SUMMARY. Figure 1 ECONOMIC IMPACT OF U.S. CIVIL AVIATION IN 2007

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1 FINAL REPORT ECONOMIC IMPACT STUDY Sacramento County Airport System Prepared for Sacramento County Airport System Sacramento, California January 2011

2 FINAL REPORT ECONOMIC IMPACT STUDY Sacramento County Airport System Prepared for Sacramento County Airport System Sacramento, California January 2011 Chicago Cincinnati Dallas London Ottawa San Francisco Washington, D.C.

3 S-1 SUMMARY Airports are important on a local, regional, national, and global basis because they provide an essential role in the movement of passengers and cargo, facilitate commerce and national defense, and link communities with one another. As globalization continues, the competitiveness of national economies and industries increasingly depends on airports and aviation infrastructure. THE ECONOMIC IMPORTANCE OF U.S. AIRPORTS The U.S. civil aviation sector (including air transportation, aircraft manufacturing, and air-based travel and tourism) collectively generated more than $1.3 trillion in economic activity in 2007 (the most recent year available), which accounted for 11.5 million U.S. jobs and $396 billion in payroll expenditures.* As shown on Figure 1, commercial aviation accounted for 93% of this contribution, with $1.2 trillion in output, $349 billion in earnings, and 10.9 million jobs. In 2007, the U.S. civil aviation sector accounted for 5.6% of Gross Domestic Product (GDP), reflecting the importance of commercial aviation to the U.S. economy. Figure 1 ECONOMIC IMPACT OF U.S. CIVIL AVIATION IN 2007 *U.S. Department of Transportation, Federal Aviation Administration, Air Traffic Organization, The Economic Impact of Civil Aviation on the U.S. Economy, December U.S. civil aviation sector share of GDP was based on an estimate of value-added economic activity of nearly $786 billion in 2007.

4 S-2 The United States accounts for approximately 40% of commercial aviation and 50% of general aviation in the world. According to the Federal Aviation Administration (FAA), there are nearly 20,000 airports in the United States, 26% of which are publicuse facilities (open to the public) and 74% private-use (closed to the public). In 2008, there were 383 primary commercial service airports in the United States, which accounted for 99% of passengers; including 30 airports classified as large-hubs, 37 as medium-hubs, 72 as small-hubs, and 244 as non-hubs.* A comparison of the economic impact generated by individual small- and mediumhub airports indicates that there is a relationship between the numbers of enplaned passengers and the total economic impact, as shown on Figure 2. Factors contributing to differences in the economic impact of airports include the size of the population, the characteristics of the economy, and the type of airline and aviation services provided. The economic importance of airports stems not only from the fact that they are major generators of economic activity but also because they can act as a catalyst for a wide range of economic activities. An airport can act as a strategic catalyst by: Influencing business location decisions Attracting new investment from U.S. and overseas companies Retaining and securing the expansion of existing businesses in the face of competition from other areas Promoting the export success of businesses located in the area Enhancing the competitiveness of the economy through the fast and efficient delivery of passenger and freight services Attracting high technology businesses that have a high demand for air travel and the shipment of goods Acting as centers of employment and training in a region by generating demand for a wide range of skills Integrating isolated communities with the global community *U.S. Department of Transportation, Federal Aviation Administration, National Plan of Integrated Airport Systems (NPIAS), , Report to Congress, September 30, 2008 (mandatory update every two years).

5 S-3 Figure 2 COMPARATIVE ECONOMIC IMPACT STUDY RESULTS FOR SELECTED SMALL- AND MEDIUM-HUB AIRPORTS PURPOSE AND SCOPE The purpose of this economic impact study is to estimate the current economic impact of the Sacramento County Airport System (SCAS)* on the economy of the Sacramento Area. The Sacramento County Airport System includes Sacramento International Airport (SMF), Mather Airport, Executive Airport, and Franklin Field. (Note that the economic impact of Franklin Field was not evaluated as part of this study.) The Sacramento Primary Area consists of El Dorado, Placer, Sacramento, San Joaquin, Sutter, Yolo, and Yuba counties. *The Airport System is owned by the County (except for Mather Airport and Executive Airport, which are leased), operated as a self-sufficient enterprise by a County department known as the Sacramento County Airport System and administered by the Director of Airports. The Director of Airports reports to the County Executive, who, in turn, reports to the County Board of Supervisors. The five elected members of the County Board of Supervisors oversee the operation of SCAS.

