The Economic Impact of the Long Beach Airport 2011

The Economic Impact of the Long Beach Airport 2011 This study provides estimates of the economic impact of the Long Beach Airport Area Complex upon the City of Long Beach and the regional economy. The Airport Area Complex houses approximately 5 percent of all Long Beach business establishments and accounts for approximately 9 percent of all jobs within the city. On a regional basis, the Airport Area Complex generates 43,000 jobs and output valued in excess of $10 billion. 7/23/2012 Lisa M. Grobar, Ph.D., Professor of Economics and Director, Economic Forecast Project, California State University, Long Beach and Joseph P. Magaddino, Ph.D., Professor Emeritus and Founding Director, Office of Economic Research, California State University, Long Beach

Table of Contents Executive Summary.............................................................................................. 3-4 I. Introduction.................................................................................................. 5 II. Purpose and Methodology of Economic Impact Study................................................................ 7 III. Long Beach Airport Area Complex................................................................................ 8 Direct Impacts................................................................................................ 8 Construction............................................................................................. 8 Annual Ongoing Construction........................................................................... 8 One-time Construction Activity......................................................................... 8 Impacts of Long Beach Airport Area Complex................................................................. 10 Indirect and Induced Impacts (Multiplier Effects)................................................................. 12 IV. Commercial and General Aviation and Related Services............................................................. 13 The Long Beach Airport....................................................................................... 13 Commercial Air Traffic.................................................................................... 13 Air Cargo............................................................................................... 15 General Aviation, Air Taxi, Air Carrier and Military............................................................ 16 Aviation Provision Impacts..................................................................................... 17 Direct Impacts........................................................................................... 17 Indirect and Induced Impacts.............................................................................. 18 Aviation Use Impacts.......................................................................................... 18 V. Long Beach Airport Dependent Activities......................................................................... 19 Direct Impacts............................................................................................... 19 Indirect and Induced Impacts (Multiplier Effects)................................................................. 20 VI. Other Businesses in the Long Beach Airport Area Complex.......................................................... 20 VII. Fiscal Impacts............................................................................................... 21 VIII. Conclusions................................................................................................. 22 List of Tables Table 1. Capital Improvement Outlays, 2009-2014................................................................... 8 Table 2. Capital Improvement Outlays Direct Jobs & Payroll, 2009-2014................................................. 9 Table 3. Ongoing and Capital Improvement Construction Total Direct and Indirect Impacts: Value of Output.................. 9 Table 4. Ongoing and Capital Improvement Construction Total Direct and Indirect Impacts: Employment Impacts............. 9 Table 5. Ongoing and Capital Improvement Construction Total Direct and Indirect Impacts: Payroll Impacts................. 10 Table 6. Total Employment by Sector, Long Beach Airport Area Complex, 2011.......................................... 10 Table 7. Average Payroll Comparisons Long Beach Airport Area Complex and Los Angeles County, 2011..................... 11 Table 8. Total Direct Impacts of the Long Beach Airport Area Complex. 2011............................................ 11 Table 9. Total Economic Impacts Long Beach Airport Area Complex, 2011.............................................. 12 Table 10. Domestic Air Passenger Traffic Share by LA Basin Airports................................................... 14 Table 11. Total Passengers and Load Factor for the Long Beach Airport (LGB), 2000-2011................................. 15 Table 12. Air Cargo at Long Beach Airport, 2004-2011................................................................ 15 Table 13. General Aviation and Related Takeoffs & Landings, 2000-2011................................................. 16 Table 14 Long Beach Airport Area Complex and Commercial & General Aviation & Related Activities Compared.............. 17 Table 15. Total Economic Impacts: Commercial & General Aviation Activities............................................ 18 Table 16. Long Beach Airport Area Complex and Airport Dependent & Related Activities Compared......................... 19 Table 17. Total Economic Impacts: Long Beach Airport Dependent Establishments, 2011.................................. 20 Table 18. Total Economic Impacts: Other Businesses in Long Beach Airport Area Complex, 2011............................ 20 Table 19. Long Beach Airport Enterprise Revenues, 2011............................................................. 21 List of Figures Figure 1. Organizational Structure of the Long Beach Airport Area Complex.............................................. 6 Figure 2. Long Beach Airport Total Commercial Passengers, 1988-2011................................................. 13 Appendix: Listing of Enterprises by Category...................................................................... 23-25 2

