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York Consulting
ACI EUROPE/
YORK CONSULTING
CREATING EMPLOYMENT AND PROSPERITY IN EUROPE:
AN ECONOMIC IMPACT STUDY KIT
February 2000
ACI EUROPE/
YORK CONSULTING
CREATING EMPLOYMENT AND PROSPERITY IN EUROPE:
AN ECONOMIC IMPACT STUDY KIT
Contents
Page
1 INTRODUCTION..............................................................................................1
2 AIRPORTS MAKING A DIRECT CONTRIBUTION.........................................4
3 AIRPORTS AS ECONOMIC GENERATORS................................................12
4 AIRPORTS AS STRATEGIC CATALYSTS...................................................15
5 ECONOMIC IMPACT STUDY PRESENTATION...........................................18
FOREWORD
This Economic Impact Study Kit has been prepared jointly by the European
Region of Airports Council International (ACI EUROPE) and York Consulting
Limited.
It is a follow-up to the ACI EUROPE document, ‘Creating Employment and
Prosperity in Europe’, that was launched at a conference in Lyon in September
1998. This document confirmed the conclusion of an earlier ACI EUROPE study
that “airports are major economic assets offering major economic returns and
benefits. Decisions made in respect of airports are decisions that affect local,
regional and national economic performance” (‘Airports – Partners in Vital
Economies’).
‘Creating Employment and Prosperity In Europe’ was based on a detailed report
by York Consulting, which collated the evidence from over 30 economic impact
studies of airports in Europe, North America and the Far East.
The Study Kit is not intended to provide a comprehensive guide to undertaking an
economic impact assessment of an airport, but to give an overview of:
• the purposes for which economic impact studies can be used;
• the approach that should be adopted;
• some of the key issues to be addressed and some of the pitfalls to be
avoided;
• the presentation of the results.
We hope that the Study Kit will be a useful guide for the work of those involved in
the airport industry and will stimulate individual airports to undertake assessments
of their own economic impact. If you would like any further information on the
Study Kit, please contact:
John Hume Nigel Mason
Director of Policy Director
ACI EUROPE York Consulting Limited
6 Square de Meeûs Smithfield House
B –1000 Brussels 92 North Street
Belgium Leeds
LS2 7PN
United Kingdom
Economic Impact Study Kit
1 INTRODUCTION
Study Purpose
1.1 There is now a substantial literature available, both in Europe and worldwide,
on the economic impact of airports. These studies have been undertaken for
a wide range of purposes, including:
• to make the economic case for airport expansion plans, such as new
runways, runway extensions and new terminal capacity;
• to make the economic case for investment in off-site infrastructure,
such as new access roads, railways and rapid transit systems;
• to examine alternative approaches to airport development, such as
whether to expand an existing facility or to develop a new site;
• to influence planning policy, such as in relation to proposals for
housing and commercial development in the area around the airport;
• to inform discussions regarding ownership structures and aviation
policy development;
• to allow an informed view to be taken of the balance between the
economic benefits and environmental costs associated with airport
development;
• to promote understanding of the economic role and impact of the
airport amongst key decision-makers.
1.2 The length and variety of this list is indicative of their importance in a wide
range of circumstances for airport operators and owners and other agencies.
As a result, the preparation of an economic impact assessment is an issue
that is likely to be relevant to most airports at some stage.
Approach
1.3 Most, if not all, economic impact studies use a broadly similar analytical
framework for estimating the economic impact of airports. This framework is
shown in Figure 1.
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FIGURE 1:
FRAMEWORK OF ANALYSIS
Direct Impact
On-Site Off-Site
Indirect
Impact
Induced
Impact
Catalytic
Impact
Total
Impact
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1.4 The four categories of impact are defined as follows:
• Direct - employment and income that is wholly or largely related to the
operation of an airport and generated either on-site or in the
surrounding area;
• Indirect - employment and income generated in the economy of the
study area in the chain of suppliers of goods and services to the direct
activities (both on-site and off-site);
• Induced – employment and income generated in the economy of the
study area by the spending of incomes by the direct and indirect
employees;
• Catalytic – employment and income generated in the economy of the
study area by the wider role of the airport in attracting economic
activities, such as inward investment and inbound tourism.
