The Role of U.S. Airports in the National Economy (2015)

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55 1. The National Plan of Integrated Airport Systems of the Federal Aviation Administration identifies airports significant to national air transportation. The 3,330 NPIAS airports account for about 65% of U.S. public use airports; 17% of all airports, including those privately used; and 99.8% of all enplanements in 2012 Report to Congress: National Plan of Integrated Airport Systems (NPIAS), 2015–2019, p.76; Office of Airport Planning and Programming, Federal Aviation Administration September 2014; and NPIAS 2013–2017 (September 2012). 2. Connectivity in the context of the analyses undertaken for this study refers to air-connections between regions and international destinations. Table 17 in Chapter 5 lists the different air connectiv- ity variables used in this study. Briefly, the 11 connectivity changes address combinations of increasing the number of nonstop desti- nations, frequencies of nonstop destinations to specific markets, and the GDP of markets served. 3. While these are positive changes, impacts could also be based on negative effects (reduced connectivity, reduced production and transport of commodities shipped by air cargo, and increased ticket prices). 4. Report to Congress: National Plan of Integrated Airport Systems (NPIAS), 2013–2017; Office of Airport Planning and Program- ming, Federal Aviation Administration September 2012. 5. The issue is not lack of an air network since, at this point in the development of aviation, most everyone has access to an air net- work of some sort. Rather, the issue is how well that network meets the needs of its users. 6. Unlike visitor spending, which includes flows of dollars brought into the nation by international visitors and taken overseas by U.S. travelers, air cargo impacts represent economic gains in the national economy, and therefore are not subtracted from the value of air cargo imported to the United States. 7. Definition of value added is drawn from the U.S. Bureau of Economic Analysis. 8. Impacts below represent total contributions to GDP from direct, indirect, and induced economic effects. 9. For aviation, a bilateral agreement between two nations allows international commercial air transportation to operate between the two countries. 10. Input-Output modeling tracks the relationships between the indus- tries of an economy estimating the scale of what each industry sells to other industries and what each industry buys from other industries. This includes what industries sell to households, and what is purchased from industries by households. The circulation of dollars from these purchases and sales is how multiplier effects are generated. 11. In many studies, multiple years of capital expenditures are averaged to avoid year-to-year fluctuations. 12. Alternately, the research team could apply the Producer Price Index to industry measures (such as output). However, given that these studies are within the past 10 years, and most are within five years, a general inflation index as provided by CPI is acceptable. 13. These are the largest NPIAS classifications for commercial airports. In the United States, 499 airports are classified as “Commercial,” includ- ing 29 large hub airports and 36 medium hub airports. 14. Including 434 commercial airports not classified as large or medium hubs, reliever airports, or general aviation airports. 15. The six sources are: County Business Patterns (U.S. Census Bureau); Moody’s, Inc.; IMPLAN LLC (private aggregators and vendors of public data); the Bureau of Economic Analysis (U.S. Department of Commerce); the Bureau of Labor Statistics’ Current Employ- ment Statistics; and Bureau of Labor Statistics’ Quarterly Census of Employment and Wages (U.S. Department of Labor). 16. On-airport visitor spending is captured in the analysis of terminal concessions. Also, on-airport cargo handling services are included in NAICS 4881, Support Activities for Air Transportation. Cargo flights are reported in NAICS 481112 and 481212, Scheduled Freight Air Transportation and Nonscheduled Chartered Freight Air Transportation, respectively. 17. It is understood that employees of commercial airports will eat lunch or otherwise spend some of their income in the terminal. As a result, the induced impacts of airport workers may be slightly overstated in this analysis. 18. International visitor spending counted in this report is the differ- ence of spending by visitors to the United States minus the spending of U.S. residents visiting international destinations. 19. Moreover, study data often predates publication dates by 1–2 years. 20. This comparison is for on-airport impacts, and thus does not include impacts relating to international visitor spending or inter- national cargo. 21. Dummy variables are used to distinguish years. For example, Dummy 1995 means this variable is coded 1 for all data that is 1995 data and is coded 0 for all other data. 22. Elasticity is a measure of the sensitivity of change between two variables—how much the quantity of one variable will change if another variable changes. 23. The one-percent change is evaluated at the mean of the variable. 24. The IMPLAN model was used for this analysis. End Notes

