Logan Airport in the Boston Regional Economy: A REMI Analysis

Transcription

1 Logan Airport in the Boston Regional Economy: A REMI Analysis Logan Airport Team Final Presentation J Regional Socioeconomic Impact Analyses and Modeling Professor: Karen R. Polenske Michael Brown, Travis Dunn, Manshi Low Isabelle Yi Xu, Hongliang Zhang Massachusetts Institute of Technology December 8, 2004 Dec MIT J Logan Airport Team

2 Agenda Logan Airport Overview Research Questions Methodology Analysis (3 Scenarios) Conclusions Dec MIT J Logan Airport Team

3 Logan Airport Logan has one of the country s highest percentage of business travelers Logan is the nation s 19 th busiest airport, serving 23 million travelers annually About 90% of Logan passengers use Logan as a destination (as opposed to a hub) Boston s growth sectors account for the largest industry demand and share for air service Demand for air service will outpace overall economic growth Opportunity to tailor services to best meet the needs of industries with the greatest demand Dec MIT J Logan Airport Team

4 Logan Airport: Seasonal Variation Logan Passenger Volumes Millions of passengers J a n- 98 Ap r - 98 Ju l- 98 Oc t - 98 J a n- 99 Ap r -99 Ju l- 99 Oc t -9 9 J a n- 00 Ap r -00 Ju l- 00 Oc t -00 J a n- 01 Ap r - 01 Ju l- 01 Oc t - 01 Ja n- 02 Ap r - 02 Ju l- 02 Oc t - 02 J a n- 03 Ap r - 03 J ul- 03 Oc t- J 03 a n- 04 Ap r- 04 J ul- 04 Month Source: Compiled using data from Massport, Statistics for Logan Airport, About Logan, Dec MIT J Logan Airport Team

5 Logan Airport: Seasonal Variation Monthly passenger volume change relative to previous year 60% 40% 20% 0% -20% -40% Percent change from previous year's volume -60% J a 99 Ap r- 99 Ju n- l -99 Oc t 9 J a 9 n-00 Ap r- 00 J ul- 0 Oc 0 t 0 J a 0 n-01 Ap r- 01 Jul -01 Oc t 0 J a 1 n-02 A pr -02 J ul- 0 2 Oct -0 J a 2 ul- n- 03 Ap r- 03 Jul -03 Oc t 0 J a 3 n-04 Ap r- 04 J 04 Source: Compiled using data from Massport, Statistics for Logan Airport, About Logan, Dec MIT J Logan Airport Team

6 REMI 5-County Region Source: Adapted from University of Texas Perry-Castaneda Library Map Collection and U.S. Census Bureau Dec MIT J Logan Airport Team

7 Research Questions Explore interactions between the Boston regional economy and Logan Airport over 20 years. Specifically: The impacts of industry expansion on Logan airport output and jobs The impacts of unforeseeable events, e.g., terror warnings on air travel and regional economy Logan Logan Airport Unforeseeable Airport Unforeseeable Industry Industry Sectors Sectors Events Events Dec MIT J Logan Airport Team

8 Research Questions Baseline forecast Growth scenario Consider growth 5% above baseline in identified sectors and use REMI to determine impact on air transportation sector Consider growth 10% above baseline in identified sectors and use REMI to determine impact on air transportation sector Security uncertainty scenario Consider impact of Homeland Security Orange alerts on air travel and use REMI to determine impact on regional economy Dec MIT J Logan Airport Team

9 Methodology: Criteria for Identifying Sectors Sector s share of the regional economy and growth trends Share of jobs (%) Growth in job share Sector s reliance on air transportation services Air travel cost as a percentage of total industry revenue Employee annual air travel trips Sector s significance to the air transportation-services industry Sector spending on air services as a percentage of total output of air services Dec MIT J Logan Airport Team

10 Methodology: Job-Share for Selected Sectors, 2000 Job-share for selected industries in 2000: Suffolk County, Boston Metro, and US Suffolk County 5-County Metro US (%) FIRE Medical Prof. Service Education Comp, Electr Air mfg Tranportation Source: Authors' calculations based on the baseline regional and national controls in REMI 5.4, 2003 Dec MIT J Logan Airport Team

11 Methodology: Job-Share for Selected Sectors 2020 Job-share for selected industries in 2020: Suffolk County, Boston Metro, and US Suffolk County 5-County Metro US (%) FIRE Medical Prof. Service Education Comp, Electr Air mfg Tranportation Source: Authors' calculations based on the baseline regional and national controls in REMI 5.4, 2003 Dec MIT J Logan Airport Team

12 Methodology: Industry Reliance on Air Services Index of industry spending on air services as a proportion of total revenue, 1996 Data Source: US Department of Commerce and BTS in EDR Group, 2001 Logan International Airport s Evolving Role in New England Economy. Dec MIT J Logan Airport Team

