ECONOMIC BENEFITS

FROM AIR TRANSPORT

IN PANAMA

EXECUTIVE SUMMARY
Air transport was Panamas fastest growing sector in the economy last year with growth in value added of 21.3%.
Tourism and other sectors facilitated by air transport also boomed last year.
Investors consider Panama low risk in most areas, but there is economic structure risk because of reliance on Panama
Canal revenue, a large current account deficit and a high public debt/GDP. Investing further in the air transport
network would help diversify this risk by supporting tourism, financial and business services.
Panamas fortunate geographical location and service sector enclaves has enabled the dynamic, competitive service
sector to make up 75% of GDP. Air transport, along with the Panama Canal, is the key infrastructure asset that
makes this possible by its connections to overseas markets and trade routes.

Panamas Tocumen International Airport is the key hub for connecting passengers between North, Central and
South America. International passengers in transit make up one-third of total passengers, the highest proportion for any
airport in the world handling over 2 million passengers. This is a measure of how efficiently passengers are consolidated
to serve city pairs that do not generate enough traffic to justify point-to-point service.

In addition, the number of arriving and departing international passengers has doubled in the past decade,
to exceed 2 million in 2006.

Economic benefits from air transport in Panama, 2006

Impact

% Panamas GDP

Economic benefits to passengers (consumer surplus)

$336 million

2%

Supply-side benefits from a 10% increase in connectivity/GDP

$12 million

0.07%

Demand-side benefits to GDP from air transport

$1,035 million

6.1%

- Air transport direct impact

$325 million

2.0%

- Air transport indirect and induced impacts

$237 million

1.5%

- Air transport facilitated tourism

$473 million

2.8%

43,233

3.3% of employment

Wage income generated by air transport (inc. tourism spending)

$340 million

5.9% of income

Tax revenues generated by air transport (inc. tourism spending)

$114 million

7.7% of revenues

Export earnings generated by air transport (inc. tourism spending)

$1142 million

9.5% of earnings

Jobs supported by air transport (inc. tourism

spending)1

Source: Oxford Economics and IATA estimates. 1This includes the impact of the spending by tourist arriving by air.

The market for passengers flying to and from Panama in 2006 was worth over US$ 700 million. This generated
economic benefits to passengers (consumer surplus) of an estimated $ 336 million in 2006, equivalent to 2%
of GDP.

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

01

 For a small economy like Panama, with its high

dependence on international service industries, air
connections to key markets are vital for economic
development. Panama was already well connected in
2002, but since then there have been major additions
to economically important destinations, such as New
Yorks JFK, Madrid and Rio de Janeiro. Frequencies
have risen by 53% since 2002.

Panama is the most highly connected economy in

the American continent. Relative to its GDP Panama
has twice the air connectivity of the United States. Its
level of connectivity has risen by 40% since 2002. This
rise provides substantial wider economic benefits for
Panama from its connections to the global air network.

Though Panama is already highly connected, further

increases in its links can create significant economic
benefits. Each 10% increase in its connectivity, relative
to GDP, can increase long-term GDP by $12 million
(0.07%) per annum.

Air transport also has an immediate and direct contribution

to Panamas GDP through the value-added it produces.
Air transport contributed $325 million or 2.1% of
value-added to Panamas GDP in 2006.

Adding indirect benefits through suppliers, induced

benefits from the spending of wage income and impacts
of air travel on tourism, the total demand-side impact
on Panamas GDP is over $1 billion or 6.1%.

Air transport supported over 5,000 jobs directly and

a total of over 11,000 in 2006, generating wage income
of $200 million or 3.5% of total wage income in Panama.
Income and corporation tax of $67 million or 4.5% of
tax revenues are generated for the Government by the
air transport industry.

The importance of investing in improved connectivity

to major overseas markets is shown by an analysis
of the addition of a new air service to New Yorks JFK
airport which generated 30,000 new passengers each
way, boosting traffic by 3% in 2006. This is estimated to
generate $10 million in economic benefits for passengers,
$16.9 million in additional GDP, 340 jobs, $6 million of
wage income and $2 million in additional tax revenues
within Panama.
The importance of keeping airport charges in line
with efficient costs is shown by estimating the impact
of an hypothetical 50% increase in charges from their
current level of $25.4 per departing passenger. It is
estimated that this would add 2.2% to the average return
fare, reducing passenger numbers each way by almost
25,000. This would cause economic costs to passengers,
due to higher travel costs, totalling $7.4 million. There
would also be wider costs for the Panamanian economy,
with GDP down $13 million, a loss of 272 jobs, wage
income down $5 million and tax revenues down $2 million.