1.5 It is important to emphasise that the direct, indirect and induced categories
are not watertight compartments that can always be defined precisely. On
the contrary, at the margin there are some fine judgements to be made that
are highlighted later in the Study Kit. For example:
• Does the estimate of the direct impact include all on-site activity or only
that related to the operation of the airport?
• Are activities located off-site in the immediate area the same as the on-
site activities, and hence should be included in the direct impact, or are
they part of the supply chain to airport companies, and hence should be
included in the indirect impact?
1.6 The focus of the quantitative estimates should be on employment and
income impacts, although the effects on tax revenues and output may also
be examined.
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2 AIRPORTS MAKING A DIRECT CONTRIBUTION
Definition
2.1 As noted earlier, the direct economic impact is the employment and income
that is wholly or largely related to the operation of an airport and generated
either on-site or in the surrounding area.
Examples
2.2 Examples of direct activities generally associated with an airport include the
following:
Aircraft Maintenance Freight Forwarders
Airlines Fuel Services
Airport Operator Ground Handling
Air Traffic Control Hotels
Car Parking In-Flight Catering
Car Rentals Passenger Handling
Cleaning Restaurants
Couriers Security
Customs and Immigration Shops
On-Site and Off-Site Activities
2.3 Some of the direct activities, such as aircraft maintenance, air traffic control
and ground handling, have to be located on-site at an airport. However,
other activities, such as car parking, hotels and in-flight catering, can be
located in the surrounding area. A “rule-of-thumb” of a 20-minute drive-time
is sometimes used to define the limits of this surrounding area.
2.4 It should be emphasised that not all airports will have any of their direct
activities located off-site. This will be dependent on the scale and role of the
airport, the size and characteristics of the airport site, its location relative to
other centres of population and employment, and the nature of transport links
to the airport site.
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Data Collection – On-Site Employers
Survey Method
2.5 It is relatively straightforward to collect data from employers located on-site at
an airport. This is because the airport operator will generally have a
comprehensive list of these employers, along with addresses, telephone
numbers and contact names.
2.6 The best approach to the collection of the required data is through a survey
using a postal questionnaire. Such surveys are not expensive to undertake
and hence all, rather than a sample, of on-site employers should be covered.
The results of the survey may be supplemented by interviews with some of
the key employers.
2.7 Given the commercial sensitivity of some of the required data, the survey is
best undertaken by an independent agency commissioned by the airport
operator. In general, only in relation to a restricted survey of on-site
employment should the airport operator consider carrying out the work. In
this case, the operator will need to be sure that the in-house resources and
expertise exist to complete the survey within a reasonable timescale.
2.8 A largely comprehensive and up-to-date census of on-site employment is an
important input to an economic impact study. The reason for this is that the
wider economic impact survey will rarely, if ever, achieve close to a 100%
response rate. Therefore, the census of employment will provide the basis
on which the results of the survey can be grossed up to the whole population
of on-site employers.
Questionnaire Design
2.9 Whenever possible, the postal questionnaire should be sent to a named
contact at all employers. It should be accompanied by a covering letter and a
pre-paid envelope for the returns to the agency undertaking the survey (in
order to maximise the response rate).
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2.10 Ideally, the covering letter should be from the Chief Executive (or equivalent)
of the airport operator in order to build support for the survey (and hence to
maximise the response rate). The letter should indicate:
• the purpose of the survey;
• the use that will be made of the data;
• that a response to part of the questionnaire is better than none at all;
• the deadline for responses;
• most importantly, a guarantee regarding the confidentiality of the
completed questionnaires. The confidentiality guarantee should include
an undertaking that the data will only be seen by the staff of the agency
carrying out the survey and will not be disclosed to any third party,
including the airport operator.