6 S-4 The scope of the study included (1) identifying the current direct employment and expenditures by airport-related businesses, (2) ascertaining the level of expenditures by air visitors, and (3) estimating the total impact of those expenditures on the regional economy in THE ECONOMIC IMPORTANCE OF THE SACRAMENTO COUNTY AIRPORT SYSTEM The Sacramento County Airport System plays an important role in the economies of the Sacramento Area and the State of California. In addition to its economic benefits, the System performs a critical air transportation role by facilitating the development of airline service, particularly low cost carrier service and supporting the role of Sacramento as the capital of California and the hub of government and commerce in Northern California. The System is a critical component of the State s infrastructure for the movement of people and goods, for facilitating regional, national, and global commerce, and for linking the Sacramento Area with the world community. In 2008, the System handled a total of 10 million passengers and 79,000 tons of air cargo, and was served by 20 passenger airlines with an average of 159 daily departures to 40 destinations. As shown in Table 1, System activity in 2008 generated: Approximately 11,000 jobs in the Sacramento Area $4.2 billion in total economic impact in the Sacramento Area (including total air visitor expenditures), accounting for 3.6% of the $117.5 billion Gross Domestic Product of the Sacramento Area $3,183.1 million in air visitor expenditures Table 1 ESTIMATED 2008 ECONOMIC IMPACT Sacramento County Airport System Employment Payroll (millions) Total economic impact (millions) (a) On-airport 4,170 $208.1 $ Off-airport 6, Air visitor expenditures (a) (b) 3,183.1 Total 11,000 $442.5 $4,222.1 Note: Payroll includes wages and benefits. (a) Includes payroll expenditures. (b) Air visitor expenditures were estimated based on responses to a survey of airline passengers conducted at Sacramento International Airport in June Employment and payroll were not calculated because data are not available to allocate the share of payroll expenditures from total air visitor expenditures. Source: LeighFisher, July 2010.

7 S-5 Figure 3 present the estimated 2008 total economic impact of the Sacramento County Airport System on the economy of the Sacramento Area, including the economic impact by airport. Sacramento International Airport accounted for 95.9% of the total economic impact of the Sacramento County Airport System in 2008, reflecting its role as the primary commercial airport providing passenger and cargo service and as a gateway for visitors to the Sacramento Area. Mather accounted for 3.6% of the total economic impact of the Sacramento County Airport System in 2008, with Sacramento Executive accounting for the remaining 0.5% of total. Figure 3 ESTIMATED 2008 TOTAL ECONOMIC IMPACT BY AIRPORT Sacramento County Airport System CURRENT ECONOMIC IMPACT The total economic impact is the sum of on-airport and off-airport impacts. The direct impact is that generated at the site of economic activity in this case, the airports in the System by the organizations who operate at the airports and by the visitors who arrive in the Sacramento Area via SMF. The indirect impact results offsite in supplying industries that provide the services, materials, or machinery to support the initial direct economic activity. An example of a business with an indirect impact would be a food wholesaler that sells supplies to on-airport concessionaires. The induced impact is the off-airport impact above and beyond the combined direct and indirect impacts of an economic activity, where successive rounds of individual and household spending create additional income, also known as the multiplier effect.

8 S-6 Table 2 presents the estimated 2008 direct and total economic impact of the Sacramento County Airport System on the economy of the Sacramento Area, including the economic impact by airport. A description of the analytical methodology and a glossary of the technical terms used in this report are provided in Appendices A and B, respectively. Figure 4 illustrates the relationship among the direct, indirect, and induced economic impacts of an airport. Table 2 DIRECT AND TOTAL ECONOMIC IMPACT BY AIRPORT Sacramento County Airport System Sacramento International Airport Mather Airport Sacramento Executive Airport Sacramento County Airport System Employment Direct (a) 3, ,170 Total (b) 8,380 2, ,000 Payroll (millions) Direct (a) $ $ 38.4 $ 8.0 $ Total (b) $ Total expenditures (millions) Direct (a) (c) $ $ 77.4 $10.6 $ Total (b) (c) ,039.0 Visitor expenditures (millions) Direct (d) $1,614.2 $-- $-- $1,614.2 Total (b) 3, ,183.1 Note: The study area includes the seven counties of El Dorado, Placer, Sacramento, San Joaquin, Sutter, Yolo, and Yuba. Payroll includes wages and benefits. (a) Based on a survey of on-airport organizations conducted in 2008 and (b) Based on the U.S. Department of Commerce, Bureau of Economic Analysis, Regional Input-Output Modeling System (RIMS II) for the study area noted above. (c) Includes payroll expenditures. (d) Based on responses to the Sacramento County Airport System Airline Passengers survey conducted at Sacramento International Airport in June Source: LeighFisher, July 2010.

9 S-7 Figure 4 AIRPORT ECONOMIC IMPACTS On-airport Economic Impact The current direct expenditures of on-airport organizations airlines, passenger terminal concessionaires, fixed base operators, ground transportation and tour operators, government agencies, and others were measured by means of a survey conducted with the assistance of the Sacramento County Airport System staff. LeighFisher conducted the on-airport organization surveys in 2009 and tabulated and analyzed survey results.* Meta Research, a Sacramento-based market research firm, conducted the June 2007 enplaning passenger survey which provided the air visitor expenditures used in this report. From the survey of on-airport organizations, it was estimated that 4,170 people were employed at the three airports in the System in 2008, making it the one of the largest employers in the Sacramento Area, and representing a total payroll of $208.1 million. As shown in Table 3 and on Figure 5, the passenger and cargo airlines together accounted for 28% of System employment and the passenger terminal concessionaires and terminal services (food and beverage, rental car, and others) accounted for 19%. Fixed base operators (FBOs), ground transportation providers, government agencies, and other businesses accounted for the remaining 53%. Total direct expenditures of on-airport organizations for payroll and goods and services in 2008 were estimated to be $515.9 million. *The 2009 survey results were augmented by the responses to an on-airport organization survey conducted in 2008 by Sacramento Regional Research Institute.

