ACRP Project 03-28The Role of U.S. Airports in the

National Economy

1

IntroductionPART 1

2

Purpose of Research

Distinguish between the role of airports in the national economy and local, regional and state airport economic impact reports.

Estimate the national economic contribution of the U.S. airport system to the national economy

Estimate how changes in airport services (nonstop flights, air cargo transported and cost of air travel) affect the national economy

3

Research Questions

Four questions were investigated to trace the impacts of U.S. airports on the national economy:

What are the national economic impacts of U.S. airports?

To what extent do improvements in national and international connectivity add to the national productivity of U.S. industries?

What is the inter-relationship between air cargo and the U.S. industrial base?

How do changes in domestic and international airfare effect the national economy?

4

Insight Through Complementary Analyses The static analysis of the national economic impacts of airports

reports the economic footprint of airports within the national economy. This is similar to traditional methods of accounting for economic impacts of airports or airport systems, except it does not include redistribution of economic effects within the United States.

The dynamic analysis of connectivity estimates the growth in GDP resulting from a change in nonstop service among airports. Connectivity refers to the total resource costs in time and out-of-pocket expenditure to move between two places. The connectivity analysis estimates the economic impacts of cost changes due to changes in connectivity.

The dynamic analysis of air cargo estimates the interrelationship between air cargo and industry productivity as measured by changes in GDP.

The dynamic analysis of airfare traces the difference between what consumers are willing to pay for a good or service and what they actually pay. In the context of air service, the difference between willingness to pay for air service and what is actually spent leaves money in households’ “wallets,” and is available to be spent in the general economy on non-aviation goods and services.

5

Overview of Role of Airports in the National Economy

Assess Contribution of Airports to National Economy

On- Airport Aviation Related Activity

Inflow of Income to the U.S. Due to Airports

• Sale of Exports to International Markets

• Spending by International Visitors in U.S. Economy

Determine How Changes in Airports/Aviation Affect U.S.

Economy

Connectivity• Improved Connectivity by

Nonstop Flights • Relationship of Air Cargo and

Industry Productivity

Airfares• Lower Costs of Air

Transportation as a Consumer Benefit

6

1

2

3

STA

TIC

DY

NA

MIC

Definitions of Dollar Terms Used Throughout this Presentation

Dollar Measurement

Definition

Labor Income Compensation for work, including gross wages, salaries, proprietor income, employer provided benefits and taxes paid to governments on behalf of employees.

Value Added/GDP The value added of a company or an industry consist of compensation of employees, taxes paid on production and imports, and gross operating surplus. Value added equals the difference between an industry’s gross output and the cost of its intermediate inputs. Value added for companies across industries and across the U.S. is “gross domestic product.”

Output Value added plus the cost of its intermediate inputs (including energy, raw materials, semi-finished goods, and services that are purchased from all sources). This is largely the value of sales or receipts and other operating income along with any inventory change.7

FindingsPART 2

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High Level ResultsContribution to U.S. GDP

Analysis Direct Contribution

Total Contribution (Including Direct, Indirect

& Induced Multiplier Effects)

Static Analysis

U.S. Airports $247 Billion $768 Billion

Dynamic Analyses

1% Increase in Nonstop Connectivity Among Airports

$1.5 Billion $4 Billion

1% Increase in Air Cargo Transported (Weight) $742 Million $2.5 Billion

1% Reduction of Airfare for Personal Travelers $249 Million $700 Million

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The national contributions of 1% changes in connectivity and air cargo are estimates based on a sample of metropolitan regions 20 regions and should be considered illustrative. Values are in 2010 dollars.

Economic Impact Analysis

Static contribution of U.S. Airports in the national economy

Similar to airport, regional, and state economic impact studies Generally measures jobs, labor income, value

added, and business sales (total output) generated by: airport administration, businesses and government agencies located on-airport, on-airport construction spending, off-airport spending by visiting passengers, the contribution to industry of providing air cargo services, and, at times, the impact of off-airport aeronautical industries.

