CHAPTER 4

The Role of the Airport in the Local Economy

Chapter 2 discusses how population and economic growth drive both economic activity and higher aviation emissions if they are not otherwise abated. This chapter focuses on new research that may help airports supplement their own economic impact studies to better explain to stakeholders and the community the important role that both commercial service and GA airports play in the local economy. The results developed will help airports address one of the important questions growing out of the climate change discussion: Since aviation climate effects are so expensive to abate, what benefits would be lost by curtailing aviation activity?

During the case studies conducted for this engagement (described in Chapter 7 and in detail in Appendix B), some airports expressed reluctance to link economic activity with climate discussions. In general, the more the local community was engaged in the climate change issue, the less willing the airport was to make the linkage. Instead, airports often choose to say that they “will accommodate growth in aviation in the most responsible and climate-friendly manner.” However, the positive economic consequences of growth may still play an important internal role in setting airport policies and goals. A different interpretation of the previous statement is that “the economic impact is why it is important (and perhaps even cost-beneficial) for a community to invest in mitigation so that aviation can continue to grow.”

Summary of Economic Impacts

Airports produce very impressive economic impact results. For example, ACI recently published an economic impact study on the national impacts of commercial airports. The following is an excerpt from that study.

Many states and larger commercial service airports have also produced economic impact studies. It is important to define terms before discussing how the results of these studies can contribute to airport communications.

How Do Economic Impact Studies Work?

Economic impact studies measure three kinds of impacts:

• Direct Impacts are the employment, payroll, spending, and annual economic activity associated with the four sources of economic activity that occur on airports: the airport itself; its tenants, including airlines; the FAA tower (if applicable) and other government employees, including the Transportation Security Administration; and visitors who arrive by air and spend money in the local economy. All direct impacts for an airport or airport system start with the daily operation of the airport(s) and consider activities needed to serve customers and aircraft using each airport; steps the airport(s) take to maintain, improve, and expand their infrastructure; and spending associated with visitors who arrive via the airport(s). Direct employment is a main driver of these impacts since it creates jobs and local household income. Spending, including by visitors, drives direct output or dollars spent locally.
• Indirect Impacts, a type of multiplier effect, measure how the direct dollars created by airport activity are re-spent in the local and regional economy, resulting in more jobs and more household income. For example, contractors hired to build a new runway at an airport would have to hire law firms, land management companies, and other professionals to accomplish their project. These are indirect impacts.
• Induced Impacts constitute another type of multiplier effect and account for people who work at the airport or on airport projects and earn wages that are then spent on other things like entertainment, health care, and so forth. Induced effects are a measure of the jobs, income, and dollars spent in the economy from these activities.

The larger and more integrated the local and regional economies are, the less “leakage” there is when counting the indirect and induced impacts. Leakage refers to dollars that are re-spent outside of the region. For example, leakage would occur if a law firm hired by an airport contractor employed lawyers who resided outside of the region.

There are examples of national, state, and local airport economic impact studies. The main methodological distinction between them is the definition of the economy affected by indirect and induced impacts.

• National studies focus on the economic impacts throughout the country. For example, if a household in Dallas earns a dollar of income because someone has a job at DFW Airport, and the household then spends the dollar in Boston, the benefits would be counted in both Dallas and Boston.
• State studies focus on impacts contained within the state. In this case, the dollar spent in Boston by the Dallas household would not count (as it would “leak out”) for the Texas state economy, but a dollar spent in Houston would be counted in a state study.
• Local or regional studies focus on tracking indirect and induced impacts at the local or regional level, usually defined by counties surrounding the airport. If the Dallas household spent a dollar in the Dallas metro area, those effects would be counted in this type of study but not if the dollar were spent in either Houston or Boston.

Most economic impact studies developed by airports have a local or regional focus. ACRP published an excellent synthesis of these models, which provides more details on the general methodologies (54).

New Research to Supplement Airport Economic Impact Studies

This section describes three new measures of economic impacts that were developed from research done for this project. All three economic measures address the question raised earlier: What benefits would be lost by curtailing aviation activity?