10 S-8 Table 3 TOTAL EMPLOYMENT IMPACT BY AIRPORT Sacramento County Airport System 2008 Sacramento International Airport Total employment (a) Sacramento Mather Executive Airport Airport Sacramento County Airport System On-airport activity Passenger airlines 2, ,230 Cargo airlines/freight forwarders 290 1, ,630 Car rentals (b) Concessionaires/terminal services (b) 600 Fixed base operators/aviation support 1, ,250 Ground transportation (b) Government agencies 2, ,690 Other (b) 60 (b) 320 TOTAL ECONOMIC IMPACT IN ,380 2, ,000 Notes: Includes direct, indirect, and induced economic impacts. Includes full and part-time employment. The study area includes the seven counties of El Dorado, Placer, Sacramento, San Joaquin, Sutter, Yolo, and Yuba. Employment related to air visitor expenditures was not calculated as part of this study. (a) Based on the U.S. Department of Commerce, Bureau of Economic Analysis, Regional Input-Output Modeling System (RIMS II) for the study area noted above. (b) Categories are combined to protect the confidentiality of the survey responses. Source: LeighFisher, July Off-airport Economic Impact Off-airport economic activity was estimated for businesses related to System activity, such as air freight forwarders, travel agencies, hotels, and companies in the region that rely on the System for business travel or shipment of goods. Total expenditures by directly related off-airport businesses for payroll and goods and services in 2008 were estimated to be $523.1 million in the Sacramento Area. Air visitors* arriving in the region through Sacramento International Airport contributed an additional $3,183.1 million to the economy of the Sacramento Area. Based on visitor spending data obtained in enplaning passenger survey, air visitors to the Sacramento Area spent an average of $675 per person per visit in As shown on Figure 6, lodging accounted for the largest share of visitor spending in 2008 (30%), followed by spending for food and beverages (28%). *Meta Research, Sacramento International Airport: Enplaning Passenger Survey, June An air visitor is defined as an enplaned passenger who does not reside in the counties of El Dorado, Placer, Sacramento, San Joaquin, Sutter, Yolo, and Yuba.

11 S-9 Figure 5 ON-AIRPORT EMPLOYMENT IN 2008 (4,170 jobs) Figure 6 AIR VISITOR SPENDING IN 2008 ($675 average per person spending)

12 S-10 Total Economic Impact As shown in Table 4, the total economic impact of the Sacramento County Airport System on the Sacramento Area was estimated to be $4,222.1 million in 2008, $442.5 million of which was payroll paid to the estimated 11,000 people whose jobs were attributable to the System. Table 4 TOTAL ECONOMIC IMPACT BY AIRPORT Sacramento County Airport System 2008 Sacramento International Airport Total expenditures (millions) (a) Sacramento Sacramento Mather Executive County Airport Airport Airport System On-airport activity Passenger airlines $ 4.27 $ -- $ -- $ Cargo airlines/freight forwarders Car rentals (b) Concessionaires/terminal services (b) 74.5 Fixed base operators/aviation support Ground transportation (b) Government agencies Other (b) 7.0 (b) 18.9 Total $ $151.3 $20.7 $1,039.0 Air visitor activity Direct (c) 1,614.2 n.a. n.a. 1,614.2 Total (a) 3,183.1 n.a. n.a. 3,183.1 TOTAL ECONOMIC IMPACT IN 2008 With direct visitor expenditures $2,481.2 $151.3 $20.7 $2,653.2 With total visitor expenditures 4, ,222.1 Notes: n.a. = not available. The study area includes the seven counties of El Dorado, Placer, Sacramento, San Joaquin, Sutter, Yolo, and Yuba. Includes direct, indirect, and induced economic impacts. Payroll includes wages and benefits. (a) Based on the U.S. Department of Commerce, Bureau of Economic Analysis, Regional Input-Output Modeling System (RIMS II) for the study area noted above. (b) Categories are combined to protect the confidentiality of the survey responses. (c) Based on responses to the Sacramento County Airport System Airline Passengers survey conducted at Sacramento International Airport in June Source: LeighFisher, July PROJECTED ECONOMIC IMPACT Continued future growth in aviation activity at the airports in the System is expected to lead to increased employment, expenditures, and total economic impact of government agencies and other businesses at SCAS airports. The future economic impact of the Sacramento County Airport System on the Sacramento Area was projected using the Federal Aviation Administration s (FAA) 2009 Terminal Area Forecast (TAF) for SMF, Mather Airport, and Executive Airport. The FAA 2009 TAF

13 S-11 was released in December 2009 using 2008 base year data and provides updated forecasts for the three SCAS airports. Projected Ongoing Annual Economic Impact The ongoing annual economic impact from SCAS operations was projected to increase in proportion to aviation activity. The FAA forecasts the number of enplaned passengers at SMF to increase an average of 2.3% per year between 2008 (the base year) and The number of aircraft operations at Mather Airport and Executive Airport is forecast to increase an average of 1.5% and 0.8% per year, respectively, between 2008 and 2030, based on the FAA 2009 TAF. The annual ongoing economic contribution associated with the FAA 2009 TAF is expected to reach $12.4 billion in 2030 (in nominal dollars), as shown on Figure 7, reflecting regional economic and aviation activity growth during this period. Figure 7 PROJECTED ONGOING ANNUAL ECONOMIC IMPACT FROM AIRPORT OPERATIONS Sacramento County Airport System Projected Cumulative Economic Impact The projected cumulative economic contribution of the Sacramento County Airport System on the economy of the Sacramento Area totaled $162.2 billion for the period from 2008 through 2030.