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1

Economic Impact of U.S. Airports on the National Economy

11

National Economic Impact of

U.S. Airports

On-Airport Transactions

International Air Cargo

Off-Airport Spending of

International Air Arrivals Net of

Spending by U.S. Residents on International

Travel

NOT COUNTED: Civil Aviation –

Aircraft Manufacturing & Parts

Domestic Air Cargo Off-Airport Spending

of Domestic Air Visitors

How is a National Economic Analysis of U.S. Airports Different than an Airport Study in a Region or State?

Measures what airports add to the national economy:1. On-airport commerce

2. International cargo (brings income to the U.S. from other countries)

3. Spending of international visitors who arrive by air

Does not include flows between domestic (U.S.) airports, which redistributes impacts within the U.S.:4. Domestic air cargo are purchases and sales within the U.S.

5. Spending of domestic air visitors represent shifting of spending from one U.S. region to another

Also, does not include impacts of related off-airport aeronautics industries.

12

Airline Employment andCommercial Airport Administration (2011)

13

Misc Categories & Other10%

General managers

1%

Statistical employ-

ees3%

General aircraft traffic

handling em-

ployees5%

Cargo handling

em-ployees

6%Mainte-nance em-

ployees8%

Pilots & copilots11%

Passenger handling employees14%

Transport related employees14%

Passenger/general services & administra-tion14%

Airport operation workers

15%

Profile of International Visitor Spending and Direct Jobs From the Spending

14

Lodging, $8.4, 29%

Food services and drinking

places, $6.5, 22%

Local Surface Transportation,

$1.6, 5%

Amusement/entertainment, $3.3, 11%

Restaurant

Hotel

Entertainment

Retail

Transportation

Travel Arrangement

0 50,000 100,000 150,000

109,116

72,482

50,562

30,257

Jobs

Visitor spending represents the net difference of spending by international travelers to the U.S. minus spending by U.S. residents traveling internationally

JobsSpending

2,731

18,732

Retail, $6.8, 23%

Domestic Air Transportation, $2.3, 8%

Travel agents,

$0.4, 2%

Direct Impacts of Airports on National Employmentby Source (in total & by percent)

15

Air Trans-porta-tion;

458000; 21%

Support Activities

for Air Trans-porta-tion;

159000; 7%State,

Local and Fed-eral Em-ployment including

TSA; 150700;

7%Non-Aeronau-

tical Rev-

enues; 87300;

4%

On Air-port Con-

struction; 84200;

4%

International Visitor Spend-ing; 314100; 14%

Interna-tional Air Cargo,

918,900, 42%

Total Direct Employment on National Economy = 2,172,200

Total National Economic Impacts of AirportsIncluding Direct and Multiplier Effects

Output

Value Added (GDP)

Labor Income/Pro

fits

16

Total Economic Impacts of Airports on the U.S. Economy

17

Economic Impact Source

Jobs Labor Income

Value Added

Output

On-Airport Activities

2,502,600 $144.9 Billion

$242.0 Billion

$448.9 Billion

International Visitor

Spending

518,400

$19.2 Billion

$31.6 Billion

$52.6 Billion

International Air Cargo

4,607,800 $288.4 Billion

$494.8 Billion

$1.096 Trillion

Total 7,628,800 $452.5 Billion

$768.4 Billion

$1.597 TrillionTotal impacts include direct, and indirect and induced multiplier effects. Employment is rounded to the nearest 100, and dollars

are in 2010 valueSources: BEA, Office of Travel and Tourism Industries of the U.S. Department of Commerce, BLS-CES, U.S. Census Bureau, U.S. Budget, FAA Form 127 & National Plan of Integrated Airport Systems (NPIAS) Report, ACI-NA, U.S. Department of Commerce data and other federal data assembled by IMPLAN. LLC. Calculations by EDR Group using 2012 National IMPLAN model.