2.11 Good practice regarding all surveys is that the questionnaire should be as
short as possible, consistent with assembling the required data. The key
areas to be covered by the survey are as follows:
• total employment at a specified date, broken down into full-time, part-
time and seasonal;
• the area of residence of employees;
• wage and salary payments;
• expenditure on purchases of goods and services by category and by
the location of suppliers;
• profitability;
• the existence of other airport-related activities located off-site (along
with the above details);
• the proportion of the activity of the organisation that is related to the
airport.
2.12 Other areas that could be covered include the breakdown of the workforce by
gender, occupation and skill category and the scale of recent capital
investment.
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2.13 Four points should be emphasised about the key areas to be covered by the
survey:
• the importance of being able to analyse employment in terms of annual
full-time equivalents, adjusting for the number of part-time and seasonal
jobs, as well as total employment;
• the need to identify what proportion of an organisation’s activity is linked
to the airport where it is located. The business of some companies may
be totally unrelated to the airport, whereas others may also be servicing
other airports and other markets;
• the importance of generating information on expenditure by airport-
related companies on goods and services and hence of exploring the
airport supply chain;
• whilst the survey covers the off-site direct activities of employers
located on-site, as discussed later, this should be complemented by a
separate survey of employers involved in the direct activities and
located entirely off-site.
2.14 It will generally be necessary to follow-up non-respondents to the survey in
order to ensure a satisfactory response rate. This should be done initially by
letter, with a revised deadline for responses being specified. Depending on
the number of non-respondents involved, a further follow-up by telephone
should also be considered, targeting larger employers in particular.
Survey Timing
2.15 The timing of the survey is also important. Some airports have a significant
volume of holiday charter traffic and hence a significant seasonal component
to their total employment. Where this is the case, the timing of the survey
should be such as to capture these seasonal jobs in the analysis. However,
adopting this approach makes it even more important that annual full-time
equivalent jobs are used as the measure of total employment.
2.16 Where seasonal employment is not a significant issue, the timing of the
survey should reflect the availability of the required data, bearing in mind that
some of this data is financial and hence may not relate to calendar years. In
this case, the spring is generally the best time for conducting the survey.
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Survey Frequency
2.17 Many airports undertake an annual survey of on-site employment.
Depending on the growth rate of the airport and the availability of resources,
this is an appropriate frequency for such a restricted survey.
2.18 In relation to a wider economic impact survey covering the areas outlined
above, an annual frequency is not necessary and would impose an
unwarranted burden on employers located at the airport (and hence would
lead to a lower response rate). As a “rule-of-thumb”, it can be assumed that
such a wider survey has a shelf life of between three and five years.
Data Collection - Off-Site Employers
2.19 It is more difficult to collect data from employers involved in direct activities
located outside an airport site. This reflects the fact that, at best, only patchy
information generally exists on these activities. As noted earlier, information
on the off-site activities of those employers that also have a presence at the
airport should be generated by the on-site survey.
2.20 In order to identify the off-site employers to be surveyed, the principal airport-
related activities should be defined, including airlines, car hire, car parking,
freight forwarding and hotels. Relevant companies within these sectors
should be identified by whatever means possible, such as:
• the local knowledge of the airport operator and other agencies;
• employment and other surveys carried out by local councils and other
agencies;
• visual inspections of employment locations adjacent and close to the
airport.
2.21 It has to be accepted that even a combination of these methods will not
generate a comprehensive list of the direct off-site employers. However, as
long as the principal activities and the major employers are included in the
survey, this is unlikely to have a significant impact on the results of the
economic impact assessment.
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2.22 The questionnaire and the approach, including timing and frequency, to the
survey of off-site employers should be the same as for the on-site employers.
Clearly, establishing the proportion of an organisation’s activity that is linked
to the airport is, if anything, even more important in relation to the off-site
than the on-site activities.
Projected Economic Impact
2.23 The focus is often not just on the current economic impact of an airport but
also on the projected impact, usually 10-20 years in the future. The basis for
these projections is forecasts of passenger and freight traffic. In order to
translate these forecasts into the projected economic impact, the key issue
concerns the rate of productivity growth to be assumed.