13 Methodology: Industry Reliance on Air Services Annual air passenger trips per employee (by industry), 1998 Business service Management service Manufacturing/ High tech Communications Finance Retail Trade Other Services Construction Education Health Service Real Estate Values reflect average annual air passenger trips per employee Data Source: Massport in EDR Group, 2001 Logan International Airport s Evolving Role in New England Economy. Dec MIT J Logan Airport Team

14 Methodology: Industry Reliance on Air Services The regional Boston economy s dependence on air services is increased by transition towards a knowledge-based economy, which includes Professional services (e.g., engineering services, legal services) Financial services Technology (Information Technology, Biotechnology) Education Boston exports services of knowledge-based sectors Finance, professional services, and computer manufacturing are among the industries that purchase the most air services Employees in the education and healthcare sectors purchase air services at an average level; however, non-employee travel (e.g., student and patient travel induced by the sectors) not included Dec MIT J Logan Airport Team

15 Methodology: Industry s Significance to the Air Services Sector Industries with high share of total air service demand in Boston Metro Professional Services Air transportation Computer/electronic manufactur ing Securities Wholesale trade Monetary author ities, et al. Reta il trade Administrative, support services Publishing Hospitals Educationa l services Construct ion Ambulatory health care services Insurance Real estate (%) Source: Authors' calculations based on data from REMI Policy Insight Version , 2004 Dec MIT J Logan Airport Team

16 Methodology: Key Sectors Identified Key sectors for Boston's economy and the air-services industry include: FIRE, professional services, healthcare, education, and computer/electronics manufacturing. The five sectors jointly account for more than one-third of total jobs in Boston Metro Each of the five promising key growth sectors has a greater than average or average reliance on air services They together account for nearly half of the industry demand for air services in the region (industry represents about 1/3 of total passenger demand) Dec MIT J Logan Airport Team

17 Scenario I: Base Case Assumptions REMI data for forecast is based on historical trends and data gathered from the Bureau of Economic Analysis, Bureau of Labor Statistics, and US Census Bureau No significant shocks to regional economy or air transportation sector Jobs in air transportation sector are directly associated with air transport at Logan Airport Demand structure for Logan Airport service remains constant (e.g., proportion of travel for business) Dec MIT J Logan Airport Team

18 Scenario I: Base Case Results Scenario I: Air transportation sector baseline REMI forecast, Jobs (000's) Output ($ billions) Output (1996 $ billions) Jobs (thousands) Year Source: Authors' calculations based on data from REMI Policy Insight Version , 2004 Dec MIT J Logan Airport Team

19 Scenario I: Base Case Results Total job loss of 1,400 in air-services sector (Boston Metro) by 2020 (~13%) Output nearly doubles Perhaps reflective of increasing automation of in-airport services and location of airline service jobs in remote locations Because Logan is a destination airport and not a hub, increase in output likely reflects increasing demand for travel from within Boston and to Boston from other locations Dec MIT J Logan Airport Team

20 Scenario II: Growth in Knowledge Sectors Assumptions Assume higher growth than in the baseline forecast, as represented by the following industries: Hospitals Education services Securities, common contracts, and investments Monetary authorities Insurance Professional Services Computer and electronics manufacturing Assume uniform percentage change in export growth across the 5-county region (5% and 10%) Assume new travel associated with growth in knowledge sectors is business travel (e.g., induced demand for air travel is negligible) Except for CEM sector, whose demand for air travel is mostly cargo-related Assume 75% of new growth is business-travel growth Dec MIT J Logan Airport Team

21 Scenario II: Growth in Knowledge Sectors Variables Exogenous Change Change in REMI Variables Additional growth in exports as 5% or Output Block 10% of industry output >> Industry Output >> Industry Sales / International Exports (share) Dec MIT J Logan Airport Team

22 Scenario II: Growth in Knowledge Sectors Individual Results Growth in Air Transportation due to 5% growth in knowledge sectors individually 0.9% Computer Manufacturing Percent Growth in Output of Air Transportation Sector 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% -0.1% Securities Professional Servces i Wholesale Trade Monetary Authorities Educational Services Retail Trade Rea l Estate Insurance Hospitals Administrative & Support Servces i Ambulatory Services Oil & G Year Source: Authors' calculations based on data from REMI Policy Insight Version , 2004 Dec MIT J Logan Airport Team

23 Scenario II: Growth in Knowledge Sectors Joint Results Impact on Air Transportation of growth in selected knowledge sectors 6% 5% Output Growth (10% Scenario) Job Growth (10% Scenario) 4% 3% Output Growth (5% Scenario) 2% Job Growth (5% Scenario) 1% 0% Year Source: Authors' calculations based on data from REMI Policy Insight Version , 2004 Dec MIT J Logan Airport Team

24 Scenario II: Growth in Knowledge Sectors Results Under 5% growth of knowledge sectors, total job loss in base case is offset somewhat by addition of about 300 jobs in By 2020, reduction in jobs is fewer than Under 10% growth of knowledge sectors, total job loss in base case is offset by addition of 600 jobs in By 2020, reduction in jobs is fewer than 900. Proportion of business travelers shifts slightly for years according to table below: Base Case 5% Growth 10% Growth Scenario Scenario Leisure (%) Business (%) Dec MIT J Logan Airport Team