Air transport also facilitates tourism. Last year over

700,000 non-resident vistors or 60% of tourists were
delivered by air transport, spending an average of more
than $1,200 each trip according to the UN World
Tourism Organisation. Air transport and tourism together
supported over 43,000 jobs. The industry altogether
also produces tax revenues (7.7%) and exports
earnings (9.5%) in excess of its 6.1% GDP share,
punching above its weight in helping to address
Panamas current account deficit and public
debt issues.

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

02

FASTEST GROWING ECONOMIC SECTOR IN 2006

Air transport was Panamas fastest growing sector in the economy last year with growth in value added of 21.3%. This
performance topped a successful year in a number of sectors, which produced growth in the whole economy of 8.1%.
The economic strength seen in 2006 raised average GDP growth over the past five years up to 5.8%, keeping Panama
among the fastest-growing economies in Latin America;
Air Transport was the Fastest Growing Sector in Panamas Economy in 2006
Total GDP
Agriculture
Fishing
Mining
Manufacturing
Construction
Financial services
Commerce
Retail
Colon Free Zone
Hotels & restaurants
Electricity & water
Transport, warehousing and communications
Panama Canal
Air transport
Telecommunications
Real estate

8.1%
7.4%
-5.9%
16.2%
5.1%
17.4%
12.8%
11.3%
13.7%
11.6%
12.5%
3.6%
13.0%
10.9%
21.3%
16.0%
5.3%

Source: Contraloria General de la Republica

Tourism and foreign investment played a significant role in supporting strong economic growth last year. Construction was
up over 17%, thanks to booming local and foreign investment in residential and commercial real estate. Internationallyoriented financial services grew by 12.8% while commerce expanded 11.3%. Commercial activity was propelled by strong
retail sales and a 22% rise in tourists. As a result of the latter, the hotel and restaurant industry saw growth of 12.5% last
year. Much of this economic activity was facilitated by air transport.
The outlook is positive. A forecast slowdown of world trade growth will dampen growth in Panamas export-oriented
service sector. However, this will be largely offset by the economic stimulus provided by Canal-related inward investment
and construction activities. Last October a referendum approved a US$5.3 billion (one-third of annual GDP) investment
to expand and modernize the Panama Canal.

AIR TRANSPORT CAN REDUCE ECONOMIC RISK

Looking further ahead, diversification continues to be important. Panama is considered by investors to be relatively low risk
in most areas. However, reliance on Canal revenue is considered to be a significant economic structure risk for Panama
(alongside a large current account deficit and a heavy public debt/GDP ratio). The expansion of air transport, and the
support that gives to tourism financial and business services, will help to broaden the economy and reduce that risk.

Sovereign risk

October 2007

BB

Currency risk

Banking sector risk

Political risk

Economic structure risk

BBB

BBB

BBB

Source: Economic Intelligence Unit

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

03

LINKING PANAMAS ECONOMY

TO THE WORLD
Panamas economic development has been closely
linked to its very fortunate location and to the creation of
three key enclaves for service sector businesses: the Canal,
the Colon Free Trade Zone, and the international banking
centre. Interaction among these enclaves and the countrys
unique monetary policy with full dollarisation, stimulated
the development of complementary service activities, in
particular international business services.

The Canal is now bringing many visitors on excursion

packages. Also a majority of non-resident arrivals by air
are travelling for leisure purposes. However, 37% of nonresident air passengers are travelling on business or to
attend conferences.

This has created a dual economy. The dynamic,

competitive, service sector makes up 75% of GDP, and
is highly integrated into the international economy. Air
transport, along with the Panama canal, is the infrastructure
that makes this possible by its connections with overseas
markets and trade routes. In sharp contrast the industrial
and agricultural production sector is not internationally
competitive and caters primarily to the domestic market.
Domestic flights carried only 9% of total air passengers
last year and less than 1% of air freight.
Panama is a small country, with an area of 75,512 square
kilometers and a population of 3.2 million. Despite this, the
strength of the internationally-integrated service sector has
allowed the Panama economy to generate faster economic
growth than average in Latin America and the Caribbean for
the past 20 years. Air transport has been a major enabler
of this expansion.