14 S-12 Projected Economic Impact of SMF s Terminal Modernization Program The Terminal Modernization Program (TMP) for Sacramento International Airport is the second phase in a multi-phased planning effort to identify (plan and design) and implement the future vision for SMF. The TMP was developed to identify preliminary facilities requirements and terminal complex alternatives and evaluate those alternatives and the selection of a preferred terminal development concept. The TMP will be implemented over a seven year period, which started in 2007, and is expected to be completed in The total construction costs of the TMP are $1.3 billion, reported as the direct impacts in Table 5. The projected total economic impact of SMF s TMP is $2.8 billion, generating $0.9 billion in payroll in the Sacramento region and supporting 21,500 jobs. Table 5 PROJECTED ECONOMIC IMPACT OF THE TERMINAL MODERNIZATION PROGRAM Sacramento County Airport System Direct Total (a) Total output (millions) $1,275.3 (b) $2,763.6 Payroll (millions) $ (c) $ Employment 8,100 (c) 21,500 Note: Data are presented in 2007 dollars. The expected duration of the construction period is seven years. The study area includes the seven counties of El Dorado, Placer, Sacramento, San Joaquin, Sutter, Yolo, and Yuba. (a) Based on the U.S. Department of Commerce, Bureau of Economic Analysis, Regional Input-Output Modeling System (RIMS II) for the study area noted above. (b) Construction estimates (direct impacts) provided by the Sacramento County Airport System staff. Includes expenditures for a parking garage which has been deferred until approximately (c) Estimated using annual salary data for the study area from the Department of Labor, Bureau of Labor Statistics, accessed December Reflects cumulative job years. Source: LeighFisher, December 2010.

15 i CONTENTS Chapter Page SUMMARY... S-1 The Economic Importance of U.S. Airports... S-1 Purpose and Scope... S-3 The Economic Importance of the Sacramento County Airport System... S-4 Current Economic Impact... S-5 On-airport Economic Impact... S-7 Off-airport Economic Impact... S-8 Total Economic Impact... S-10 Projected Economic Impact... S-10 Projected Ongoing Annual Economic Impact... S-11 Projected Cumulative Economic Impact... S-11 Projected Economic Impact of SMF's Terminal Modernization Program... S INTRODUCTION Scope of Study Economic Impact Methodology Definition of Terms Economic Impact of the Sacramento County Airport System THE ECONOMIC IMPORTANCE OF AIRPORTS Commercial Aviation Contribution to the U.S. Economy The Direct Economic Impact of Airports AIRPORT ROLE AND SERVICE Airport Service Region Regional Economic Trends Regional Service Role Sacramento International Airport Mather Airport Executive Airport ECONOMIC IMPACT OF THE AIRPORT Direct Economic Impact Employment Payroll Expenditures Air Passenger Visitors Indirect and Induced Economic Impact Total Economic Impact Tax Impacts Airline Crew Impacts

16 ii CONTENTS (continued) Chapter Page 5 PROJECTED ECONOMIC IMPACT FAA 2009 TAF Projected Ongoing Annual Economic Impact Projected Cumulative Economic Contribution APPENDIX A METHODOLOGY APPENDIX B GLOSSARY

17 iii TABLES 1 Estimated 2008 Economic Impact... S-4 2 Direct and Total Economic Impact by Airport... S-6 3 Total Employment Impact by Airport... S-8 4 Total Economic Impact by Airport... S-10 5 Projected Economic Impact of the Terminal Modernization Program... S-12 6 U.S. Civil Aviation Economic Impact in Comparative Data on Economic Impacts of Selected U.S. Airports Airport Service Region Population Historical Socioeconomic Data Airlines Serving Sacramento International Airport Historical Enplaned Passengers Air Traffic Profile Domestic Passenger Origins and Destinations and Airline Service Historical Air Cargo Historical Aircraft Operations Estimated On-airport Economic Impact by Type of Organization, Sacramento County Airport System Estimated On-airport Economic Impact by Type of Organization, Sacramento International Airport System Estimated On-airport Economic Impact by Type of Organization, Mather Airport Estimated On-airport Economic Impact by Type of Organization, Executive Airport Air Passenger Visitor Expenditures by Type of Expenditure in Direct and Total Economic Impact by Type of Organization, Sacramento County Airport System Direct and Total Economic Impact by Type of Organization, Sacramento International Airport System Direct and Total Economic Impact by Type of Organization, Mather Airport Page

18 iv TABLES (continued) 24 Direct and Total Economic Impact by Type of Organization, Executive Airport Estimated State and Local Tax Impacts Overnight Airline Crew Impacts Projected Ongoing And Cumulative Total Economic Impact: A-1 On-airport Organizations Surveyed... A-5 A-2 On-airport Organization Survey Responses... A-7 Page FIGURES 1 Economic Impact of U.S. Civil Aviation in S-1 2 Comparative Economic Impact Study Results for Selected Small- and Medium-Hub Airports... S-3 3 Estimated 2008 Total Economic Impact by Airport... S-5 4 Airport Economic Impacts... S-7 5 On-airport Employment in 2008 (4,170 Jobs)... S-9 6 Air Visitor Spending in 2008 ($675 Average per Person Spending)... S-9 7 Projected Ongoing Annual Economic Impact from Airport Operations Sacramento County Airport System... S-11 8 Total Economic Impact of U.S. Commercial Aviation in U.S. Commercial Aviation Visitor Spending Airport Service Region Comparative Distribution of Nonagricultural Employment Origins of Passengers Using Sacramento International Airport Enplaned Passenger Trends Enplaned Passenger Market Shares in Historical and Forecast Enplaned Passengers Historical and Forecast Aircraft Operations

