure 8).
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October 2007
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There are several major economic factors that determine
the long-run level and growth of a country’s economy.
Assets such as natural resources, larger well-educated
populations and energy resources are critical. However, all
other things being equal, the level of air connectivity can
also have an impact on long-run economic performance.
IATA estimates that Bolivia would receive an US$8 million
per annum increase in its GDP from each 10% increase
in connectivity, relative to GDP. This highlights not only
the constraint that relatively low connectivity can place
on economic growth, but also the substantial economic
benefits that can be available through increases in Bolivia’s
connectivity levels.
Table 3: The Impact on Bolivia’s Long-run GDP
from its Level of Air Connectivity
Air connectivity per
$billion of GDP
Impact on GDP from
a 10% increase
Bolivia 0.190 + $8 million (0.07%)
Source: IATA
DEMAND-SIDE BENEFITS
FOR BOLIVIA’S ECONOMY
Air transport also has an important demand side contribution
to Bolivia’s GDP through the value-added it creates and
the demand and employment that flows from that activity
through its supply chain and other industries.
The contribution of air transport to the Bolivian economy
is significant and has increased slightly since 2001. Its
direct impact – in terms of the benefits it creates through
employment and economic activity in the airline industry
– has increased from US$46 million in 2001 to $53 million
in 2006 (see Figure 9), though may fall slightly in 2007
with the reduction in capacity.
In addition to the direct contribution to Bolivia’s GDP
from the airline industry, there are further impacts through
the employment and economic activity that is stimulated
within the industry supply chain (indirect impacts) and
through the benefits generated by the spending of wage
income earned within the aviation industry on goods and
services in other industries (induced impacts). The total
value-added created by air services in Bolivia – including
the direct, indirect and induced benefits – is estimated to
be $133 million in 2006, equivalent to 1.3% of Bolivia’s
total GDP. This total value-added has increased by $18
million since 2001 (see Table 4).
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Table 4: Bolivia Air Services: Economic Benefits
2001 2002 2003 2004 2005 2006
GDP Summary (US$m)
Direct 46 43 50 51 50 53
Indirect 47 43 48 48 51 53
Induced 23 22 25 26 25 26
Total 115 108 122 126 126 133
Employment Summary (jobs)
Direct 4,940 4,749 5,711 5,715 5,366 5,250
Indirect 11,009 12,807 14,617 14,329 14,471 14,158
Induced 9,056 8,706 10,471 10,478 9,838 9,625
Total 25,004 26,261 30,799 30,523 29,675 29,033
Wages Summary (US$m)
Direct 15 14 15 14 13 15
Indirect 17 15 16 15 15 17
Induced 8 8 9 8 7 8
Total 40 36 40 37 35 40
Tax Summary
Direct 9 8 8 8 8 10
Indirect 8 8 8 10 12 12
Induced 4 4 4 5 6 6
Total 21 20 20 23 26 27
Source: Oxford Economics
Air transport is highly capital intensive but nonetheless
remains a large employer. It also generates a number of
additional jobs in the supply chain and supports jobs in
other industries through the induced impacts it generates.
Air transport directly employs an estimated 5,250 people in
Bolivia, but supports a total of over 29,000 jobs within its
economy.
The jobs that are supported by air transport are typically
highly productive because of the high capital intensity of
the industry and because of the specialist skills required
in many job functions. Consequently, a large proportion
of the employment generated also has relatively higher
wages compared to many other sectors of the economy.
Air transport is estimated to support 0.6% of employment
within Bolivia but 1.3% of its wage income (see Table 5).
Air transport also makes a significant contribution to export
earnings, both directly through the activity of airlines and
indirectly through the facilitation of exports by other sectors
of the economy. It was estimated to generate $68 million
of exports in 2006, equivalent to 1.9% of Bolivia’s exports.
Its share of exports has declined slightly from 2.3% in 2003
even though the total amount of exports it generates has
increased. This reflects the impact of natural gas exports
on overall exports from Bolivia.
There is also a strong contribution towards taxation
and therefore, to supporting government spending
programmes. Direct payments of tax by the airline industry
are estimated to be $10 million in 2006. Adding indirect
and induced impacts generates a total contribution to
government tax revenues of $27 million, equivalent to
1.2% of Bolivia’s total tax revenues.
IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN BOLIVIA
October 2007
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Table 5: Bolivia Air Services: Economic Impact (includes direct, indirect and induced effects)
GDP Employment Wages Taxes Exports
2001 115 25,004 40 21 28
2002 108 26,261 36 20 26
2003 122 30,799 40 20 46
2004 126 30,523 37 23 54
2005 126 29,675 35 26 63
2006 133 29,033 40 27 68
Contribution to Bolivia’s Totals
GDP Employment Wages Taxes Exports
2001 1.4% 0.6% 1.4% 1.5% 1.9%
2002 1.4% 0.7% 1.3% 1.4% 1.7%
2003 1.5% 0.8% 1.5% 1.4% 2.3%
2004 1.4% 0.7% 1.4% 1.3% 2.1%
2005 1.4% 0.7% 1.3% 1.1% 2.0%
2006 1.3% 0.6% 1.3% 1.2% 1.9%
AIR TRANSPORT PROVIDES
FURTHER BENEFITS FOR TOURISM
Source: Oxford Economics
In addition to the direct and multiplier economic impacts generated from air transport, the industry also plays a key role
in facilitating growth in the Bolivian tourism industry. Around 515,000 tourists arrived in Bolivia in 2006, of which 45-50%
arrived by air.
The impact from tourists is estimated to have boosted Bolivia’s GDP by a further US$169 million in 2006, equivalent
to around 1.6% of its GDP (see Table 6). Tourism is labour rather than capital intensive. It is estimated to support nearly
79,000 jobs, equivalent to 1.7% of the total in Bolivia. It also generates $52 million of additional wage income, equivalent
to 1.7% of the total, i.e. similar to its proportionate share of employment. Tax income generated by tourism is 1.6% of the
total, while it also generates 3.3% of exports.
Table 6: Bolivia Air Services: Tourism Impact (includes contribution of air travellers’ expenditure)
GDP Employment Wages Taxes Exports
2001 105 54,540 41 19 50
2002 100 55,325 40 18 60
2003 121 66,736 46 21 99
2004 141 73,162 46 29 113
2005 174 81,857 50 40 141
2006 169 78,714 52 37 119
Contribution to Bolivia’s Totals
GDP Employment Wages Taxes Exports
2001 1.3% 1.4% 1.4% 1.3% 3.3%
2002 1.3% 1.4% 1.4% 1.3% 3.8%
2003 1.5% 1.6% 1.6% 1.5% 5.0%
2004 1.6% 1.7% 1.7% 1.6% 4.4%
2005 1.9% 1.9% 1.9% 1.7% 4.5%
2006 1.6% 1.7% 1.7% 1.6% 3.3%
Source: Oxford Economics
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October 2007
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Adding the demand-side contributions from air transport to
those facilitated in tourism gives a total demand-side valueadded
of $302 million, equivalent to 2.9% of Bolivia’s GDP
(see Table 7). It also makes a contribution of between 2.4%
and 3.1% of Chile’s employment, wage income and tax
receipts, as well as a strong 5.1% contribution to exports.
The demand-side contributions have all increased in absolute
terms since 2001. However, their proportionate impact
has declined in some cases. This reflects the rationalisation
of the air transport industry within Bolivia and the strong
growth in the Bolivian economy as a whole over the period,
rather than any major decline in the importance of the air
transport or tourism sectors.
Looking forward, the suspension of services by LAB is
likely to see a reduction in the economic contribution in
2007. However, the air transport and tourism sectors
remain key potential drivers of future growth in the Bolivian
economy. With underlying demand for air transport services
still expected to grow, we would expect investment in new
and replacement air transport services to increase and the
contribution of the sector to the economy to grow over the
medium to long term.
Table 7: Demand-side Contributions from Air Transport and Tourism
GDP Employment Wages Taxes Exports
2001 220 79,544 81 40 78
2002 208 81,586 77 38 86
2003 243 97,535 86 42 145
2004 266 103,684 83 52 167
2005 300 111,532 85 66 204
2006 302 107,747 92 64 186
Contribution to Bolivia’s Totals
GDP Employment Wages Taxes Exports
2001 2.7% 2.0% 2.8% 2.7% 5.1%
2002 2.6% 2.1% 2.8% 2.7% 5.5%
2003 3.0% 2.4% 3.1% 2.9% 7.4%
2004 3.1% 2.4% 3.1% 2.9% 6.5%
2005 3.2% 2.5% 3.2% 2.8% 6.5%
2006 2.9% 2.4% 3.1% 2.8% 5.1%
Source: Oxford Economics
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October 2007
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ESTIMATING THE BENEFITS
FROM NEW SERVICES
There have been significant rationalisation and reduction
in routes from Bolivia in recent years, many involving
secondary routes within South America. However, several
of the key routes to major hub airports have been retained,
helping to minimise any reductions in overall connectivity
levels. In addition, a new direct route has been established
from Santa Cruz to Madrid. The route started in mid-2006
and has quickly expanded capacity. It accounts for over
20% of Bolivia’s current overall level of connectivity in 2007.