Leisure passengers are obviously vital to support the

growing tourist sector. However, business passengers not
only spend but enable the development of the key service
sector industries such as financial and business services.

The duality of the economy has problems as well as

successes. Unemployment and poverty rates are high
and the distribution of incomes is very unequal. Tourism
has strong potential for bringing income and economic
activity across the country and is now being developed
more rapidly. The Panama Canal has become an increasing
source of visitors but air transport remains the largest
and fastest growing channel for bringing tourists into
the country.

Source: Instituto Panameno de Turismo

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

04

ACCELERATING GROWTH
IN AIR TRANSPORT
The number of international passengers has more than doubled in the past decade. International air transport has grown
faster than the rest of Panamas economy.

Panama is an important destination in its own right for tourists and business travellers. However, Tocumen International
Airport is perhaps more important as a key hub connecting passengers between North, Central, South America and the
Carribean. International passengers in transit make up one-third of total passengers. This is the highest proportion of transiting passengers for any airport handling over 2 million passengers a year in the world today. It is a measure of how efficiently traffic is consolidated in Panama to serve city-pairs that do not generate enough traffic to justify point-to-point service.
The development of air travel in the past decade
Passengers

Domestic

International

Total
Arriving/dep.

Transit

Million

Million

Million

Million

Million

1996

0.31

1.51

1.08

0.43

1.81

1997

0.34

1.73

1.21

0.52

2.07

1998

0.34

1.79

1.28

0.51

2.14

3.3%

1999

0.33

1.71

1.23

0.47

2.04

-4.7%

2000

0.27

1.93

1.30

0.64

2.21

8.3%

2001

0.24

2.10

1.49

0.61

2.34

6.3%

2002

0.23

1.94

1.30

0.64

2.17

-7.7%

2003

0.22

2.08

1.42

0.65

2.30

6.1%

2004

0.24

2.36

1.60

0.77

2.61

13.5%

2005

0.28

2.71

1.77

0.94

2.99

14.8%

2006

0.31

3.16

2.04

1.12

3.47

15.8%

% Change
14.0%

Source: AAC

Due to relative short travel distances within Panama there is substantial competition from other modes of transport
which has severely limited the potential for air transport in the domestic market. Domestic traffic has risen in the past
few years but is no higher than 10 years ago, and less than 10% of the total. The same is true for domestic air freight.
Because manufacturing is a small proportion of Panamas economy, even international air freight shipments at around
80,000 tonnes are less than 20% higher than a decade ago.
Yet the highly internationalised and integrated Panamanian economy generates a very large demand for international
air passenger trips. Tourism has also been actively developed in recent years. As a result the number of international
passengers has doubled in the past decade.

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

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ECONOMIC BENEFITS
TO AIRLINE PASSENGERS

SUPPLY-SIDE BENEFITS
FROM CONNECTIVITY

The key economic value from air transport is the benefit

received by airline passengers and shippers themselves.
Passengers are obviously willing to pay the air fare. But
a large number of passengers will value the trip more than
the cost of the fare, for the pleasure of the tourist visit or
the value of the business contract achieved through the
trip. Economists call this value, over and above the fare,
consumer surplus.

For a small economy like Panama, with its high dependence

on international service industries, air connections to key
markets are vital for economic development. These air
transport connections are a key infrastructure asset for the
economy, a facilitator for the growth and development of
modern industries.

In 2006 the market for passengers flying to and from

Panama totalled US$672 million, with an average one-way
fare of $286 and 2.35 international and domestic arriving or
departing passengers. Using a price elasticity of passenger
demand of 1 we estimate that passengers gained surplus
value worth $336 million in 2006.

