Ask many airport officials and they will tell you that local businesses are a major source of passenger (or freight) activity at their facility. The challenge is quantifying that gut feeling. Only airlines that have corporate contracts to fly a firm’s personnel from place to place have clear and immediate evidence of the amount of passenger traffic attributable to business activity. Because those data are proprietary, they are not reported to public sources. Researchers need to find other ways to tie activity at an airport to different businesses or industries. Fortunately, there are ways to shine some light on the topic.

Summary of Research on Air Service and Employment

This section provides a brief overview of some research that relates air service to local or regional economic activity and employment. The Technical Report contains more information for interested readers.

Early Research on Air Service and Employment

Many academic researchers have written about the relationships between air service and economic activity. For example, Bruekner (2003) found a correlation between air service and total employment in metropolitan areas, reporting that a 10 percent increase in passenger traffic raises total employment by 0.9 percent and service employment (defined as employment in wholesale and retail trade; finance, insurance, and real estate; services; government transportation; and public utilities) by 1.1 percent, suggesting employment gains far beyond the airport.

McGraw (2020) examined the effects of commercial airports on local economies for the 60-year period from 1950 to 2010. Focused on airports in midsized and smaller cities, the analysis found that the presence of airports in these communities contributed to an average of 3.9 percent growth in total employment (and 3.4 percent growth in population) per decade. Effects on wages and job creation in airport cities were also observed.

ACRP Report 132 examines the role of U.S. airports in the national economy. Airports facilitate services to businesses and personal travelers by providing passenger transportation and rapid long-distance cargo movement. For businesses, passenger and cargo transportation services are intermediate purchases used to facilitate production or sales. For example, a company may acquire an electronic component that is part of a larger product. After production, that product may be sent by air to a customer. For personal travel, the final product that is being purchased is air transportation.

Airports’ Role in the U.S. Economy

ACRP Research Report 218 discusses the contributions of air service at small-hub and non-hub airports to local economic activities. The researchers examined the relationship between annual departing seats at airports and the number of regional jobs that could be associated with this activity. The report noted that for areas served by small hub airports, each departing seat was associated with 0.005 jobs. In other words, for every 1,000 departing seats, there were 5 associated jobs in the area. This generally means that the addition of a daily departure with a 100-seat aircraft (36,500 annual seats) would support 182.5 jobs. For the non-hubs studied, there was an estimate of 0.0114 jobs per departing seat. “This is an average regional impact … that is over twice as strong as that shown for small hub airports….[A]t a nonhub airport, it takes fewer than half the annual departing seats to “result” in a regional job…” (Ballard et al. 2020)

In other words, airport activity is connected to economic activity in the surrounding region.

Air Service and the Relationship to Particular Industries

Recent research has found stronger evidence that links air service and certain industry sectors. These include professional, scientific, and technical fields; finance; corporate management offices and headquarters; information technology; and advanced manufacturing businesses that generate demand for air cargo service or have corporate travel requirements related to managing a globalized supply chain. Some of this recent research is the following:

• In an analysis of the effects of additional international air service and regional employment, especially “new economy” employment such as that associated with information technology, biotechnology, management services, etc., Button and Taylor (2000) found links between the economic structures of surrounding areas and the availability of international air services. Those areas enjoying such services have attracted, retained, or internally generated relatively more new economy employment (broadly defined) than those without such services.

• Alkaabi and Debbage (2007) analyzed the links between passenger enplanements and employment in certain specific sectors. They reported a strong linear relationship between air passenger demand and the percent of a metropolitan statistical area’s (MSA’s) employment in professional, scientific, and technical services.

• Sheard (2014) extended the analysis to cover the relationship between air service and “tradeable services.” These are services that can be produced in one location and transported to another and includes such things as publishing and financial services. A 10% increase in air traffic would generate 1,650 additional service jobs in an MSA with 1 million residents but would have no measurable effect on employment in manufacturing or most non-tradable services (e.g., hair salons or auto repair shops).

• Bloningen and Cristea (2015) found significant relationships between air service and employment growth in service and trade-related industries. Increases in air service led to statistically and economically significant increases in regional growth. A 50 percent increase in the air passenger growth rate leads to an average 3.2 percent increase in the annual growth of per-capita income and an average 5.5 percent increase in the annual rate of employment. Air traffic changes also have a positive and significant effect on the growth in the number of local businesses.
  