Total Impacts of U.S. Airports as Percent of U.S. Economy

18

Includes direct impacts & indirect and induced multiplier effects. Calculations based on national data sets and U.S. Bureau of Economic Analysis, using IMPLAN, LLC.

Employment Labor Income GDP Total Output

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

4.3%4.8% 4.9%

5.8%

Pe

rce

nt

of

U.S

. E

con

om

y

Meta Analysis of Airport Economic Impact Studies

Assembled 1,000+ airport economic impact studies

Studies varied by time, location, classification of airports & methodologies

Objective was to compare this approach to the assembly of the preceding national databases for the 3,330 NPIAS airports

Objective to estimate economic output generated “on-airport”

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On-Airport Calculation by Regression AnalysisExplaining the Levels of Revenues Generated on Airports by Examining a Series

of Independent Variables (Characteristics of Airports and their Regions)

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NPIAS* Database(3,330 airports)

•Airport Facility Descriptions•Classification•Runway length(s)•Location•Tower, etc.

• Aviation Activities•Operations•Enplanements

Additional Data• Socio-economic data per

county/MSA**• Income• Poverty• Population• Per capita personal income• Distress composite index (based

on ARC)• Employment/industry

*National Plan of Integrated Airport Systems Report, Federal Aviation Administration**The United States Office of Management and Budget designates metropolitan statistical areas (MSA) . Each MSA must have at least one urbanized area of 50,000 or more inhabitants.

Independent Variables Considered

Estimates of Total On-Airport Impacts

Basis of Analysis JobsLabor Income

Value

Added

Output

Method 1

Aggregated

Databases

2.5 millio

n

$145 billion

$242 billion

$449 billion

Method 2Regressio

n Analyses

2.9 millio

n

$164 billion

$261 billion

$471 billion

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Excludes off-airport visitor spending and cargo impacts

On-airport impacts are validated by the regression analysis

Dynamic Analyses Complement Static National Economic Impacts

Dynamic: if changes at airports occur, the consequence will be increases in national productivity across U.S. industry sectors.

The Effects of Three Potential Changes Are Explored:

1. Strengthening connections among U.S. airports and between U.S. and international airports

2. Increasing air cargo transported through U.S. airports

3. Decreasing airfares for personal travelers

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Three Types of Dynamic Analyses

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ELEMENT EFFECT ECONOMIC IMPACTS

Initial from Analysis Subsequent Modeling

1. Connectivity of Airports2. Inter-relationship of air cargo and industry productivity3. Impacts of changes in air travel costs

Airport Connectivity

Connectivity Improved connectivity has direct

effects (costs and time) and can have indirect effects, for example, by increasing accessible market size and reducing costs in the supply chain.

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2

Key Connectivity MeasuresTwo or More Daily Nonstop Domestic Flights

International Nonstop Destinations

Domestic Nonstop Destinations

Percent of the World GDP Served DailyFive or More Daily Nonstop Domestic Flights

Airline Hubs Served-Domestic

International Nonstop Departures

Percent of the World GDP Served Nonstop

Domestic Nonstop DeparturesPercent of the World GDP Served Twice or More DailyNumber of Airlines

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Note: 18 connectivity variables were analyzed. The table above shows the variables that proved significant for one or more industries.

Regions for Connectivity & Cargo AnalysesCode/ Multi-

Airport Region

Airport/Region Airports in Multi-Airport Regions

SF Bay San Francisco Bay Area SFO, OAK, SJCChicago Chicago metropolitan region ORD, MDW

ATLHartsfield-Jackson Atlanta International Airport

 

CVGCincinnati/Northern Kentucky International Airport

 

STL Lambert-St. Louis International Airport  PIT Pittsburgh International Airport  RDU Raleigh-Durham International Airport  DEN Denver International Airport  

Phoenix Phoenix metropolitan region PHX, AZASLC Salt Lake City International Airport  

Boston Boston metropolitan region BOS, MHT, PVDPHL Philadelphia International Airport  DTW Detroit Metropolitan Wayne County Airport  SAN San Diego International Airport  PDX Portland International Airport  TPA Tampa International Airport  MCI Kansas City International Airport  TUL Tulsa International Airport  SAT San Antonio International Airport  BNA Nashville International Airport  