These three measures directly address statements some organizations have made (see Chapter 5) to curtail aviation activity in order to address climate change:

• Expected Additional Economic Impacts Due to Growth in Activity: The incremental increase or decrease in future regional jobs, output, and income due to small changes in enplanements, operations, and/or based jet aircraft. These impacts are driven by local transactions in the region. If aviation activity increases (decreases) according to FAA’s Terminal Area Forecast (TAF), there will be more (less) aviation-driven jobs, income, and gross output in the region.
• Cost to Consumers If They Made the Same Trip Using Another Mode of Transportation: If all worldwide commercial airport operations were curtailed, how much more costly would trips be that were made by local consumers in 2019 if they were made with alternative modes? These impacts are a measure of how much more efficient aviation is relative to other modes in producing commercial trips that local consumers take from the airport. It does not measure how many fewer trips would be taken if costs via another mode were substantially higher. The model developed also reports the incremental emissions that would result if another mode were used instead of aviation.
• Cost to Consumers If They Made the Same Trip Using Another Airport: If only the local commercial airport operations were curtailed, how much more would it cost local consumers to make the same trips they took in 2019 via an alternative airport with about the same or better service levels? These impacts measure how much more efficient the local airport is in facilitating the commercial trips local consumers take from the airport instead of the next closest airport that produces a similar level of service. It does not measure how many fewer trips would be taken if consumers had to use the alternative airport. The model also reports the incremental emissions that would result if another airport were used instead of the local airport.

Details on how these measures were estimated can be found in Appendix A of the Guide. Appendix A also discusses how to update the models. In this section, the focus is on interpreting the results.

Expected Additional Economic Impacts Due to Growth in Activity

Chapter 5 discusses statements made by some organizations that because abatement costs for aviation are so high, the only way to reduce emissions is to reduce activity—that is, flights and passengers. This section describes a way to estimate the costs to the local economy of losing projected future growth.

The following estimates of economic benefits use a model to estimate how jobs, household income, and total expenditures will grow in the region as a result of activity growth. The model also provides separate estimates of the benefits of new types of air service at commercial service airports. Details on the methodology can be found in Appendix A.

Figure 4-1 shows an estimate of the average annual jobs, household income, and local expenditures gained or forgone due to additional or reduced enplanements at a commercial airport with more than 2,500 enplanements per year.

On average,

• 100 additional enplanements produce one additional job in the region and
• One additional enplanement produces $437 in annual income in the region and $1,299 in additional regional output.

It is important to note that the values in Figure 4-1 are annual. The net added job(s), income, and output will remain in the region so long as enplanements remain.

Figure 4-2 provides a different set of economic benefits that an airport would gain (or lose) due to changes in air services. They are based on the connectivity benefits estimated in ACRP Report 132 (55). This type of analysis is relevant to provide information on the consequences if the airport stops promoting new air services or loses air services to some areas. The example is for Austin, Texas, and is based on its January 2023 Official Airline Guide (OAG) schedule.

Looking at Figure 4-2, the first row says that adding nonstop service to one more domestic city (column c) would add $72.7 million (column e) annually to Austin’s GDP. The second row says that adding nonstop service at least once per week to an international city would add $341.3 million to the regional GDP. These estimates depend importantly on existing levels of air service and the size of the local economy. For example, Austin already has nonstop service to all the major connecting hubs in the United States, so there is a 0% change in the GDP from trying to add service to another domestic hub city. The details on how to apply this methodology are contained in Appendix A.

Figure 4-3 provides information on the average regional economic benefits due to the growth in activity and growth in based jet aircraft for a GA airport. The economic impacts of each are separately reported in the figure.

Figure 4-3 illustrates that, on average,

• 183 additional GA operations produce one job in the region;
• Each additional GA operation produces $231 in regional income and $657 in additional regional output; and
• An additional jet at a GA airport results in 14 added jobs, $666,126 in added income, and over $2.1 million in additional regional output.

Costs to Consumers If They Made the Same Trip Using Another Mode of Transportation

The values shown in Figures 4-1, 4-2, and 4-3 focus on the contribution of the airport to the local and regional economy. They demonstrate that airports are an important driver of local economic activity, household income, and jobs. If activity were to slow down for whatever reason, some of this economic activity could be lost to the community (unless something else took its place).

The discussion now turns to the costs to consumers if they opted or were forced to travel via different modes of transportation. There would be two impacts to focus on:

• First, if a consumer selected another mode, it would have to be ground based. The out-of-pocket cost to the consumer may be higher or lower than the fare they pay to fly.
• Second, in most cases, except for very short trips, the elapsed time of travel via air will be less than via a ground-based mode. Consumers would thus spend more time traveling, and this time can be valued using U.S. DOT value-of-time estimates.