19 1-1 Chapter 1 INTRODUCTION This report presents an analysis of the current economic impacts of the Sacramento County Airport System (the System) on the region it serves. The Sacramento County Airport System includes Sacramento International (SMF), Mather, and Executive airports. To provide the context for the economic impact study for the System, this chapter sets forth the scope of work, and discusses the methodology used to measure the economic impacts of the System. SCOPE OF STUDY LeighFisher* was retained by the Sacramento County Airport System to conduct an independent study of the economic impacts associated with the Sacramento County Airport System in In completing the economic impact study, the following subtasks were performed: Conducted surveys of on-airport businesses to update and validate employment and expenditure data for the airports in the System. Completed an inventory of off-airport economic benefits of air travel, such as for tourism. Incorporated expenditure data for visitors to the airport service region from passenger surveys conducted by Meta Research, a Sacramento-based market research firm, in June Using the Regional Input-Output Modeling System (RIMS II) developed by the U.S. Department of Commerce, an input/output model was developed for the Sacramento Primary Area (El Dorado, Placer, Sacramento, San Joaquin, Sutter, Yolo, and Yuba counties) to define the relationship among Airport activity, employment and expenditures, and economic impact. Based on data collected in the surveys, these results were used to estimate the economic impact of the System on the Sacramento Area. ECONOMIC IMPACT METHODOLOGY Definition of Terms The total economic impact of an airport is the sum of related direct, indirect, and induced impacts. Direct Economic Impact. The direct economic impact is the impact generated on-site in this case, the airports in the System by the organizations who operate at the airports and by the visitors who arrive in the Sacramento Area via SMF. The on-airport direct impacts include the *Formerly Jacobs Consultancy.

20 1-2 employment, payroll, and local expenditures of all enterprises located at the airports airlines, terminal concessionaires, general aviation businesses, ground transportation providers, government agencies such as the Federal Aviation Administration (FAA), and other businesses. These enterprises have a direct and quantifiable impact on the economy of the region served by the System. Indirect Economic Impact. The indirect economic impact of the System is the impact resulting off-site, and includes the employment and expenditures of (1) supplying industries that provide the services, materials, or machinery to support industries that derive business from on-airport businesses, such as wholesale food distributors, office supply firms, and jet fuel suppliers and (2) businesses serving visitors arriving at SMF, such as hotels and motels, restaurants, rental car companies, travel agencies, and taxicab operators. Induced Economic Impact. The induced economic impact of the System is the off-airport impact above and beyond the combined direct and indirect impacts of an economic activity, where additional income is created by successive rounds of individual and household spending known as the multiplier effect. The direct, indirect, induced, and total economic impacts of the System are measured in terms of total dollar expenditures, payroll, and employment. The estimates of the System s current economic impact presented in this report were derived from surveys of on-airport businesses conducted in 2009 and the passenger surveys mentioned earlier. The results of this study are intended to be estimates of economic impact, stated in terms of expenditures and jobs related to operations at the airports in the System. They should not be interpreted as benefits of airport operations in the sense that such expenditures or employment would not occur if the airports were not in existence; they simply represent dollar flows and jobs in the economy related to activity at the airports in the System. Economic Impact of the Sacramento County Airport System As discussed in greater detail in Appendix A, the methodology used to evaluate the current economic impact of each airport in the System involved (1) developing primary data on the direct economic impact of on-airport businesses from the surveys, (2) supplementing these data with relevant regional, State, and national economic indicators, and (3) using models and other statistical techniques to estimate the indirect and induced economic impacts of on-airport activity. Direct Economic Impact. Surveys of on-airport organizations were used to obtain employment and expenditure data for analysis of direct on-airport economic impacts; expenditures for services and supplies, capital improvements, and local taxes; and other expenditures contributing to the System s economic impact.

21 1-3 The 57% overall response rate to the on-airport organization surveys conducted at the airports in the System was better than the 33% to 35% average response rate for a survey of this type. The employment, payroll, and total economic impact estimates provided in this report, therefore, reflect an above-average sample size. The economic impact of organizations that either did not respond to the survey or provided only partial information was estimated based on survey information obtained from similar responding organizations, and, if available, responses by these organizations to economic impact studies for other airports, as described in Appendix A. Indirect, Induced, and Total Economic Impact. Data from the on-airport organization survey conducted in 2009 and passenger surveys conducted in 2007 by Meta Research were used to estimate the total direct employment, payroll, and economic impacts of airport activity in These estimates of direct impact were categorized by industry sector and used as inputs to an economic impact model which calculates the indirect and induced economic impact. The total economic impact of each airport in the System is the sum of the direct, indirect, and induced impacts. The economic impact model used for this study is structured to reflect the economy of the Sacramento Area and was obtained from the U.S. Department of Commerce, Bureau of Economic Analysis.