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11 Industry Sectors Included in Connectivity Analysis

NAICS Code Sector

31-33 Manufacturing42 Wholesale Trade51 Information52 Finance and Insurance53 Real Estate and Renting and Leasing54 Professional, Scientific, and Technical Services55 Management of Companies and Enterprises

56 Administrative Support, Waste Management & Remediation Services

71 Arts, Entertainments, and Recreation72 Accommodation and Food Services

11, 21, 22, 44-45, 48-49, 61, 62, 81 and 92

Other: Agriculture, Forestry, Fishing & Hunting; Mining, Quarrying, and Oil & Gas Extraction; Utilities; Retail Trade; Transportation & Warehousing; Educational Services; Health Care and Social Assistance; Other Services; and Public Administration

27

Impacts of Connectivity Variables Differ According to Industry Sector

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IndustryNumber

of Airlines

Domestic Nonstop

Departures

Airline Hubs

Served-Domesti

cManufacturing $158 $85  Wholesale Trade $43 $51  Information     $24Finance & Insurance   $151 $226Real Estate, Rental & Leasing $95  Professional Scientific & Technical Services   $57 $112Management of Companies & Enterprises     $8Administration & Support Waste Management Services   $11  Art, Entertainment & Recreation   $3Accommodation & Food Services   $0.1  Other**   $3  Total $201 $453 $374

Example of Findings:Dollars in 2010 Millions of GDP Generated by 1% Increases in the 3 connectivity variables shown

** Other represents the aggregation of 9 economic sectors shown on Slide 27.

Direct Value Added per Industry Sector in 20 MSAs Based on 1% Increases of Connectivity Variables ($millions)

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Note: Impacts on each industry sector vary according to connectivity variable. ** Other represents the aggregation of 9 economic sectors shown on Slide 27.

IndustryNumber of

Airlines

Domestic Nonstop

Departures

Airline Hubs

Served-Domestic

Domestic Nonstop

Destinations

Two or More Daily Nonstop

Domestic Flights

Five or More Daily Nonstop

Domestic Flights

International Nonstop

Departures

International Nonstop

Destinations

% World GDP

Served Nonstop

% World GDP

Served Daily

Manufacturing $158 $85   $123 $356     $172    

Wholesale Trade $43 $51   $30   $64   $38   $6

Information     $24   $19 $39 $23   $41

Finance & Insurance   $151 $226   $99   $42     $34

Real Estate, Rental & Leasing

$95   $176 $180 $49   $236    

Professional Scientific & Technical Services

  $57 $112       $82     $153

Management of Companies & Enterprises

    $8 $26     $7 $18 $16  

Administration & Support Waste Management Services

  $11   $33   $23 $95 $51  

Art, Entertainment & Recreation

  $3 $4   $7       $14

Accommodation & Food Services

  $0   $20           $19

Other**   $3   $272     $100   $95

Total $201 $453 $374 $686 $654 $119 $192 $683 $68 $361

Total Economic Impacts for the 20 MSAs Driven by a 1% Increase in Each Variable Including Direct & Indirect and

Induced Effects

Variable Jobs Labor Income Output

Value Adde

dNumber of Airlines 7,500 $471 $1,725 $794

Domestic Nonstop Departures 9,900 $614 $2,025 $1,118

Airline Hubs Served-Domestic 7,600 $493 $1,340 $831

Domestic Nonstop Destinations 17,400 $963 $3,030 $1,67

6 Two or More Daily Nonstop Domestic Flights

19,200 $1,161 $4,455 $2,13

5 Five or More Daily Nonstop Domestic Flights 1,900 $106 $336 $221

International Nonstop Departures 4,400 $267 $689 $429

International Nonstop Destinations 17,500 $949 $3,240 $1,74

2 % of World GDP Served Nonstop 2,300 $108 $247 $156 % of the World GDP Served Daily 9,100 $517 $1,291 $807 % of the World GDP Served Two or More Daily 2,800 $176 $635 $291

30

Note: Jobs rounded to the nearest 100. Values in 2010 dollars (millions). Direct employment, labor income, output and all spinoff impacts calculated using IMPLAN, LLC.