Commercial air service is an input to businesses in a regional economy. The BEA’s national I-O tables show how commercial aviation is “consumed” in the economy, whether by households (i.e., leisure travel) or by businesses (i.e., business travel expenses, including cargo shipments). For airlines, airports, and regional economies, I-O tables quantify how air service (as an input) is relied upon by other sectors of the economy and reveal the diversity of industries that use air transportation to support their operations. I-O tables demonstrate the role and importance of air service to the broader economy.

“The End Users of Commerical Air Transport” expands on information shown on the right side of “Simplified Diagram of Input–Output Flows,” focusing on the consumers or users of air transport. Most consumers are individuals traveling for personal (leisure) purposes; 53 percent of travel purchases is for personal reasons. Another 16 percent is exported (air transportation “consumed” by international travelers). The remaining 31 percent is used by industry as an input to the development of their goods or services.

It is this 31 percent that is associated with regional economic activity. “The End Users of Commerical Air Transport” also shows how the 31 percent is divided among different industry sectors, including finance, insurance, real estate, information, and other industries.

The End Users of Commercial Air Transport

Improved Connectivity Strengthens Economic Activity

Connectivity is critical to businesses. Connectivity allows a business to access both customers and suppliers from outside of the immediate area. Increasing connectivity broadens the number of consumers that a business can reach. With more business comes more activity and more employment.

One study (Bilotkach 2015) showed that the number of destinations served by non-stop flights has a positive impact on total number of jobs, number of business establishments, and average wages. Adding flights to a new destination generated more economic effects than adding capacity to an existing destination. On average, connecting an MSA with an extra destination created 223 jobs and 15 new business establishments.

As a measure, “connectivity” reflects how well the airport and region are tied to other parts of the domestic and international economy. It reflects the number, size, and significance of markets to which the airport has nonstop and one-stop access. Changes in air service that add to the number of destinations served—especially destinations that offer further connections to other cities and countries—broaden a region’s access to new markets and thus offer opportunities for more business and social connections. Access to more destinations makes a region more attractive for businesses.

There are different aspects of airline service that can improve a community’s access to domestic and global markets. An airport’s connectivity increases when any of the following happen:

• More capacity is provided to a given destination, either through additional daily flights or larger aircraft.
• Connecting opportunities from current nonstop destinations increase (that is, more flights and destinations are added from an existing destination).
• The number of nonstop destinations increases, especially if a new destination is another connecting hub that offers additional flights to further destinations.
• The “quality” of destinations increases (e.g., flights are added to a large hub that serves a major U.S. location and provides service to many international destinations).

Consider these examples (shown in the “connectivity” graphic): In the initial condition, Airport A has nonstop service to two points: one is a non-hub (B) with no beyond points. The other is a hub (C) with multiple beyond connecting flights. A line to each shows daily service: two flights with 100-seat aircraft to the non-hub and three flights with 75-seat aircraft to the hub.

Connectivity at Airport A increases if any of the following occur:

• More flights are added to the hub (e.g., five flights daily).
• Larger aircraft are used to the hub (e.g., 100-seat aircraft instead of 75-seat).
• The hub gains access to additional destinations (e.g., Airport C adds service to points 5-8).
• Service to another hub (D) is offered. That hub serves some of the markets already served from the first hub but also other destinations. Bonus points if circuity is decreased.
• Service to a large international gateway (E) is won, adding service to some existing markets AND transatlantic or other international service.

An abundance of research documents how improved connectivity benefits a regional economy. For example, the International Air Transport Association (IATA) created a “connectivity index” that measures the access between an individual airport, region, or country and the global economy. The index measures the number and size of destinations served, the frequency of service to each, and the number of onward connections available from those destinations.

IATA’s index recognizes that connections to major gateways provide greater global connectivity than connections to the same number of spoke ends. For example, direct service to 40 small regional destinations does not have the same importance as direct connections to 40 major global markets.

Because the IATA model focuses on increasing service to international markets, it perhaps discounts increases in connectivity that occur when access to domestic locations improves.

A similar index was created by researchers at the Massachusetts Institute of Technology (MIT). Its Airport Connectivity Quality Index (AQCI) focused on U.S. airports and took into account the “quality” of destinations served. This means that new service to a large hub is more valuable than service to a small or non-hub airport because the large hub offers more connecting opportunities. The AQCI also gave weight to international destinations.