2.24 The rate of productivity growth should generally be defined in terms of the
annual compound percentage fall in the density of on-site employment,
where density equals the number of on-site employees per million
passengers per annum (mppa).
2.25 The assumed rate of productivity growth should be derived from historical
trends in employment density at the airport concerned or, if the relevant data
does not exist, from experience at comparable airports. In using this
historical data, a judgement must be made regarding the extent, if any, to
which future trends may differ from those in the past. Factors that may be
relevant in this context include whether:
• past on-site productivity growth has been achieved by the increasing
development of off-site activities;
• there are unrealised productivity gains in the pipeline because of the
recent rapid growth in on-site employment;
• the airport is likely to attract a greater (or fewer) number of major
developments, such as airline headquarters, maintenance facilities and
large hotels/conference centres, than in the past;
• the demand for greater customer care and an increasing tightness of
the regulatory regime, such as increasing security requirements, may
stimulate the demand for labour;
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• the pace of technological change is likely to alter compared to the past,
either increasing or decreasing the expected rate of productivity growth.
2.26 Unless other evidence is available, the same rate of productivity growth
should be assumed for both the on-site and off-site activities.
2.27 There are two instances where a somewhat different approach may be
appropriate:
• in relation to airports where air freight represents a significant proportion
of their activity, employment density can be defined in terms of
workload units, rather than mppa. A workload unit equals a movement
of one passenger or 0.1 tonnes of freight. The rate of productivity
growth would then be defined as the annual compound percentage fall
in the number of on-site employees per workload unit. This approach
can only be adopted where there is a forecast of both passenger and
freight traffic;
• in relation to the largest airports, it may be appropriate to adopt a more
disaggregated approach. For example, Amsterdam Schiphol Airport
has been undertaking annual surveys of on-site employment for the
past 30 years. The airport operator has undertaken econometric work
on this time series data that has generated the following co-efficients for
the elasticity of four categories of on-site employment:
− passenger-related - such as check-in staff, cabin crew, people
employed in shops, hotels and restaurants, public transport, taxis
and car hire companies. The data suggests an elasticity of 0.97,
meaning that a 1% change in the number of passengers leads to a
0.97% change in the related employment;
− freight-related - such as couriers, freight despatchers, freight
offices and forwarding companies. The data suggests an elasticity
of 0.77, meaning that a 1% change in the volume of freight
handled leads to a 0.77% change in the related employment;
− aircraft movement-related - such as maintenance personnel,
pilots and flight engineers, petrol and oil companies, air traffic
control and aircraft despatchers. The data suggests an elasticity
of 0.46, meaning that a 1% change in the number of aircraft
movements leads to a 0.46% change in the related employment;
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− other employment - such as administration, police, cleaning
companies, banks and bureau de change, travel agents and tour
operators. This category of employment is analysed in terms of
workload units. The data suggests an elasticity of 0.86, meaning
that a 1% change in the number of workload units leads to a
0.86% change in the related employment.
Capital Investment
2.28 One of the features of airports is that they are capital intensive facilities, with
investment constantly being made in infrastructure, buildings and equipment.
2.29 Where this capital investment is a major project, such as a new runway or
terminal capacity, it is good practice to identify the economic impact
separately. However, care must be taken not to double-count impacts in
both the direct and capital investment categories.
2.30 Estimates of construction employment and income can be derived on the
basis of:
• the total value of the project;
• survey evidence on the number of jobs supported per unit of
expenditure;
• data on income per job in construction;
• industry productivity growth assumptions (where the project is due to be
implemented in the future).
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3 AIRPORTS AS ECONOMIC GENERATORS
Definition
3.1 As noted earlier, the operation of airports does not just generate employment
and income directly but also through two additional channels:
• Indirect – employment and income generated in the economy of the
study area in the chain of suppliers of goods and services to the direct
activities (both on-site and off-site);
• Induced – employment and income generated in the economy of the
study area by the spending of incomes by the direct and indirect
employees.
Study Area
3.2 The definition of the study area is an important input to the estimation of the
indirect and induced impacts. The reason for this is that the larger the study
area, in terms of output, income and employment, the greater is its capacity
to supply the goods and services required by airport-related companies.