Estimated National Impacts of Each Connectivity Variable

National extrapolation is for illustrative purposes to show order of magnitude effects

31

Impacts based on 1% increase in the connectivity variables below

Direct EffectsTotal Direct and Multiplier Effects

JobsValue Added

JobsValue Added

Number of Airlines 5,600 $862 32,200 $3,407 Domestic Nonstop Departures 13,300 $1,944 42,500 $4,797

Airline Hubs Served-Domestic 12,400 $1,605 32,600 $3,566 Domestic Nonstop Destinations 29,600 $2,944 74,700 $7,192 Two or More Daily Nonstop Domestic Flights

17,200 $2,806 82,400 $9,161

Five or More Daily Nonstop Domestic Flights

3,400 $511 8,200 $948

International Nonstop Departures 8,200 $824 18,900 $1,841 International Nonstop Destinations 27,500 $2,931 75,100 $7,475 % of World GDP Served Nonstop 5,600 $292 9,900 $669 % of the World GDP Served Daily 18,500 $1,553 39,000 $3,463 % of the World GDP Served Two or More Daily

2,100 $305 12,000 $1,249

Mean Impacts of All Variables 13,036 $1,507 38,864 $3,979Note: Jobs rounded to the nearest 100. Values in 2010 dollars (millions). Calculations based on the value added previously presented. The basis of the extrapolation is that the national GDP is 4.3 times the aggregate GDP of the 20 regions tested.

Air Cargo & Productivity

Air cargo differs significantly from passenger travel Key airports are different (cargo hubs, gateways) Shipping cost is more important than

connectivity Current logistics network provides almost universal

coverage

Approach Developed a time series analysis relating

changes in air cargo to changes in manufacturing and wholesale industry productivity (for the years 1995, 2000, 2005, and 2010)

Explaining changes to industry productivity reflected by the amount of air cargo handled

32

3

Direct & Multiplier Impacts in Manufacturing and Wholesale Sectors Driven by a 1% Change in Air Cargo Tonnage

in 20 Sampled MSAs

33

Note: Jobs rounded to the nearest 100. Values in 2010 dollars (millions). Direct employment, labor income, output and all spinoff impacts calculated using IMPLAN, LLC.

Impact Type Jobs Labor Income

Output

Value Added

Direct Effect 1,200 $94 M $490 M $173 M

Total “Spinoff” (multiplier) Effect

4,100 $228 M $769 M $411 M

Total Effect 5,300 $321 M $1,259 M $583 M

Note: Dollars in $2010 Millions

Estimated National Impacts Given a 1% Increase in Air Cargo Tonnage

Direct Impacts for manufacturing and wholesale trade industry sectors: $742 million in direct value added 5,100 direct jobs

Total impacts, including multiplier effects: $2.5 billion in value added 23,000 jobs

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National extrapolation is for illustrative purposes to show order of magnitude effects

Impact of a Presumed 1% Decrease in Air Fare(dollars in millions)

35

1% drop in airfare represents about $2 per domestic ticket and $7 per international ticket

National economic impacts based on $815 million of additional consumer surplus

Impact Type Jobs Labor Income

Output Value Added

Direct Effect 1,400 $162 $553 $249Multiplier Effect 4,400 $223 $728 $408Total Effect 5,800 $385 $1,281 $657

Note: Jobs are rounded to the nearest 100. Dollars are in 2010 value using 2012 national model from IMPLAN, LLC.