Panama has a great location to act as the major hub airport

connecting South and Central America, to the US and
Carribean. These air transport connections to destinations
of major economic importance are also key channels of
economic stimulus to the business sector in Panama.
International Routes, May 2002

The Economic Value of Flights to Passengers

over and above the Cost of the Fare, 2006

Source: PaxIS Plus, ACC

These connections provide the modern service industry

sector in Panama with access to global markets, enhancing
links within and between businesses and providing greater
access to resources and to international capital markets.
Panama was already well connected in 2002. But since
then there have been major additions to economically
important destinations, such as New Yorks JFK, Madrid
and Rio de Janeiro in Brazil.

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

06

The number of destinations has risen by 38% since 2002.

Frequencies have also grown rapidly in recent years and
are up 53% over the same period;

International Routes, May 2007

Capacity serving a couple of key destinations in the US,

Miami and Newark, has fallen over this period reducing
the economic benefit or economic connectivity of these
expanded services. However, new services to JFK and
Brazil have more than made up. Weighting the destinations
by their economic importance and measuring the seats
available shows that air or economic connectivity has
risen by 40% between 2002 and 2007.

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

07

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 Panama 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.

Panama has the highest connectivity in the Americas

Source: IATA Economic Briefing: Aviation Economic Benefits, June 2007

Not only has Panamas connectivity improved over time, but it is extremely high relative to other countries in a similar
situation. It is the most highly connected economy in the whole American continent by far.
Relative to its GDP, Panama has more than twice the connectivity of the United States. Compared with major Latin
American economies, Panama has several times the connectivity of even an economy with a strong export sector like
Chile.
There are several major economic factors that determine the long-run level and growth of a countrys 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
Panama would receive a US$12 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 have been generated through increases in Panamas connectivity levels.
The Impact on Panamas Long-run GDP
from Improvements in its Level of Air Connectivity

Panama

Air connectivity per US$billion of GDP

Impact on GDP from a 10% increase

0.448

+ $12 million (0.07%)

Source: IATA

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

08

DEMAND-SIDE BENEFITS
TO PANAMAS GDP
Air transport also has an immediate and direct contribution to Panamas GDP in an accounting sense through the valueadded it produces, or the profits and employee wages that flow from that activity.

Source: Oxford Economics

This contribution has risen as air transport boomed in the past couple of years. By 2006 it was estimated that air transport
contributed US$325 million of direct value-added to GDP or 2% of total economic activity in Panama. But there are
substantial additional indirect effects to add to this direct contribution to GDP.
Building up the demand side benefits for Panamas GDP
Panama Air Services: Economic benefits
US$mn

2001

2002

2003

2004

2005

2006

Direct

168.5

184.6

196.1

212.5

268.0

325.1

Indirect

69.7

76.9

79.0

87.5

114.1

148.9

GDP Summary

Induced

45.5

49.8

52.9

57.4

72.4

87.8

TOTAL

283.7

311.4

328.0

357.4

454.4

561.7

Direct

4438

4644

4867

4821

5066

5149

Indirect

3032

3324

3353

3262

3721

3893

Induced

1978

2153

2247

2138

2361

2295

TOTAL

9448

10121

10466

10222

11148

11337

Direct

50.1

50.9

58.6

66.9

90.2

117.4

Indirect

25.8

27.4

27.6

30.4

38.1

49.7

Induced

16.8

18.4

19.6

21.2

26.7

32.4

TOTAL

92.7

96.7

105.8

118.5

155.0

199.5

Direct

14.9

16.7

19.4

24.2

35.2

46.2

Indirect

6.1

6.6

6.9

7.5

9.9

12.9

Employment Summary

Wages Summary

Tax Summary

Induced

4.0

4.3

4.6

4.9

6.3

7.6

TOTAL

25.0

27.5

30.9

36.6

51.3

66.7

Source: Oxford Economics

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA
October 2007

09

In addition to the direct contribution to Panamas

GDP from the value-added created by airlines, there are
additional impacts through economic activity stimulated
in the supply-chain (indirect impacts) and through the
spending of wages generated within the air transport sector
(induced impacts). The additional value-added created
through indirect and induced impacts almost doubled the
$325 million of GDP directly contributed by air transport
to $561 million or 3.3% of Panamas GDP.

There is an even larger proportional contribution to

taxation and therefore to supporting government spending
programmes. Since wage income is relatively high and air
transport companies are profitable, contributions to income
and corporation tax are significant. Direct payments of tax
by the air transport industry are estimated to be $46 million.
Adding indirect and induced impacts generates a total
contribution to financing Panamas public spending of
$66 million or 4.5% of total tax revenues.