Abstract The Long Beach Airport (LGB), established in 1923, is the oldest municipal airport in California. It encompasses 1,166 acres in the center of Long Beach with convenient access to the 405 Freeway and is home to commercial, corporate and general aviation services, flight schools, air cargo, manufacturing, and two Class A business parks. LGB is a gateway to the City of Long Beach and surrounding communities as well as an economic engine for the region. The following study was commissioned to quantify LGB s economic impact on the City and region. This executive summary provides a brief highlight of the study. The accompanying report provides detail related to study methodology and breaks down the information into important economic factors and drivers. The Long Beach Area Airport Complex is an important and integral part of the City s economy, responsible for 18,000 direct local jobs or 9% of all jobs in Long Beach. These 18,000 jobs, in turn, created an additional 25,000 jobs raising the total employment impact within the region to 43,000 jobs. Moreover, it is significant to note that the average wage of $78,000 for these jobs is 50% higher than the Los Angeles County average. Annual related payroll for Long Beach and the region was $1.4 billion and $2.6 billion, respectively. The value of output directly associated with the enterprises on site at the Long Beach Airport Area Complex is $6.2 billion. At the regional level, with indirect and induced impacts, this value increased to almost $11 billion in goods and services. The Airport is clearly an important component of the overall vitality of the City s economy. In 2011, there were significant and sizable economic impacts on the City and region from the economic activities in the Long Beach Airport Area Complex. More importantly, the prospects for future growth remain very bright. We believe that the market will support enhanced uses of the Airport and the adjacent land within the current framework of the Airport Noise Compatibility Ordinance, ensuring a quality of life and economic vitality for the citizens of Long Beach. At the same time, the Long Beach Airport continues its operation without support from the City s General Fund or taxpayer dollars. Additionally, approximately 30 percent of the Airport s $32.6 million annual budget reimburses the general fund for public services consumed during the operation of the airport. Accordingly, we find the airport to be an important asset and engine of economic growth for the City and region. Executive Summary This study measures the economic impact, based on 2011 data, of two study areas: the Long Beach Airport Area Complex and Long Beach Airport Dependent Activities. The second area is further sub-divided into two components: General Aviation and Related Activities and Airport Manufacturing and Dependent Activities. The Long Beach Airport Area Complex is defined as the large geographical area north of Interstate 405 and south of Carson Street and bordered by Clark Avenue and Cherry Avenue. Our study found a total of 417 establishments in this area, with direct employment of almost 18,000, generating an estimated payroll of $1.4 billion and $6.2 billion in sales of goods and services. Total employment in the Airport Area Complex represents approximately 9 percent of all jobs and approximately 5 percent of all business establishments in Long Beach. The Long Beach Airport Area Complex is associated with an annual average payroll of $78,165 which is 50% greater than the average payroll for Los Angeles County. When indirect, or multiplier impacts are added to the direct impacts measured above, the Airport Area Complex is found to support about 43,000 jobs in the region, associated with total regional earnings surpassing $2.6 billion, and regional output of almost $11 billion. 3 continued