Therefore, other factors being equal, the indirect and induced impacts will
tend to be greater for any given level of direct impact as the size of the study
area increases.
3.3 The study area that is appropriate will depend on the scale and role of the
airport and the purpose of the economic impact assessment. The following
conventions should serve as a guide to the definition of the appropriate study
area:
• International hub airports – such as Amsterdam Schiphol, Frankfurt,
London Heathrow and Paris Charles de Gaulle. These airports are of
such a scale and importance that their impact on the national economy
should be assessed. The regional and sub-regional/local impacts may
also be examined. For example, the impact on the local labour market
of the expansion of direct airport employment may be an issue that
needs to be addressed;
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• International – such as Düsseldorf, Manchester, Milan and Zurich.
These are large airports with a substantial volume of international
scheduled passenger traffic. The primary focus should be on the
regional impact of these airports, although national and sub-
regional/local effects may also be examined;
• Regional – such as Birmingham, Nice and Malaga. These have a
lower volume of passenger traffic. The primary focus should be on the
regional impact of the airports, although sub-regional/local effects may
also be examined;
• Local – such as Cardiff, Newcastle and Valencia. The focus should be
on the sub-regional/local impacts of these airports.
Indirect/Induced Estimates
3.4 Two approaches are used to estimate the indirect and induced impacts of
airports:
• Multipliers – this involves the use of co-efficients, applied to the direct
impacts of the airport, in order to estimate the flow of expenditure
through the economy. The values of the multipliers used can be based
on:
− detailed evidence on the pattern of purchases of goods and
services derived from the surveys of on-site and off-site
companies, making assumptions regarding the marginal tax rate
and the propensity to import goods and services from outside the
study area;
− empirical evidence from other airports;
− empirical evidence relating to the specific region/area in which the
airport is located;
• Input/Output Models – this involves the use of a model of the inter-
relationship of the sectors of the study area economy in order to
estimate the total impact of the initial injection of income, expenditure
and employment provided by the airport.
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3.5 The choice between these two approaches is largely be determined by the
availability of data. Where an input/output model exists for the study area
based on recent economic data, this represents the most appropriate
methodology. This will often be the case for national and regional
assessments.
3.6 At a local level, it is unlikely that that input/output data will be available,
although there may be an option of adapting national or regional data. In
these circumstances, the choice between this approach and using multiplier
analysis will depend on the availability and robustness of the data needed
both to make the adaptations to the input/output model and on which to base
the multiplier assumptions.
3.7 The ACI EUROPE document, ‘Creating Employment and Prosperity in
Europe’, includes a range of multipliers from existing economic impact
studies for different types of both airport and study area.
3.8 Unless other evidence is available, the same indirect and induced multipliers
should be used for any estimates of the economic impact of capital
investment.
3.9 In relation to projections of indirect and induced impacts, productivity growth
in line with overall economic forecasts for the study area should be assumed.
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4 AIRPORTS AS STRATEGIC CATALYSTS
4.1 The economic importance of airports stems not only from the fact that they
are major generators of economic prosperity, but also because they can act
as magnets for a wide range of economic activities.
4.2 As noted earlier, this wider economic role of airports is known as the catalytic
impact and the mechanisms through which it operates include the following:
• influencing company location decisions and competitiveness. The
presence of an international airport can be a critical factor in:
− attracting new inward investment from outside the area, and
especially companies from overseas;
− retaining existing companies in the area, whether they had
previously been inward investors or indigenous operations;
− securing the expansion of existing companies in the face of
competition with other areas;
− promoting the export success of companies located in the area
by the provision of passenger and freight links to key markets;
− enhancing the competitiveness of the economy, and the
companies in it, through the provision of fast and efficient
passenger and freight services;
• attracting business and leisure visitors and hence inbound tourism to
the area, generating income and employment in the tourism industry.