Market Change in Consumer Surplus

Domestic $506 Internationa

l $310

TOTAL $815

4

Consumer surplus is the difference between what

travelers are willing to pay and what they actually pay for air

travel

ConclusionsPART 3

36

Multiple Approaches

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The multiple approaches carried out in ACRP Project 03-28 are complementary in understanding the economic impacts of airports to the national economy:

The economic impact analysis is a snapshot of the economic contribution of airports at a given moment

The dynamic analyses estimate how national economic impacts of airports will change if:(1) connectivity between airports and regions; (2) air cargo tonnage; and/or (3) the cost of airfare change.

Direct & Total Economic Impacts of U.S. Airports in the National Economy

38

Activity Jobs Labor Income Output Value

AddedEconomic Impact of U.S. Airports 2,172,20

0 $147,642 $637,002

$247,424

Changes in Economic Impacts Generated by:1% Improvement of Connectivity Variables 13,000 $795 $3,043 $1,5071% Increase of Air Cargo Tonnage 5,100 $403 $2,103 $7421% Decrease in Air Fares 1,400 $162 $553 $249Activity Jobs Labor

Income Output Value Added

Economic Impact of U.S. Airports 7,628,900

$452.5 Billion

$1.6 Trillion

$768.4 Billion

Changes in Economic Impacts Generated by:1% Improvement of Connectivity Variables 38,900

$2.3 Billion

$7.4 Billion $4.o Billion

1% Increase of Air Cargo Tonnage22,700

$1.4 Billion

$5.4 Billion $2.5 Billion

1% Decrease in Airfares 5,800 $0.4 Billion

$1.3 Billion $0.7 Billion

Direct Impacts ($ values in millions)

Total Impacts Including Direct plus Economic Multipliers ($ values as noted)

Notes: Direct and total impacts of connectivity reflect the mean average of all 11 connectivity variablesAll values are in 2010 dollars. Jobs are rounded to the nearest 100. Total impacts include estimates of direct, indirect, and induced impact. National extrapolation for connectivity and cargo is for illustrative purposes to show order of magnitude effects.Calculations used IMPLAN, LLC national model, Version 3, 2012.

Research Team

Economic Development Research Group, Inc.

Dr. David Gillen, University of British Columbia

ICF International

Kramer aerotek

Mead & Hunt, Inc.

Cover photographs courtesy of Mead & Hunt

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AppendixMethodology Slides

Part 4

40

AIRPORT SERVICES

AIRLINE SERVICES

Inputs: Labor, Capital,* Materials, Services

FINAL DEMAND FOR AIR TRAVEL

FINAL DEMAND FOR OTHER GOODS &

SERVICES

INTERMEDIATE DEMAND FOR AIR

TRANSPORTATION

OTHER ECONOMIC SECTORS

Passenger, Cargo, & Aircraft Handled

Business Air Travel & Air

Cargo Shipments

Air Transportation Input

Other Inputs

Personal Air Travel

For businesses, the sale of air transportation services for travel and cargo transport support production and sales of products and services by U.S. companies and industries.

For personal travel, the final product produced and sold is transportation.

*Includes construction

Airports’ Role in the U.S. Economy Generates

Economic Impacts

Process to Calculate Economic Impacts of Airports

42

Results of Regression Analysis (1 of 2)Static Economic Impacts

Classification

Explanatory Variables Results

Large Hubs

Connecting enplanements

All else constant, an additional 5,000 domestic connecting enplanements per year would be associated with an estimated $2.3 million dollars of direct airport revenue.

Medium and Small

Hubs

Domestic commercial

operations at medium hubs

Domestic connecting

enplanements at small hubs

All else constant, an additional 5,000 commercial operations at a medium hub airport would generate approximately $2.1 million. For small hub airports, an additional 100 domestic connecting enplanements would yield an additional $1.97 million of revenue.

43

Regressions based on NPIAS data base of 3,330 airports, aviation facilities and activities, regional socio-economic data and 1,013 economic impact studies

Results of Regression Analysis (2 of 2)Classificat

ion Explanatory

Variables Results

Non-hub Primary Airports

Number of domestic

enplanements;

Maximum runway length

All else constant, an additional 100 domestic enplanements at a non-hub primary airport would be associated with a $0.13 million increase in direct revenue. Additionally, a 1,000-foot increase in runway length would be associated with a $0.66 million increase in direct revenue.