Executive Summary continued from page 3 The Economic Impact of the Long Beach Airport, 2011 When we restrict our sample of firms within the airport area to only those in Airport-Dependent activities, we find 87 establishments. These establishments generated direct employment of 11,600 jobs, an estimated payroll of $1.1 billion and an annual output of $5 billion. When indirect, or multiplier impacts are added to the direct impacts measured above, Airport-Dependent activities are found to support over 29,000 jobs in the region, associated with total regional earnings of almost $1.9 billion, and regional output of almost $8.3 billion When we sub-divide our sample of Airport Dependent firms to include only those establishments engaged in General Aviation and Related Activities, we find 60 establishments. These establishments generated direct employment of 2,915 jobs, an estimated payroll of $179 million and an annual output of about $600 million. When indirect, or multiplier impacts are added to the direct impacts measured above, General Aviation and Related Activities are found to support over 6,000 jobs in the region, associated with total regional earnings of almost $334 million, and regional output of almost $1.2 billion. The Long Beach Airport also has an annual construction outlay of $10 million to maintain and refurbish its runways and infrastructure. These ongoing construction activities generate 51 direct jobs in Long Beach with an annual average payroll of $71,000. The Long Beach Airport is in the midst of major construction projects, including modernization of its historic terminal, the recently completed parking structure and a new passenger concourse. Over the period, 2009-2014, this activity will generate on average 156 direct jobs each year. At the regional level, over 300 jobs on average will have been created each year. Approximately 60 percent of all tickets purchased at the Long Beach Airport are purchased by individuals or firms in Los Angeles County. Orange County accounts for 35 percent of all tickets sold, with other counties accounting for the remaining 5 percent. We estimate that 59,000 overnight visitors used our local airport in 2011. These overnight visitors spent $26.6 million on hotel expenditures and $24.4 million of expenditures in other local businesses, such as restaurants, retail, and entertainment. These expenditures account for roughly 15 percent of the total economic impact of overnight visitors on the city s economy. In addition, flight crews spent $1.2 million on hotel expenditures and another $1.2 million on other expenditures. Combining the expenditures of overnight visitors with that of flight crews yields a total expenditure of $53.4 million within the City of Long Beach. In 2011, the airport generated $32.6 million in fees and revenues. The majority of these fees were related to parking, fix-base operators, car rentals, and landing fees. We estimate that overnight visitors using the Long Beach Airport, and airport crew generated transient occupancy tax revenues for the City in the range of $2.2-4.9 million. In addition, the Long Beach Airport generates a variety of other taxes and fees, including business license taxes, property taxes, sales taxes, and utility user taxes. The following report will discuss direct, indirect, multipliers, aviation dependent businesses and non-dependent businesses, construction, tax generation, and more. All in all, the results of this report prove the Airport to be a thriving economic engine for the City. 4