The sum of these two items is called the full price of travel (FPT) and usually includes higher out-of-pocket costs and higher time-related costs. The higher FPT would cause consumers to change where they travel or even whether they travel at all. The project team does not try to estimate this impact here. Instead, the team wanted to identify how much more efficient air transportation is than available alternatives for the same trips consumers have already taken. In effect, consumers would be poorer by the increase in the FPT if the air mode were not available.

Details on how these estimates are made can be found in Appendix A.

Table 4-1 shows the average results for large, medium, small, and nonhub airports broken down by the changes in out-of-pocket and time-related costs as well as the change in the FPT.

Table 4-1. Average increase in FPT via alternate mode by type of hub.

The increases in out-of-pocket costs make intuitive sense. Most trips made by air are to distant places. For example, taking a car to a domestic destination or a boat overseas will be more expensive than flying when taking into account the life cycle cost of the automobile, assuming two passengers per trip, and the added expense of accessing a second mode for intercontinental trips.

To understand the time-related costs, it is important to understand how they were derived. Two explanations are provided:

• For some domestic and nearby international trips, driving is the alternative mode of travel. A consumer might spend 1 hour flying to a city 350 miles away but 7 hours driving. The time-related penalty would show a relatively large percentage increase.
• For very distant places, like Asia, the consumer making the same trip via an alternative mode is assumed to travel by auto to the closest port city and then board a cruise ship. It will take many days to make the trip to Asia, Europe, or Africa for example. The time-related costs count only 8 hours of each day of ship time. The other 16 hours are assumed to be consumed sleeping and in other types of activities (working, socializing, eating, etc.) that the consumer would do anyway. This last assumption probably severely understates the time-related cost penalty of alternative modes for very long trips.

Example of the Advantage of Aviation Versus an Alternative Mode

Take a simple example of a trip from the East Coast of the United States to Europe. Via commercial aviation, the trip might take 8 hours and cost about $800. The FPT would be the fare plus the value of consumer time, which, using the U.S. DOT value of time of $47.10 per hour, would be $377; in this example, the FPT via aviation would be $1,177 ($800 in out-of-pocket costs + $377 in time-related costs).

If aviation was not available, the trip would be taken by ocean liner. Assume the consumer resides in a port city and incurs no additional costs to get to the ship. The typical time to cross the Atlantic would be 6 days or 144 hours. A consumer would be devoting 6 days to make the Atlantic crossing instead of 8 hours. Using the U.S. DOT’s value of time of $47.10 and assuming a passenger would use 8 hours a day to sleep and 8 hours a day for personal time whether they were traveling on an ocean liner or at home, they would invest at least 48 hours (8 hours x 6 days) traveling on a cruise ship, which would be worth $2,261. A typical cost on the Queen Mary would be $1,600 one way. So, the FPT for the trip (money plus the value of time) would be $3,861.

In this example, aviation would save the consumer: $2,684 each way ($3,861 via ocean liner minus $1,177 via commercial aviation) or $5,368 for the round trip. This example illustrates the vast increase in travel productivity made possible by aviation, especially for long-distance trips.

These alternative mode estimates are not available for GA airports because the trips from GA airports are not as well documented in terms of aircraft type, origins, destinations, and the number of passengers.

Table 4-1 also reports the estimated percentage change in CO₂ emissions that would occur by traveling via alternative modes. The results are based on the travel distances for the trips made from the airport, and the U.S. Environmental Protection Agency (EPA) measures of CO₂ emissions by mode and other source material reported in Table 4-2 and Figure 4-4. The large increases in emissions reported in Table 4-1 are due primarily to the assumed reliance on ocean liners as an alternative to air transportation for intercontinental trips (except within the Americas). Per-passenger mile, ocean liners emit twice as much GHG emissions on long-haul trips (over 2,300 miles) than the average commercial aircraft (see Table 4-2).

The conclusion from Table 4-1 is that aviation is less costly for consumers and produces fewer emissions than alternative modes of transportation for trips typically taken from the airport.

Table 4-2. Unit measures of CO₂ emissions by mode.

SOURCE: EPA 2022 GHG emission-factors-hub.xls; NREL Annual Technology Baseline: https://atb.nrel.gov/transportation/2020/jet_fuel; https://airinsight.com/the-pending-newfaa-weight-balance-rules/; ICCT: https://theicct.org/marine-cruisingflyingmay22/#.~.text=So%2C%20if%20one%20person%20goes,2%/20on%20an%20average%20airline.