Non-primary

Commercial Service Airports, Relievers

and General Aviation Airports

Maximum runway length at GA airports, relievers and commercial

service airports

GA operations at GA airports

A reliever airport with a 1,000-foot increased runway length would, on average, tend to contribute to a $0.025 million increase in direct revenues. This interpretation can also be applied to reliever and commercial services airports by swapping out the parameter estimates. Additionally, general aviation airports experiencing an additional 1,000 general aviation (itinerant plus local) operations would see an additional $912 of direct revenue. It would be reasonable to expect direct revenues of $0.86 million dollars for a general aviation airport with a maximum airport runway length of 4,000 feet and 10,000 general aviation operations.

44

Measuring Productivity and Productivity Change

Real GDP will increase if productivity in the economy increasesProduction Function:

45

),( technologyinputsfQ Multifactor Productivity (MFP) is the change in output(s) due to the change in inputs.

In this analysis, to estimate impacts of improved connectivity, output is Real GDP, and inputs are changes in airport connectivity as well as other standard inputs such as labor.

To estimate impacts from increased air cargo, output is Real GDP, and inputs are changes in enplaned and deplaned cargo tonnage.

Estimate Linkage Between Changes in Air Connectivity and Changes in Productivity

Select a representative sample of 20 Regions (MSAs) and 26 Airports

Assemble data on change in Multi-factor Productivity (MFP) for each region in 1995, 2000, 2005 and 2010:

46

MFP By Industry (BLS)

Regional Economic Data

(GRP, investment,

labor)

Nonstop Flight Pattern (O-Ds, frequency) for

sample airports

Among the 26 sample airports and between the 26 airports & 15 major international markets

Two or More Daily Nonstop Domestic Flights in the Most Important of the Connectivity Variables

Connectivity Measure

Elasticity

(average)

Rank Relative Weight

Two or More Daily Nonstop Domestic Flights 0.0915 1 1.00International Nonstop Destinations 0.0375 2 0.41Domestic Nonstop Destinations 0.0284 3 0.31Percent of the World GDP Served Daily 0.0259 4 0.28Five or More Daily Nonstop Domestic Flights 0.0258 5 0.28Airline Hubs Served-Domestic 0.0254 6 0.28International Nonstop Departures 0.0182 7 0.20Percent of the World GDP Served Nonstop 0.0169 8 0.18Domestic Nonstop Departures 0.0164 9 0.18Percent of the World GDP Served Twice or More Daily 0.0161 10 0.18Number of Airlines 0.0160 11 0.17

47

Calculated Elasticities of Airport MFP Analysis

Interpretation: For every 1% increase of destinations served by Two or More Daily Nonstop Domestic Flights, GDP will increase by .000915 on average (1% * .0915).

Basic Concept of Airfare Change(Consumer Surplus)

Change in price leads to change in quantity demanded and in consumer surplus

Change in spending on air travel (measured by the change in consumer surplus) frees up money for other consumption

The increased spending on other goods and services contributes to economic growth

48

Impact of a Presumed 1% Decrease in Air Fare

49

1% drop in airfare represents about $2 per domestic ticket and $7 per international, which is expected to create an aggregate of $991 million in passenger welfare

National economic impacts based on $991 million of induced travel expenditure and $815 million of additional consumer surplus (dollars in millions)Impact Type Jobs Labor

IncomeOutput Value

AddedDirect Effect 1,400 $162 $553 $249Multiplier Effect 4,400 $223 $728 $408Total Effect 5,800 $385 $1,281 $657

Note: Jobs are rounded to the nearest 100. Values are in 2010 dollars using 2012 national model from IMPLAN, LLC.

Market Change in Consumer Surplus

Total Induced Air Travel Expenditure

Domestic $506 $671 Internationa

l $310 $320

TOTAL $815 $991