I. Introduction The Long Beach Airport is one of the oldest municipal airports in the U.S. having been dedicated in 1923. The Airport is a very important economic asset to the residents and businesses of the City of Long Beach as well as to those visiting and residing within the Southern California region. Commercial air transportation facilitates business and leisure travelers and many businesses and individuals rely upon general aviation services. In providing these essential air transportation services, the Long Beach Airport supports the economic vitality of the city and the regional economy. The purpose of this study is to quantify the economic importance of the Airport. The Long Beach Airport is a self-supporting enterprise of the City of Long Beach. The Airport does not receive support via the City s general fund and instead generates its revenues via user fees and tariffs. In 2011, the total revenue of the Airport to support its operations was $32.6 million. Almost 30 percent of these operating funds were used to purchase services from the City General Fund and other City operating units, such as Police, Fire, City Attorney, and Public Works. In 2010, the Long Beach Airport began a capital improvement plan which includes a new parking structure, modernization of the historic terminal building and the addition of a new passenger concourse. It is anticipated that these capital improvements will involve expenditures of almost $200 million over the planning horizon. These improvements promise a more welcoming and pleasant experience for those utilizing the airport as well as a more efficient and effective work environment for the businesses and their employees at the airport. The Long Beach Airport is somewhat unique among municipal airports in that the airport property includes a cluster of commercial Class-A office buildings, industrial facilities and a municipal golf course. Some of the tenants within the Kilroy Airport Center and the Airport Business Park provide transportation related services and their proximity to the airport facilitates their business model. Other tenants who are not in the transportation related sectors of the economy, such as the Long Beach Marriott, chose their location because of the proximity of the airport and its strategic access to the freeway network providing easy access to clients and customers in Los Angeles and Orange Counties. Additionally, the Long Beach Airport has had a rich history as an important aerospace manufacturing facility dating back to the Douglas Aircraft Company and through its successor the Boeing Corporation. While manufacturing no longer enjoys the level of activity it once did, the Boeing Company continues to utilize its onsite production facility to manufacture the C-17 and is expected to continue to do so over the near-term. Other properties owned by Boeing and once used as manufacturing facilities have already been or are in the process of being transitioned to other uses. Douglas Park, a 260 acre mixed use development, is destined to become a dynamic business hub. Most recently, the Sares-Regis Group began a $95-million construction project of seven buildings with a combined 667,000 square feet at the Douglas Park site and hopes to sell these properties upon completion. The Boeing Company continues to transition its former 717 production facility to another use. Given the breadth of activities associated with the airport, our study focused on the large geographical area north of Interstate 405, south of Carson Street, and bordered by Clark Avenue and Cherry Avenue. As indicated above, most but not all of the property is owned by the City of Long Beach. For purposes of our study, we designate this large land area as the Long Beach Airport Area Complex. The Long Beach Airport Area Complex has been and will continue to be an important source of economic growth for the city and region and this report attempts to quantify this impact. 5

The Long Beach Airport Area Complex is composed of two clusters of business establishments: those enterprises that provide or support air transportation services and those that do not. Stated differently, some businesses have chosen their location because of access to the airport runways or the activities supported by the airport terminal. This includes the entire activities one associates with any municipal or regional airport (commercial and general aviation and their support activities) as well as the manufacturing activities of Boeing and others. This large subset we define as the Long Beach Airport Dependent Activities. Long Beach Airport Dependent Activities is further sub-divided into two components: General Aviation and Related Activities and Airport Manufacturing and Dependent Activities. Long Beach Commercial and General Aviation and Related Activities is what one might commonly refer to when discussing the Long Beach Airport. This subset includes the economic activities of the airlines, airline support firms, car rental agencies, general shuttle operators, general aviation and support activities etc. These activities can be referred to as Aviation Provision Impacts; these aviation business establishments provide jobs, payroll and goods and services. In addition, there is economic activity associated with the use of aviation services by passengers. For example, visitors generate lodging nights and other expenditures within the city or region. These impacts are Aviation Use Impacts. The relationship between the study areas is outlined in the organizational chart below. Figure 1. Organizational Structure of the Long Beach Airport Area Complex Long Beach Airport Area Complex Airport Dependent Activities Other Businesses Commercial & General Aviation & Related Activities Air Transportaon Mfg. & Dependent Activities 6

