The Evolving Air Transport Industry

CHAPTER 1· THE EVOLVING AIR TRANSPORT INDUSTRY
spending that results from the direct and indirect economic impacts. The total of these
economic impacts measure the importance of an industry in terms of the employment it
provides and the goods and services it consumes. The following sections explore the effect
of air transportation on each of these economic impacts.
Direct Impact
Direct economic impacts are the consequences of what might be termed first-tier economic
activities carried out by an industry in the local area. In the air transportation industry,
airports provide the greatest direct impact to local economies. The reason for this is the
more or less obvious fact that the economic activities that take place at the airport directly
involve the local economy. Most direct impacts, like airport employment and fixed-based
operations, occur at the airport; others, like the local production of goods and services for
use at the airport, may occur off-site.
Expenditures by airlines, fixed-based operators and tenants also generate direct
impacts, but only those expenditures thatlead to local business activity are relevant for a
regional economic assessment. For this reason, it is important to distinguish between the
local value-added component of expenditures and the regional import component. Thus,
airline expenditures on fuel generate local fuel storage with distribution systems and also
contribute to the importation of fuel into the region. In most parts of the country, only the
former component is relevant for any local economic impact analysis. Therefore, the direct
economic impacts of air transportation for a community are usually measured on the basis
of the airport's immediate economic activity. In addition, large aircraft manufacturers can
generate a huge direct economic benefit by locating their production facilities in a given
community or state. For example, the direct economic impact of the Boeing 787 Dreamliner
project on Washington State in 2006 has been estimated at approximately 11,470 jobs, with
an economic output of $2.268 billion (Deloitte, 2004). There are, of course, numerous other
examples of large direct economic impacts provided by the air transportation industry.
Indirect Impact
Indirect impacts derive from off-site economic activities that are attributable to air
transportation activities. For example, indirect economic impacts include services provided
by travel agencies, hotels, rental car companies, restaurants, and retail establishments.
These enterprises have a strong relationship to the air transportation industry and,
like airport businesses, employ labor, purchase locally produced goods and services,
and invest in capital projects. Indirect impacts differ from direct impacts because they
originate entirely off-site. Typically, indirect economic impacts are generated by visitors to
the area, who are traveling by air. A good example of an industry that has a strong indirect
economic impact relationship withair transportation is the hotel industry. Airlines provide
economic benefits to the hotel industry by requiring hotel rooms for passengers who have
business, or are vacationing, in a city. This increased demand for hotel accommodation
in the city creates employment and may require the construction of more hotels, thereby
creating more economic impact. The large demand for hotel accommodation caused by
air transportation is one of the main reasons why areas around major airports almost
always contain numerous hotels.
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