Air transport is highly capital intensive but nonetheless

is a significant employer. It also generates a large number
of additional jobs in the supply chain and supports jobs
in other industries through induced impacts. Air transport
directly employs over 5,000 employees, but supported
a total of 11,337 jobs last year.

Air transport also makes a significant contribution to

export earnings, an important facet given the size of
Panamas balance of payments current account deficit.
Over $260 million of exports are generated, some 2.2%
of total exports.

The jobs air transport supports are highly productive

because of its capital intensity and the skills required for
many functions. As a result they are relatively well paid.
Air transport generates 0.9% of total employment in
Panama but 3.5% of wage income.
Demand-side Contributions from Air Transport
Panama Air Services: Economic impact
(includes direct, indirect and induced effects)
GDP
US$mn

Employ.
jobs

Wages
US$mn

Taxes
US$mn

Exports
US$mn

2001

283.7

9448

93

25

131

2002

311.4

10121

97

28

144

2003

328.0

10466

106

31

151

2004

357.4

10222

118

37

167

2005

454.4

11148

155

51

196

2006

561.7

11337

200

67

261

Contribution to Panamas totals

GDP

Employ.

Wages

Taxes

Exports

2001

2.4%

0.9%

2.1%

2.4%

1.6%

2002

2.5%

0.9%

2.2%

2.6%

1.9%

2003

2.5%

0.9%

2.3%

2.7%

2.0%

2004

2.5%

0.8%

2.4%

3.0%

1.9%

2005

2.9%

0.9%

3.0%

3.8%

1.9%

2006

3.3%

0.9%

3.5%

4.5%

2.2%

BENEFITS FROM TOURISM

Added to the direct and multiplier effects through the
economy from air transport, the industry also facilitates
tourism. Over 700,000 tourists or 60% of the total arrived
by air transport last year. Average spending by each visitor
is also high at over US$1200 a trip.
The impact from the tourists delivered by the air transport
industry boosted Panamas GDP by an additional $473
million last year or 2.8% of GDP.
Tourism is labour rather than capital intensive so this
supported almost 32,000 jobs or 2.5% of total employment
in Panama. Since employment in tourism is less productive
than in air transport, wages are relatively lower and total
wage income generated in tourism is less than in air
transport at $140 million or 2.5% of the total.
Since wage income is lower the amount of income tax
generated is somewhat lower at $47 million or 3.2% of
total taxation. However, considerable export income is
generated at over $880 million of 7.3% of total export
earnings.

Source: Oxford Economics

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

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Demand-side Contribution from Tourism

Demand-side Contributions from Air Transport and Tourism

Panama Air Services: Tourism impact

(includes contribution of air travellers spend)

Panama Air Services: Overall economic benefits

(includes tourism impact)

GDP
US$mn

Employ.
jobs

Wages
US$mn

Taxes
US$mn

Exports
US$mn

GDP
US$mn

Employ.
jobs

Wages
US$mn

Taxes
US$mn

Exports
US$mn

2001

263.9

24709

100

26

481

2002

313.0

24513

97

31

510

2001

547.6

34157

193

51

612

2002

624.4

34634

194

59

654

2003

331.2

24635

97

33

544

2003

659.2

35101

203

64

694

2004

380.5

26902

109

38

615

2004

737.9

37124

227

75

783

2005

411.8

28032

2006

473.1

31895

114

41

702

2005

866.2

39180

269

93

898

140

47

881

2006

1034.9

43233

340

114

1142

Contribution to Panamas totals

Contribution to Panamas totals

GDP

Employ.

Wages

Taxes

Exports

GDP

Employ.