II. Purpose and Methodology of Economic Impact Study Economic impact reports provide a profile of an enterprise or activity in terms of the number of jobs, earnings, and the value of output captured by the regional or national economy. These reports provide a snapshot of the economic activity at a moment in time, usually a calendar year. In this report, we analyze the total economic impacts of the economic activity at the Long Beach Airport. To do this we utilize the IMPLAN regional modeling system from the Minnesota IMPLAN Group, Inc. The IMPLAN model can be customized to generate regional multipliers for any county or set of counties in the United States. For our purposes, we measure these economic impacts on the regional economy, which we define as the counties of Los Angeles, Orange, Riverside, San Bernardino and Ventura. The term economic impact is commonly used to describe the contribution that an enterprise or organization will make to local, regional, state or national economy. These economic impacts take four forms: Direct Impacts: These include the direct expenditures and output associated with the operation of the airport and other businesses in the airport complex. Indirect Impacts: These measure the economic activity that will occur in other Southern California industries resulting from the direct purchases of goods and services by the airport and the other businesses in the airport area described above. For example, taxis or other shuttle providers, in the course of doing business, will purchase fuel, business services, equipment, and supplies from other firms within the region. These expenditures, in turn, give rise to additional economic impacts within the region. Induced Impacts: These reflect the economic impact that will occur in Southern California as employees of the airport and airport area businesses spend their earnings purchasing goods and services in the regional economy. The sum of the direct, indirect and induced expenditures will constitute the total economic impact of the Long Beach Airport on the region s economy. Fiscal Impacts: These impacts measure the effect that businesses within the Long Beach Airport Area Complex have on local tax revenues. Most of the local revenues generated arise from property taxes and retail sales taxes. While much of the property is owned by the municipality and not formally taxed as such, leaseholds are subject to the possessory interest tax. The possessory interest tax operates similar to the property tax with a one percent assessment based upon valuation. We do not estimate this fiscal impact since data is not publicly available. In addition, the retail sales tax activity within the study area was also ignored since it is minor in comparison to other retail centers within Long Beach and again not publicly available. We do, however, provide information regarding the revenues generated by the airport to support its operating budget, as well as an estimate of the transient occupancy taxes (TOT) generated by visitors to Long Beach. The model quantifies direct economic impacts in the following ways: Economic Activity the dollar value of the output, goods or services, produced by firms associated with the Long Beach Airport. Earnings The payroll paid to individuals whose jobs are directly or indirectly attributed to the Long Beach Airport. Jobs The number of jobs directly or indirectly attributed to the Long Beach Airport and its use. The study year of 2011 was chosen as this was the most current year for which complete data was available. 7

Direct Impacts Construction The Economic Impact of the Long Beach Airport, 2011 III. Long Beach Airport Area Complex Annual Ongoing Construction The very nature of operating an airport, especially given the traffic levels at Long Beach in terms of takeoffs and landings as well as servicing passengers, involves a substantial annual outlay to maintain the runways, the terminal and related facilities. It is estimated that the Long Beach Airport administration will spend approximately $10 million annually on runway maintenance as well as maintenance of other airport structures. The bulk of funds supporting the ongoing maintenance of the airport are federal funds. Since these outlays are annual outlays the construction jobs associated with these activities are also ongoing. The direct impacts of the ongoing annual construction at the Long Beach Airport generate 51 jobs and an annual payroll of $3.6 million. The average payroll is approximately $71,000. Inasmuch as the $10 million construction activity is an annual ongoing operation to maintain the runways and the airport s infrastructure, these jobs and payroll are in addition to the airport s impacts discussed below. One-time Construction Activity In addition to the ongoing approximately $10 million expenditure on annual maintenance, the Long Beach Airport is in the midst of a series of infrastructure improvements to the airport. The historic terminal modernization project broke ground in 2011. The new parking structure was completed four-months ahead of schedule and opened in July 2011. Over the period 2009-2014, the Long Beach Airport expects to spend almost $200 million in capital improvements. These funds include the modernization of the terminal, the new parking structure and a new passenger concourse as well as other improvements funded by federal support. The accompanying table provides an annual breakdown of the capital improvement expenditures, including design and actual construction costs. Table 1. Capital Improvement Outlays, 2009-2014 Year Capital Expenditure (million $) 2009 $19.9 2010 $26.5 2011 $46.5 2012 $37.2 2013 $37.3 2014 $17.6 The economic impact associated with the capital improvements are listed in the accompanying tables. Unlike the annual outlays of operating expenditures, construction jobs vanish when projects are completed. For this reason the construction impacts are reported separately from the other impacts associated with the Long Beach Airport. Table 2 shows the total direct impacts of the capital improvement outlays shown above. As the table indicates, these outlays have created an annual employment in the range of 101-235 jobs over the past three years, and are expected to generate about 188 jobs this year and next, and an additional 88 jobs in 2014. These jobs are associated with an annual average payroll of about $71,200. It should be noted that all payroll and output data expressed in these tables are in 2011 dollars. 8