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23 2-1 Chapter 2 THE ECONOMIC IMPORTANCE OF AIRPORTS Airports are important because they perform an essential role in the movement of passengers and cargo, facilitate commerce and national defense, and link communities with one another on a local, regional, national, and global basis. As globalization continues, the competitiveness of national economies and industries will increasingly depend on airports and aviation infrastructure. COMMERCIAL AVIATION CONTRIBUTION TO THE U.S. ECONOMY The U.S. civil aviation sector (including air transportation, related manufacturing, and air-based travel and tourism) collectively generated more than $1.3 trillion of total economic impact in 2007 (the most recent year available), which accounted for 11.5 million U.S. jobs and $396 billion in payroll expenditures, as shown in Table 6. In 2007, the U.S. civil aviation sector accounted for 5.6% of Gross Domestic Product (GDP).* Commercial aviation accounted for most of this contribution, with $1.2 trillion in total economic impact, $371 billion in earnings, and 10.9 million jobs. The importance of commercial aviation to the U. S. economy is reflected in its contribution to national output, personal earnings, and employment. Table 6 U.S. CIVIL AVIATION ECONOMIC IMPACT IN 2007 Employment (thousands) Payroll (billions) Total economic impact (billions) Commercial aviation 10,881 $ 371 $1,225 General aviation Total 11,512 $ 396 $1,315 Source: U.S. Department of Transportation, Federal Aviation Administration, Air Traffic Organization, The Economic Impact of Civil Aviation on the U.S. Economy, December The primary contributions of commercial aviation to the U.S. economy are related to (1) airlines and supporting services (commercial and noncommercial), (2) aircraft, engines, and parts manufacturing, and (3) air visitor travel and other trip-related expenditures. In the above referenced study, U.S. commercial aviation accounted for $236 billion in direct economic impacts (19% of total impacts), as shown on Figure 8. *Based on an estimate of value-added economic activity of nearly $786 billion in 2007.

24 2-2 Figure 8 TOTAL ECONOMIC IMPACT OF U.S. COMMERCIAL AVIATION IN 2007 In the FAA study, the direct impacts of commercial service include the activity of airlines, airports, aircraft manufacturers, and the air cargo industry. Indirect impacts include the expenditures of airline passengers other than air fares and the associated charges paid to airlines and travel arrangers. Indirect expenditures result from money spent for lodging, food, and entertainment, local and other travel, and tourist items. Induced (or secondary) impacts result from expenditures made by industries identified in the measurement of direct and indirect (primary) impacts to supporting businesses and entities, as well as the spending of direct and indirect employees. Air visitor expenditures accounted for the largest share of the induced impact, with $345 billion in output and more than 3.7 million jobs. The above referenced study did not report the type of air visitor expenditures. Figure 9 presents the shares of air visitor expenditures by type based on an earlier economic impact study of U.S. commercial aviation.

25 2-3 Figure 9 U.S. COMMERCIAL AVIATION VISITOR SPENDING THE DIRECT ECONOMIC IMPACT OF AIRPORTS The United States accounts for approximately 40% of commercial aviation and 50% of general aviation in the world. According to the FAA, there are nearly 20,000 airports in the United States, 26% of which are public-use facilities (open to the public) and 74% private-use (closed to the public). In 2008, there were 383 primary commercial service airports which accounted for 99% of passengers in the United States; including 30 airports classified as large-hubs, 37 as medium-hubs, 72 as small-hubs, and 244 as non-hubs.* Similar to other major industries, airports make a major and direct contribution to their surrounding areas, providing direct employment, economic prosperity, and stability to regions. To understand the economic contribution an airport makes to a region, its economic value needs to be quantified. The direct economic impact of an airport is estimated by considering the economic value of the activities of companies operating on-site at the airport or adjacent to the airport whose operations directly support on-site activity. Economic value can be described generally as the *U.S. Department of Transportation, Federal Aviation Administration, National Plan of Integrated Airport Systems (NPIAS), , Report to Congress, September 30, 2008 (mandatory update every two years).

26 2-4 employment, income or value added, output and tax revenues generated by the companies and agencies operating at an airport. A study of 23 European airports sponsored by Airports Council International (ACI) concluded that on-airport employment averaged approximately 1,100 employees per million passengers (enplaned and deplaned) for the airports studied*. The results of this study confirmed the findings of a 1992 ACI 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 economic performance. A comparison of the economic impact of selected small- and medium-hub U.S. airports is presented in Table 7. Of the 24 selected airports listed, Sacramento International Airport ranked 4 th with a total output of $4,050 million in The average number of on-airport employees per million passengers (enplaned and deplaned) was 329 for SMF, lower than the average of 626 for the airports listed in Table 6. In addition, the total output for SMF averaged $405 million per million passengers, somewhat lower than the average for the selected small- and mediumhub U.S. airports ($434 million). Differences in these metrics reflect the varying characteristics of the population and economic base of individual airports and the type of airline and aviation services provided. *Airports Council International Europe, Creating Employment and Prosperity in Europe: A Study of the Social and Economic Contribution of Airports, September 1998.