56 25. Due to the difference in industries that are affected, a one-percent increase in the percent of the world’s GDP served by “two or more daily flights” account for more output ($232 million) than destinations with “five or more daily nonstop domestic flights” ($168 million). 26. Output is primarily the aggregate value of business sales, budget expenditures (for public and nonprofit entities), produced but unsold inventory, breakage, and spoilage (for perishable products). 27. The research team used the 2012 IMPLAN national model, adjusted to 2010 dollars. Output for the manufacturing and wholesale sectors were calculated separately, using the ratio “output/value added.” Out- put is primarily business sales, but also includes value of inventory, damaged products, and spoilage. 28. An airport-pair market is defined as the air travel between two air- ports, and is bi-directional. For example, the airport-pair market of JFK-LAX (between New York Kennedy International Airport and Los Angeles International Airport) included passengers boarding in New York and landing in Los Angeles, and those boarding in Los Angeles and landing in New York. 29. In the research team’s calculations, the change in consumer surplus of the induced air travelers varies with the change in fare. 30. The consumer surplus of induced travelers may also include the added consumer surplus of existing travelers who decided to increase the amount they traveled due to lower prices. 31. A welfare benefit is derived from individuals’ consumption of goods and services. In this regard, the total benefit from a 1% drop in air- fares is $991 million, of which a portion is income not spent on air travel and available for other household spending or investing. 32. This is due to the demand elasticity for international trips (-1.04) being quite close to -1.0. An elasticity of 1.0 implies that a given percentage change in airfare produces the same percentage increase in travel, with no change in the total spending on air travel. 33. Note that direct income is disproportional to direct jobs. This is the result of comparing the impact of two different ways that house- holds can spend income: air travel and other goods and services. The research team determined the economic impacts of the consumer surplus generated by a 1% reduction in airfares by summing the two modeling approaches. First, the $991 million paid for induced air travel due to the lower fares are considered to be dollars diverted from the general economy to air transportation. This switch in spending produces a negative economic effect because, as noted in Table 25, the impacts of the purchase of air transportation services is less than the impacts of the equivalent amount of general household spending. Second, the $815 million of consumer surplus is rec- ognized as money that travelers are able to spend on goods and services—this is, in effect, money left over “in their pockets.” The net impact of the additional consumer surplus is derived from adding the money diverted from household spending to air travel (which is negative) to the impacts of spending $815 million on goods and services other than air transportation (which is positive). In Table 25, labor income per worker in air transportation is almost twice that in sectors related to general household spend- ing. But, labor intensity (jobs per dollar of spending) is almost 2.7 times greater in the general bundle of household spending than for air transportation services. Thus in the aggregate, labor income accounts for $0.22 of every dollar of spending on air transportation and $0.30 of every dollar on general household spending. These results represent overall differences in the national economy effects reflected by the spending substitution. In this analysis, more dol- lars are being transferred from the bundle of general household spending to air transportations than are spent on general goods and services. 34. The reason is often customer driven. One example is a manufac- turer of off-shore oil drilling equipment shipping parts by air to fix a damaged oil ring. The reason for the air shipment is that the money lost daily due to a malfunctioning rig dwarfs the cost by air transportation. 35. Source: BEA National Product Accounts. The national GDP in 2010 was $15 trillion, and the portion in the 20 MSAs was a com- bined $3.5 trillion, or 23.3% of the national total. 36. The profile of commodities shipped by marine mode is very differ- ent than the profile of air cargo. 37. This observation is based on surveys analyzed for the consumer surplus analysis. Please see Appendix 2 and Appendix 2A for details. 38. The Freight Analysis Framework is administered by the Federal Highway Administration of the U.S. Department of Transportation. 39. In the case of the Task 7 analysis, the data sets range from 2011 to 2013, and the economic impact studies used for the regression formulae were conducted from 2006 to 2012.