25 Scenario III: Orange Alert Assumptions Homeland Security implemented a color-coded terrorism advisory system in March 2002 Terror levels have remained at yellow, or elevated, except for 5 periods when the alert was raised to orange, or high. These occurred: September 10-24, 2002 February 7-27, 2003 March 17-April 16, 2003 May 20-30, 2003 December 21, 2003-January 9, 2004 Relative declines in passenger volumes at Logan Airport were observed during these periods, as compared to the historical share for the months involved. Dec MIT J Logan Airport Team

26 Scenario III: Orange Alert Assumptions Monthly Share of Passengers Average Since Orange Alert Orange-alert periods 11.0% 10.5% 10.0% 9.5% Share 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% Aug 02 Apr-02 Jun 02 Oct-02 Dec-02 Aug 03 Feb-03 A pr-03 J un-03 Oct-03 Dec 03 Feb-04 Apr-04 Jun-04 Aug 04 Month Source: Data compiled from Massport, Statistics for Logan Airport, About Logan, Dec MIT J Logan Airport Team

27 Scenario III: Orange Alert Assumptions Month Historical Average Share for month Actual share for month Difference April May June July August September October November December January February March April May June July August September October November December January February Source: Data compiled from Massport, Statistics for Logan Airport, About Logan, Dec MIT J Logan Airport Team

28 Scenario III: Orange Alert Assumptions Based on monthly share losses, assume 150 thousand passenger loss per orange alert Based on historical trend of 5 orange alerts in 2.5 years, assume 2 orange alerts per year from Based on current volume of ~23 million passengers per year, a loss of 300,000 passengers represents roughly a 1% decline in travel In REMI, assume a decline of 1% in output of air transportation for each year from (Suffolk County only) Measure impacts of this change on the Boston region Dec MIT J Logan Airport Team

29 Scenario III: Orange Alert Variables Exogenous Change Change in REMI Variables Decline of 1% in output of air transportation Output Block >> Industry Output >> Industry Sales / Int l Exports (share) Dec MIT J Logan Airport Team

30 Scenario III: Orange Alert Results Jobs Lost under Orange Alert Scenario Air Transportation Jobs Jobs Food Service Jobs Administrative Support Jobs Year Source: Authors' calculations based on data from REMI Policy Insight Version , 2004 Dec MIT J Logan Airport Team

31 Scenario III: Orange Alert Results Difference in output from base under Orange Alert 0-5 Air Transport Output Total GRP $ (millions) Year Source: Authors' calculations based on data from REMI Policy Insight Version , 2004 Dec MIT J Logan Airport Team

32 Conclusions Our Logan Airport team has determined interdependencies among identified industry sectors and the air-services sector using three scenarios The key growth sectors all have greater than average or average reliance on air services, and together account for more than 50% of industry demand for air services in the region Interdependence between industries has been explored through linkages between identified industry sectors and the air service sector via 3 scenarios Impact of Homeland Security alerts is small, but noteworthy. Correlation between alerts and economic performance should be examined in more detail Further growth in business travel, though modest, implies that a continued focus on business travel-oriented services at Logan is appropriate Dec MIT J Logan Airport Team

33 Selected References Boston Redevelopment Authority Publication. 1 September The Boston Economy 2004 Turning the Corner. Boston Redevelopment Authority Publication. 1 October The Boston Economy Boston Redevelopment Authority Publication. 1 January Leadership Through Innovation: The History of Boston's Economy: EDR Group Logan International Airport s Evolving Role in New England Economy. Harrison, B., and J. Kluver, Deindustrialization and Regional Restructuring in Massachusetts. In Deindustrialization and the Regional Economic Transformation: The Experience of the United States, edited by Lloyd Rodwin and Hidehiko Sasanami. Boston, MA: Unwin Hyman, pp Leonard, P., Modicamore, D., and G.W. Perkins, The Boston Economy Turning the Corner. Boston Redevelopment Authority Publication # 599. Lewis, G., Avault, J., and J. Vrabel, History of Boston's Economy: Growth and Transition Boston Redevelopment Authority Publication # 529. Massport Logan Airport Statistics, About Logan. REMI Policy Insight Model, Version 5.4, REMI Policy Insight Model, Version 6.0, Rickman, D.S. and R.K. Schwer, "A Comparison of the Multipliers of IMPLAN, REMI, and RIMS II: Benchmarking Ready-Made Models for Comparison," The Annals of Regional Science, Vol. 29, No. 4, pp U.S. Census Bureau. 20 December Population in Metropolitan and Micropolitan Statistical Areas in Alphabetical Order and Numerical and Percent Change for the United States and Puerto Rico: 1990 and Dec MIT J Logan Airport Team