27 2-5 Table 7 COMPARATIVE DATA ON ECONOMIC IMPACTS OF SELECTED U.S. AIRPORTS Ranked in terms of total output Airport Hub size Study year Study year total passengers (millions) (a) On-airport employment On-airport jobs per million passengers Total output (millions of 2008 dollars) Output per million passengers (millions of 2008 dollars) Kansas City International M , $5,923 $542 Oakland International M , , Houston William P. Hobby M , , Sacramento International Airport M , , Southwest Florida International M , , Albuquerque International Sunport M , , Port Columbus International M , , Providence-T.F. Green M , , A.B. Won Pat Guam International S , , Norfolk International M , , Omaha Eppley Field M , , Manchester-Boston Regional M , , Buffalo Niagara International M , , Spokane International S , , Fresno Yosemite International S ,100 1, Portland International S , Albany International S , Long Island MacArthur International S , Rochester International S , Syracuse Hancock International S ,910 1, Bangor International S ,583 1, Hilo International S , Des Moines International S , Lihue S (a) Includes enplaned and deplaned passengers. Source: Published economic contribution studies of individual airports listed, adjusted to 2008 dollars.

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29 3-1 Chapter 3 AIRPORT ROLE AND SERVICE This chapter presents discussions of the airport service region, regional economic trends, and the regional service roles of the airports in the Sacramento County Airport System, including airline service, passengers, cargo, based aircraft, and aircraft operations. The information in this chapter presents a description of airport activity and provides the basis for the economic impacts presented in Chapter 4. AIRPORT SERVICE REGION As shown on Figure 10, the primary area served by SMF (referred to as the Sacramento Area) consists of the following seven counties: El Dorado, Placer, Sacramento, San Joaquin, Sutter, Yolo, and Yuba.* For nearly all residents of and visitors to the Sacramento Area, SMF is relatively closer, both in terms of geographical distance and drive time, than competing airports in the Bay Area and the Reno/Tahoe area, especially considering traffic congestion to Bay Area airports and mountain driving conditions to Reno. SMF also draws passengers from an 11-county outlying area. For the purpose of this Report, these 11 counties (Amador, Butte, Calaveras, Colusa, Glenn, Napa, Nevada, Shasta, Solano, Stanislaus, and Tehama) are referred to as the secondary air service area. Residents of the northern part of the secondary air service area, including the cities of Redding and Chico, would have to drive directly past SMF to reach the next-closest major airport Oakland International Airport (OAK) which is 90 roadmiles to the southwest. For residents of other areas, such as Napa County, SMF is further than Bay Area airports, but it can be a more convenient option in terms of drive time. The identification of counties in the Sacramento Area and the secondary air service area is supported by airport catchment area studies conducted for the Sacramento County Airport System by Sabre Airline Solutions in 2005 and GRA, Inc. in The GRA report identifies a line of indifference, which is the point where potential customers find driving to SMF or to the closest alternative airport to be equally convenient. As shown in Table 8, the population of the Sacramento Area was nearly 3.0 million in 2009, concentrated primarily in Sacramento and San Joaquin counties. The 11-county secondary airport service area contained an additional 1.7 million people in *These seven counties represent three contiguous Metropolitan Statistical Areas (MSAs): the Sacramento Arden-Arcade Roseville MSA composed of El Dorado, Placer, Sacramento and Yolo counties; the Stockton MSA composed of San Joaquin County; and the Yuba City MSA composed of Sutter and Yuba counties.

30 3-2 Figure 10 AIRPORT SERVICE REGION

31 3-3 Table 8 AIRPORT SERVICE REGION POPULATION County 2009 Population Percent of total Primary area.sacramento 1,400, %.San Joaquin 674, Placer 348, Yolo 199, El Dorado 178, Sutter 92, Yuba 72, Subtotal 2,967, % Secondary area.stanislaus 510, %.Solano 407, Butte 220, Shasta 181, Napa 134, Nevada 97, Tehama 61, Calaveras 46, Amador 37, Glenn 28, Colusa 21, Subtotal 1,747, % Estimated airport service region 4,714, % Source: U.S. Department of Commerce, Bureau of the Census, accessed July REGIONAL ECONOMIC TRENDS The development and diversity of the economic base of an airport service region is important to airline traffic growth at the airport serving the region. This is particularly true where the industries in the region rely on the airport for passenger and cargo service. Sacramento is the capital of California and the hub of government and commerce within the Sacramento River Valley region between the San Francisco Bay Area (the Bay Area) to the west and the Sierra Nevada mountain range to the east. Table 9 presents historical trends in population, nonagricultural employment, and per capita income in the Sacramento Area, the State of California and the United States from 1990 through Between 1990 and 2009, population in the Sacramento Area increased an average of 1.9% per year, faster than the average of 1.1% per year for the State and the nation.

32 3-4 Nonagricultural employment in the Sacramento Area increased an average of 1.5% per year between 1990 and 2009, faster than the average of 0.6% per year for the State and the average of 0.9% per year for the nation. From 2000 to 2009, nonagricultural employment in the Sacramento Area increased at a slower rate than during the 1990s (an average of 0.5% per year), reflecting the effects of the 2001 economic recession and the current recession which began in December Between 1990 and 2008 (the most recent year available), Sacramento Area per capita income (in 2000 dollars) increased an average of 1.1% per year; lower than the rate for the State (1.2% per year) and the nation (1.3% per year). The average per capita income (in 2000 dollars) in the Sacramento Area was $30,688, lower than that for the State and the nation in Figure 11 shows a comparative distribution of nonagricultural employment by industry sector for the Sacramento Area in 2000 and in 2009, and for the State and the nation in Employment in services (41.6%), including health, education, professional, business, and other services and in the trade sector (14.9%) accounted for 55.5% of total nonagricultural employment in the Sacramento Area in 2009.

