Cost Benefit Analysis of Air Transportation Infrastructure Investment

Komazin, Lucija

Title (croatian)

Analiza koristi i troškova ulaganja u zračnu i prometnu infrastrukturu

Mentor

Saša Drezgić (mentor)

Defense date and country

2018-06-12, Croatia

Abstract

In today’s dynamic and complex economic environment infrastructure investments present a key precondition for efficient and effective functioning. As such complex public ventures involve originally high financial outlays, majority of countries find hard time in initial realization. When it comes to the project preparation and development there is a need for significant knowledge and understanding of latest trends in macroeconomic environment. Appraisal of the projects is one of the most... More important things before their application. Investments in transportation infrastructure like roads, railways, airports and ports are one of the most substantial for ongoing economic growth. In recent years air traffic market has attracted the highest financial inflows and has become one of the top revenue generating economic areas. Constant passenger demand has increased the need for modernization of existing facilities as well as building of new ones. Globalization and technological advancement enabled faster transfer from one destination to another which benefits not only travelers but also businesses since better connectivity creates an opportunity of attracting foreign investments. Also, with traffic connectivity development, tourism blooms which means more revenues and a better country performance. More advanced technology investments in airports enable faster service providing, thus people tend to travel more. On the other hand, air traffic has its drawbacks. Safety and environmental effects significantly affect functioning flow, thus some of the world most popular organizations like International Civil Aviation Organization and International Air Transport Association have brought package of measures to stabilize global environment. Year by year, aircraft companies lower their ticket fares so traveling by air becomes accessible and affordable to wider range of people. Usually, such complex and costly infrastructural projects like investing in modernization of an airport in case of Losinj Airport or even building a new one, require countries or local municipalities to seek financial help from subordinates. As the Republic of Croatia is a part of European Union many state projects can be easily financed with the supportive subsidies EU provides on member’s behalf. However, there is a need for good planning basis that would present the most advantageous way of modeling and project implementation, so the benefits can be recognized. Among the numerous tools of project appraisal public sector is mostly using Cost Benefit Analysis that serve in developing professional study upon investment benefits in communal projects. On the one hand, all the revenues and benefits of the venture are collected, and on the other hand all the costs and losses of the venture. The gathered data must be quantified and reduced to an equally measurable unit, most often money. The biggest chances of the Mali Losinj Airport project development include strengthening the domestic and regional air traffic market, the development of networking infrastructure like road modernization on the island, the arrival of low-carriers, while the biggest threats are connected to noise pollution since the airport is close to the urban area. It is known that the European Mediterranean area is one of the most touristic receptive regions in the world. It is especially important for Republic of Croatia since it has influenced positively in development of the national tourism. Croatian beauties and natural resources are of high attractiveness, so it welcomes tourists from all over the world. Worldwide air traffic data records high rates of annual growth, especially in the part related to tourist routes, therefore no doubt that this type of industry will emerge even more in future years. In order to increase the share of air traffic in the arrival and departure of tourists in relation to the existing situation, it is necessary to focus on distant touristic markets like United States, China, Korea, Australia and enhance infrastructural investments in modernization of air transportation infrastructure that will stimulate higher financial inflows in the state budget. Less

Language

english

Study programme

Title: Business economics; specializations in: International Business (held in English)
Course: International Business (held in English)
Study programme type: university
Study level: undergraduate
Academic / professional title: sveučilišni/a prvostupnik/prvostupnica (baccalaureus/baccalaurea) ekonomije (sveučilišni/a prvostupnik/prvostupnica (baccalaureus/baccalaurea) ekonomije)

File origin

Born digital

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