Costs to Consumers If They Made the Same Trip Using Another Airport

It is also important for each airport to communicate the efficiency their community gains by using the local airport instead of the closest alternative airport with approximately the same service level. This is relevant because in some communities there may be movements to curtail operations or even shutter the local airport because of concerns about climate change, noise, or other issues. It is important for the community to understand how much more costly it is (both in terms of FPT and emissions) when local passengers choose to fly from a nearby, larger airport—a form of leakage as previously discussed that is an air service problem often encountered by small and nonhub airports.

Preserving or improving the level of service would be an important criterion consumers would consider when selecting an alternative airport in the event their local airport closed or its operations were curtailed. For example:

• Consumers using an FAA large hub would be best served by accessing and flying out of the closest large hub. Both hubs are likely to produce large numbers of desirable, nonstop flights to more places than smaller airports.
• Consumers using a small hub airport might also opt to fly out of a nearby large hub; they would experience higher access costs (time and money) but enjoy and save time taking more nonstops than available at the local airport.

The measures presented here consider the out-of-pocket costs of driving or otherwise accessing a more distant alternative airport plus the value of the time required to access the alternative. The cost also takes account of whether consumers would enjoy more nonstop services (fewer connections) at the alternative airport, in which case they would save the time that would have been spent making those connections if they had flown via their local airport. These changes in costs are then compared to the actual consumer out-of-pocket (fare) and time-related costs for trips taken from the airport.

Table 4-3 shows the results by FAA large, medium, small, and nonhub airports. The table reports the percentage of change in the time-related costs, out-of-pocket (cash) costs, and FPT when using the closest airport with at least comparable service (same FAA hub-type or better).

Table 4-3 also reports the estimated increases in the tons of GHG emissions due to driving to a more distant airport.

The results reported in Table 4-3 demonstrate that local consumers would spend on average 19% to 29% more (on an FPT basis) when flying from an alternative airport. This is made up of 10% to 15% higher out-of-pocket costs and 29% to 45% higher time-related costs. The time-related costs account for the offsetting benefit that some domestic passengers gain by using the alternate airport; even accounting for that, local passengers incur net out-of-pocket and time-related costs.

Table 4-3. Average increase in FPT via alternate airport by hub-type.

Table 4-4. Increase in FPT due to using an alternate airport.

Tables 4-4, 4-5, and 4-6 look behind these findings to add color to the commentary.

First, the cost of using an alternative airport depends in part on the quality of service available at the alternative versus the subject airport. Table 4-4 uses FAA hub classifications for both the subject airport and the alternative used in the analysis. For example, if the subject airport is a medium hub and the alternative airport is a large hub, then on average the FPT from the alternate would be 21% higher.

In most but not all cases, when the alternate airport has a higher hub classification than the subject airport, the cost of using the alternate is lower than otherwise. This makes sense because better service at the alternate likely includes more nonstops to more places, which will offset some of the penalty of added airport access cost and time.

Table 4-5 shows that in most cases, even when an alternate airport has many more nonstop services, consumers usually save time overall by flying locally. This means that in almost all cases, the added access time needed to reach an alternative airport exceeds the time savings due to having more nonstops at an alternate.

Finally, it is interesting to look at the dispersion of the results of the analysis by breaking them into quintiles from the smallest increase in the FPT to the largest. This is shown in Table 4-6.

The dispersion of results is greatest for large-hub airports. This is attributable to the assumption that the alternate for a large hub is (in most cases) another large hub. As a result, for example, using Newark Liberty International Airport as the alternate for JFK International Airport only a few miles away would result in a relatively small increase in the FPT. But it is far more difficult to replace the quality of service in Las Vegas, which is 283 miles from Los Angeles. Of course, different assumptions about alternatives would yield different results.

The dispersion across other hub-types is more muted simply because there are more likely to be closer alternate airports that provide comparable service. However, the trend is clear that replacing the service at a more isolated airport will be more costly in terms of out-of-pocket costs, time, and GHG emissions.

Again, alternative airport measures are not available for GA airports because of a lack of comparable information.

Table 4-5. Airports where passengers save time by flying locally.

Table 4-6. Average increase in FPT of traveling from another airport by quintile.

The materials in this chapter can be used to develop effective airport communications, including in response to or in anticipation of organizations concerned about aviation activity because of the effects on climate change. Appendix A outlines how an airport can undertake similar studies with updated information on schedules and assumptions about alternates that make the most sense given the message to be communicated to such organizations. The next chapter reviews what some of these groups believe and want.