4.3 Some airport economic assessments have attempted to quantify some of
these catalytic impacts. However, there is a fundamental methodological
problem stemming from the fact that the catalytic impacts relate to the effect
of airports on the operation of the whole economy. As a result, it is
impossible to isolate what is attributable to the airport and what is attributable
to a wide range of other factors.
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4.4 Therefore, the catalytic impacts are best discussed in qualitative terms,
rather than an attempt being made to provide quantitative estimates. One of
the dangers of the latter approach is that the lack of a robust basis may
undermine the credibility of the quantitative estimates of the direct, indirect
and induced impacts. However, this is not to say that quantitative evidence
cannot be assembled in relation to the catalytic impacts, just that it is not
appropriate to produce overall estimates in terms of employment and income.
4.5 The qualitative approach to the discussion of the catalytic impacts can draw
on a wide range of secondary evidence, including:
• surveys of attitudes to business locations, such as the annual Healey
and Baker survey of Europe’s top business cities;
• surveys of key business location factors, such as the work undertaken
by the University of Reading in the UK;
• surveys of the impact of airports on company location decisions, such
as work on Hartsfield International Airport in Atlanta.
4.6 The ACI EUROPE document, ‘Creating Prosperity and Employment in
Europe’, and the detailed York Consulting report on which it is based, provide
a good overview of the available evidence on the catalytic impacts.
4.7 In undertaking an economic impact assessment of an airport, this secondary
evidence can be supplemented by the following:
• surveys of inward investors and other companies in the study area on
the significance of the airport for their location decisions, export
performance and overall competitiveness;
• case studies of inward investors or other companies for which the
airport is a particularly important facility. These case studies could
include relevant quotations from senior managers in the companies;
• a review of the use made of airports in the marketing and promotional
material prepared by agencies, such as those responsible for the
attraction of inward investment and inbound tourism;
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• an analysis of trends in business and leisure tourism and the
importance of visitors travelling via the airport to this market. This
analysis should focus on overseas visitors because domestic
passengers generally have the option of travelling via surface modes of
transport, which means that an airport is unlikely to generate significant
additional expenditure by domestic visitors;
• a review of the strategies and policies of agencies involved in economic
development, in order to demonstrate the ways in which the airport can
contribute to the achievement of their objectives.
4.8 Finally, the impact assessment should highlight any other economic benefits
that the airport generates. These could include impacts on:
• training and skills development – airports are major centres of
employment generating a demand for a wide range of skills. This
means that airports can contribute significantly to the training and skill
development of the labour force of their catchment areas;
• innovation – companies using high technology often have a high
demand for air travel and for shipping products and components by air
freight. As a result, airports can assist regions in establishing clusters
of these companies, with consequent benefits for the competitiveness
of the local economy;
• integrating isolated communities – airports play an important role in
integrating some of the more remote areas of Europe, such as parts of
Greece, Scandinavia, Scotland and Spain. This will have an impact on
the success of the local economies, the provision of local services such
as education and health care, and supporting sporting and cultural links.
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5 ECONOMIC IMPACT STUDY PRESENTATION
5.1 It is good practice to prepare both a full economic impact study report and a
free-standing executive summary. The areas that the full report should cover
include the following:
• a statement of the purpose of the study;
• a discussion of the economic impact methodology;
• a profile of the airport, in terms of passenger and freight activity, and a
review of the traffic forecasts;
• a review of the economic policy context, including aviation, planning
and economic development strategies and policies;
• a review of the current situation of, and prospects for, the economy of
the study area;
• an analysis of the current and projected quantitative economic impact
estimates;
• a discussion of the catalytic impacts.
5.2 The value of an economic impact study will not be realised unless the report
and its findings are presented to the target audiences using the appropriate
formats and media. Marketing expertise can be helpful in delivering the
message.
5.3 Having decided on the target groups and the best way of presenting the
results, it may be necessary to produce a variety of different communication
products, such as press releases, brochures, copies of the full report and the
free-standing executive summary, media briefing reports, and magazine or
newspaper articles.
5.4 It may be useful to involve other supportive agencies in the launch of the
economic impact study report. These could include Chambers of Commerce,
local councils and regional development agencies.
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