33 Table 9 HISTORICAL SOCIOECONOMIC DATA Sacramento Area, State of California, and United States Population (thousands) State of California Sacramento Area United States Nonagricultural employment (thousands) Sacramento State of United Area California States Per capita income in 2000 dollars Sacramento State of United Area California States ,084 29, , , ,487 $25,314 $28,243 $25, ,500 33, ,172 1,020 14, ,785 29,477 33,519 30, ,935 36, ,375 1,128 14, , ,073 32, ,968 36, ,007 1,065 14, ,920 n.a. 33,972 31,414 Average annual percent increase (decrease) % 1.3 % 1.3% 2.4 % 1.5 % 1.9% 1.5% 1.7 % 1.7% (5.6) (6.0) (4.3) n.a. (3.1) (2.2) n.a Note: The Sacramento Area includes the seven counties of El Dorado, Placer, Sacramento, San Joaquin, Sutter, Yolo, and Yuba. n.a. = Not available. Sources: Population: U.S. Department of Commerce, Bureau of the Census, accessed July Nonagricultural employment: U.S. Department of Labor, Bureau of Labor Statistics, accessed July Per capita income: U.S. Department of Commerce, Bureau of Economic Analysis, accessed July Data for the State and nation are preliminary. 3-5

34 3-6 Figure 11 COMPARATIVE DISTRIBUTION OF NONAGRICULTURAL EMPLOYMENT REGIONAL SERVICE ROLE The Sacramento County Airport System consists of SMF, Mather Airport, Executive Airport, and Franklin Field. SMF is the principal air carrier airport serving the County and a wide region surrounding the County, and is located about 12 miles northwest of downtown Sacramento. Mather Airport, a former U.S. Air Force Base, is located 12 miles east of downtown Sacramento and serves cargo airlines and general aviation. Executive Airport, located about 5 miles south of downtown Sacramento, is a general aviation airport with no scheduled airline service. Franklin Field, located about 15 miles south of downtown Sacramento, is a general aviation airport used primarily for training.* The following sections provide a discussion of the regional service role of SMF, Mather Airport, and Executive Airport. *As noted earlier, the economic impact of Franklin Field was not evaluated as part of this study.

35 3-7 Sacramento International Airport The primary role of SMF is to provide air transportation and related services to accommodate the demand generated in the Sacramento Area, the surrounding area served by SMF, and the State of California. SMF performs a critical air transportation role in the region by facilitating the development of airline service, particularly low cost carrier service, and in providing a transportation link to the State s capital and a gateway to northern California. SMF is a critical component of the State s infrastructure for the movement of people and goods, for facilitating regional, national, and global commerce, and for linking the Sacramento Area with the world community. Passenger Origins. The share of air visitors traveling through SMF increased from 49.5% in 2002* to 60.9% in 2007, contributing, in part, to the increase in air visitor expenditures described in Chapter 4. Figure 12 presents the origins of passengers using SMF in 2007 based on the results of the passenger survey. Sacramento Area residents accounted for 39.1% of total enplaned passengers in As shown on Figure 12, air visitors to the Sacramento Area accounted for the remaining 60.9% in 2007, with 32.2% of enplaned passengers residing in other parts of the United States, 15.3% from northern California, 11.4% from southern California, and 2.2% from outside the United States. In 2007, the purpose of travel for 62.3% of passengers at SMF was leisure-related, 27.5% was business-related, and 10.2% was for both leisure and business. Airlines Serving SMF. As of July 2010, a total of 14 passenger airlines provided scheduled passenger service at SMF, as shown in Table 10. Included in the total are seven major and national airlines, three low cost carriers three regional and commuter airlines, and one foreign-flag airline. Two airlines provided all-cargo service. *Martin Associates, The Local and Regional Economic Impacts of the Sacramento County Airport System, October 1, 2003.

36 3-8 Figure 12 ORIGINS OF PASSENGERS USING SACRAMENTO INTERNATIONAL AIRPORT Table 10 AIRLINES SERVING SACRAMENTO INTERNATIONAL AIRPORT As of July 2010 Alaska Airlines American Airlines Continental Airlines Delta Air Lines Hawaiian Airlines United Airlines US Airways Major/national Regional affiliates Horizon (Alaska Airlines) Mesa (US Airways) Skywest (Delta Connection, United Express) Low cost carriers Frontier Airlines JetBlue Airlines Southwest Airlines Foreign flag Mexicana Airlines Cargo Federal Express West Air Industries (a) Frontier is currently an operating brand of Republic Airways Holdings. (b) Mesa has operated under Chapter 11 bankruptcy protection since January Source: Sacramento County Airport System records and Official Airline Guide, online database, accessed July 2010.

37 3-9 Enplaned Passengers. The number of enplaned passengers at SMF increased an average of 4.8% per year between 1990 and 2009, exceeding growth in the nation as a whole during this period (an average of 2.2% per year), as shown in Table 11 and Figure 13. This period included the expansion of service by Southwest Airlines at SMF starting in 1991 and other low cost carriers (e.g., Frontier and JetBlue). Since 1990, much of the growth in passenger traffic at SMF has been driven by low cost carriers, with mainline activity remaining relatively unchanged. Since 2000, regional affiliate and international passenger traffic has also increased at SMF. Figure 13 ENPLANED PASSENGER TRENDS Sacramento International Airport