It provides a significant economic contribution, even with
just a half-year contribution in 2006 (see Table 8). This
contribution will increase even further in 2007
Table 8: The Economic Contribution in 2006 of the VVI – MAD Route
2006 Estimated contribution of the VVI-MAD route in 2006
Departing passengers 990,000 16,924
Economic benefits to passengers (US$m) 196 3
Boost to GDP (US$m) 133 2
Boost to Employment 29,033 500
Boost to Wage Income (US$m) 40 1
Boost to Tax Revenues (US$m) 27 0.5
Source: Oxford Economics, IATA
In 2006, based on only a half-year of operation, the route
from Santa Cruz to Madrid was estimated to have nearly
17,000 departing passengers (with a similar number on
the MAD-VVI leg), representing around 1.7% of the overall
total of departing passengers from and within Bolivia. As an
important route, the benefits of this service are likely to be
proportionately greater than an average service.
However, in the absence of more detailed estimates,
assuming a linear impact for a change in passengers can
provide an indication of the minimum benefits associated
with the route. Table 8 shows that the MAD-VVI route
creates at least US$3 million of consumer surplus for
passengers, $2 million for GDP and boosts employment
by at least 500 jobs. It also creates wage income of at least
$1 million and $0.5 million of additional tax revenue for the
government. However, these figures are based on only half
a year of operations, with the contribution provided by the
route expected to more than double in 2007.
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October 2007
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ESTIMATING THE ECONOMIC
COST OF CHARGES
It is important that airport charges and taxes are kept closely in line with the efficient cost of providing services at the
airport. Otherwise, increases in airport charges and taxes can have a negative impact in terms of offsetting any revenue
through a significant reduction in the economic benefits that aviation generates. By way, of illustration, we consider the
impact of a hypothetical 50% increase in departure charges on passengers at Bolivian airports (see Table 9). Currently,
the charges are US$25 per international departure and Boliviano15 (US$2) per domestic departure, equating to an
average charge per departure of $11.6, or 2.9% of the average return fare.
Table 9: The Economic Costs of Higher Airport Passenger Departure Charges
2006 50% rise in Charges Change
Average departure charge per passenger 11.6 17.4 + 5.8
As a % of average return fare 2.9 4.4 + 1.5
Departing passengers 990,000 973,665 - 16,335 (-1.65%)
Economic benefit to passengers (US$m) 196 192.8 - 3.2
Boost to GDP (US$m) 133 130.8 - 2.2
Boost to Employment 29,033 28,554 - 479
Boost to Wage Income (US$m) 40 39.3 - 0.7
Boost to Tax Revenues (US$m) 27 26.5 - 0.5
Source: Oxford Economics, IATA
A 50% rise in departure charges would raise the cost of travelling to and within Bolivia by 1.5%. Best practice academic
studies show that on average there will be an 11% fall in passenger numbers for every 10% rise in air fares. Therefore,
a 1.5% increase in fares would see a reduction of more than 16,000 in passenger departures.
There would be an increase in revenues from the departure charge of $5.6 million but this would be more than offset by
the economic costs to passengers and the wider economy in Boliva. The direct impact on passengers is estimated to be
a loss of economic benefit (consumer surplus), due to higher travel costs, of $3.2 million.
The impact of reduced air traffic and the reduced spending of these passengers is estimated to reduce annual GDP
in Bolivia by $2.2 million, cause a loss of 479 jobs, reduce wage income by $0.7 million, and reduce Government tax
revenues by $0.5 million as a result of lower corporate and income tax payments.
METHODOLOGY
• Economic benefits to passengers are estimated as shown in Figure 4.
• Supply-side benefits from connectivity were estimated based on the methodology published in ‘Airline Economic
Benefits: IATA Economic Briefing No.8, July 2007’.
• Demand-side benefits to GDP and benefits from tourism were estimated by Oxford Economics using their global
economic model and satellite models.
• The benefits from new services was estimated by measuring the addition to passenger numbers and using the analysis
provided by Oxford Economics, assuming a linear impact from a percentage increase in passenger numbers.
• The economic cost of charges were estimated as explained in the last section together with the use of the analysis
provided by Oxford Economics, assuming a linear impact from a percentage increase in passenger numbers.
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October 2007
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