When it comes to the economics of Britain's aviation industry, it's a question of geography. Where once it was Britain's maritime strength that sustained the country's economic links with the world, now that burden has passed from the seas to the skies.

Aviation is a big player in UK plc. The hi-tech wings for Airbus passenger-jet aircraft - the only commercial jet manufacturer to rival mighty Boeing - are built in Britain, also home to Rolls-Royce one of a handful of world-class aero-engine manufacturers. Agusta-Westland, part-based in the west country, makes helicopters considered fit for the US president. Britain boasts two long-haul carriers, British Airways and Virgin and its short-haul low-cost market is vibrant and hugely competitive. On top of that, Heathrow is the busiest international airport in the world, handling 67 million passengers last year.

According to a recent publication put together by the industry itself, aviation in the UK supports 675,000 jobs, adds £14bn to the economy and brings in visitors who spent around £10bn. But does the industry's economic importance mean it has been given an easy ride by governments down the years?

Compared to the automotive industry it looks distinctly fiscally favoured. Drive a vehicle on Britain's roads and you are asked to pay tax in the shape of both the road fund licence and hefty fuel duties at the pump. Contrast that with the airline industry. Not only does it not pay tax on aviation fuel but, when prices started to soar on the back of escalating oil prices, some airlines simply slapped a fuel "tax" on passengers to help meet the cost increases.

The industry, which does stump up almost £1bn in air passenger duty, reckons it pays its way and that comparing fuel tax regimes is simply unfair. Philippe Rochat, executive director of the Air Transport Action Group, a consortium of aviation industry organisations, argued in a recent letter to the Financial Times that the idea that aviation was undertaxed was a myth. "While aviation fuel is not taxed on international services, aviation pays for its own infrastructure and a lot more. Taking into account all the taxes and charges paid by all transport modes, aviation, unlike other transport, is making a substantial net contribution to public budgets."

The importance of air travel was underlined in the white paper on air transport which was published at the end of 2003. It noted: "Air travel has increased five-fold over the past 30 years, and demand is projected to be between two and three times current levels by 2030. Some of our major airports are already close to capacity, so failure to allow for increased capacity could have serious economic consequences, both at national and at regional level."

Earlier this year airports operator BAA warned that capacity constraints at its London airports would limit growth. Transport expert Christian Wolmar, however, believes that the industry is getting off lightly. The white paper, he says, was "pretty much a walkover for the aviation industry ... it was the same old predict and provide philosophy."

At the same time the industry is showing a growing awareness that it will not be able to remain outside the debate on climate change. Many argue that a tax on fuel simply would not work unless every country signed up for it - hence the decision to opt for passenger duty. If Britain acted unilaterally, airlines would simply take on fuel at the cheapest point. Instead, the idea of an emissions trading scheme - where airlines would have limits on carbon dioxide emissions and have to buy certificates for any excess - is gaining ground.

The Treasury insists that making direct comparisons between taxation in different transport sectors "is not always appropriate", but acknowledges the aviation industry has more to do to cover its environmental costs "especially as these grow in future as aviation demand expands".

Whatever the outcome of the fuel debate, however, the aviation industry will be under increasing pressure to develop in a "sustainable" manner but its economic clout will mean that the industry will always be in a strong position to press its case.