Subsidies in Aviation

Relatively little attention has been paid to the existence of subsidies in aviation. As the sector’s importance for economic development is often highlighted, this paper seeks to provide a conceptual overview of the various forms of subsidies in aviation, as a contribution to a more holistic understanding of economic interrelationships. Based on a purposive sampling strategy, existing forms of subsidies are identified and categorized along the value chain. Focus is on industrialized countries, for which more information is available. Results indicate that significant subsidies are extended to manufacturers, infrastructure providers and airlines. These contribute to global economic growth related to aviation, but they also influence capacity in global aviation markets, strengthen the market position of individual airlines, and create conflicts between airlines and the countries they are based in. While the actual scale of subsidies cannot be determined within the scope of this paper, it provides a discussion of options to empirically assess the effects of aviation subsidies on market outcomes. Finally, general conclusions regarding the impact of subsidies on the overall sustainability of the air transport sector are drawn: These include rapidly growing capacity in the aviation system, economic vulnerabilities, and negative climate change related impacts. Results call for a better understanding of the distribution, character and implications of subsidies.