Wages

Taxes

Exports

2001

2.2%

2.3%

2.3%

2.5%

6.0%

2002

2.6%

2.2%

2.2%

3.0%

6.7%

2001

4.6%

3.2%

4.4%

4.9%

7.7%

2002

5.1%

3.1%

4.4%

5.6%

8.6%

2003

2.6%

2.1%

2.1%

2.9%

7.2%

2003

5.1%

3.1%

4.5%

5.7%

9.2%

2004

2.7%

2.2%

2.2%

3.1%

6.9%

2004

5.2%

3.1%

4.6%

6.2%

8.8%

2005

2.7%

2.2%

2006

2.8%

2.5%

2.2%

3.1%

6.8%

2005

5.6%

3.1%

5.2%

6.9%

8.7%

2.5%

3.2%

7.3%

2006

6.1%

3.3%

5.9%

7.7%

9.5%

Source: Oxford Economics

ESTIMATING THE BENEFITS

FROM NEW SERVICES
There have been several major new routes opened from
Tocumen International Airport in recent years. In fact the
addition of services to New Yorks JFK and Madrid airports
account for one-third of the improvement in Panamas
connectivity in the past six years. The table below shows
estimates of the economic contribution of the new route
to JFK airport.

We estimate this new service created economic benefits

to passengers over an above their ticket price (consumer
surplus) of US$10 million in 2006.
In addition this new market created wider economic
benefits for Panama, including $16.9 million in GDP, an
extra 340 jobs, wage income of $6 million and additional
tax revenues for the Government of $2 million.

Last year this market supported over 30,000 passengers

travelling to New York (and a similar number of the return
journey), an addition of 3% to traffic.
The Economic Contribution in 2006 of the New Route from PTY to JFK Airport
Actual situation in 2006

Estimated contribution
of the PTY-JFK route

1,036,508

30,901

336

10

Boost to GDP ($ million)

561.7

16.9

Boost to Employment

11,337

340

Boost to Wage income ($ million)

199.5

Boost to Tax revenue ($ million)

66.7

Departing passengers
Economic benefits to passengers ($ million)

Source: IATA

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

11

ESTIMATING THE ECONOMIC

COST OF CHARGES
Aeronautical revenues at Tocumen International Airport
totalled US$26.3 million in 2006, consisting of landing fees
and a $20 international departure charge. Since there were
1.04 million departing passengers last year this implies
airport charges averaged $25.4 per departing passenger
or 4.4% of the average return fare in 2006 of $573.

A 50% rise in airport charges would raise the cost of

travelling to Panama by 2.2%. Best practice academic
studies show that on average there will be an 11% fall
in passenger numbers for every 10% rise in air fares.
So Panama would receive almost 25,000 fewer visitors
as a result.

The table below estimates the economic cost to Panama

of a hypothetical 50% increase in airport charges.
The Economic Costs of Higher Airport Charges

Aeronautical charge/ departing passenger

As a % of average return fare

Actual situation in 2006

50% rise in airport charges

Change

$25.4

$38.1

$12.7

4.4%

6.6%

2.2%

1,036,508

1,011,589

-24,919 (-2.4%)

336

328.6

-7.4

Boost to GDP ($ million)

561.7

548.2

-13

Boost to Employment

11,337

11,065

-272

Boost to Wage income ($ million)

199.5

194.5

-5

Boost to Tax revenue ($ million)

66.7

64.7

-2

Departing passengers
Economic benefits to passengers ($ million)

Source: IATA

There would be an increase in aeronautical revenues of $12.7 million but this would be more than offset by the economic
costs to passengers and the wider economy in Panama. The direct impact on passengers is estimated to be a loss of
economic benefit (consumer surplus), due to higher travel costs, of $7.4 million.
The impact of reduced air traffic and the reduced spending of these visitors is estimated to reduce annual GDP in Panama
by $13 million, cause a loss of 272 jobs, reduce wage income by $5 million, and reduce Government tax revenues by
$2 million as a result of lower corporate and income tax payments.

METHODOLOGY
Economic benefits to passengers are estimated as explained on p6.
Economic benefits from producers are proxied by operating profits. Data on p1 for 2006 shows airlines only, since
airport financial results were not published at the time of writing.
Supply-side benefits from connectivity were estimated based on the methodology published in Airline Economic
Benefits: IATA Economics 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 costs of charges were estimated as explained in the last section above together with the use of the
analysis provided by Oxford Economics, assuming a linear impact from a percentage increase in passenger numbers.
Brian Pearce
economics@iata.org

IATA Economics - www.iata.org/economics - ECONOMIC BENEFITS FROM AIR TRANSPORT IN PANAMA

October 2007

12

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