Table 2. Capital Improvement Outlays Direct Jobs & Payroll Impact, 2009-2014 Year Capital Expenditure (million $) Jobs Payroll (millions $) 2009 $19.9 101 $7.2 2010 $26.5 133 $9.5 2011 $46.5 235 $16.7 2012 $37.2 188 $13.4 2013 $37.3 188 $13.4 2014 $17.6 90 $6.3 Tables 3-5 display the total economic impacts, which include the indirect and induced impacts, in terms of value of output, employment and payroll. The regional valuation of total output is over $400 million over the six year period or an average of $66 million per year. The regional total employment impacts average over 300 jobs per year with an average payroll of $66,000. Table 3. Ongoing and Capital Improvement Construction Total Direct and Indirect Impacts: Value of Output [in million dollars] Year Direct Expenditure Indirect Induced Total 2009 $19.9 $10.3 $12.5 $42.7 2010 $26.5 $13.7 $16.7 $56.9 2011 $46.5 $24.2 $29.4 $100.1 2012 $37.2 $19.3 $23.5 $80.0 2013 $37.3 $19.4 $23.5 $80.2 2014 $17.6 $ 9.1 $11.0 $37.7 Table 4. Ongoing and Capital Improvement Construction Total Direct and Indirect Employment Impact Year Direct Employment Indirect Employment Induced Employment Total Employment 2009 101 40 62 203 2010 133 53 82 268 2011 235 93 145 473 2012 188 75 116 379 2013 188 75 116 379 2014 90 35 55 180 9

Table 5. Ongoing and Capital Improvement Construction Total Direct and Indirect Payroll Impacts [in million dollars] Year Payroll Indirect Induced Total 2009 $7.2 $2.8 $3.4 $13.4 2010 $9.5 $3.7 $4.5 $17.7 2011 $16.7 $6.6 $8.0 $31.3 2012 $13.4 $5.3 $6.4 $25.1 2013 $13.4 $5.3 $6.4 $25.1 2014 $6.4 $2.5 $3.0 $11.9 Impacts of Long Beach Airport Area Complex To compile a listing of businesses in the Long Beach Area Airport Complex we employed a variety of techniques and data sources. The Long Beach Airport Administration provided a listing of tenants. These tenants were contacted via a telephone survey to identify the number of employees working at the Long Beach Airport Area Complex. In addition, two datasets were purchased to identify firms and employment within the Long Beach Airport Area Complex. This information was crosschecked with the telephone survey results. Additionally, searches of Dunn & Bradstreet as well as other search engines were used to identify firms and verify employment. Our study of businesses within the Long Beach Area Airport Complex footprint found a total of 417 establishments, which generated direct employment of almost 18,000 jobs. The average firm size was approximately 40 employees per firm. The total employment represents approximately 9 percent of all jobs within Long Beach, while approximately 5 percent of all business establishments in Long Beach are in the Airport Area Complex. In 2011, these jobs generated an estimated payroll of $1.4 billion, and these businesses directly generated $6.2 billion in sales. Table 6 shows the jobs in the airport complex, by sector. Table 6. Total Employment by Sector, Long Beach Airport Area Complex, 2011 Sector Employment Percent Manufacturing 9,259 52% Transportation 2,662 15% Other 1,691 9% Hotel, Personal & Business Services 1,141 6% Wholesale Trade & Retail Trade 944 5% Finance, Insurance & Real Estate 910 5% Health, Legal & Educational Services 635 4% Government 410 2% Automotive Services (Rental Car) & Parking 321 2% Government 17,973 100% 10

As Table 6 indicates, the majority of jobs in the airport complex are in the manufacturing sector. This is primarily due to the presence of Boeing, which despite its significant reductions in workforce remains the largest single private employer in Long Beach. While the Boeing employment in Long Beach includes a variety of activities, approximately 3,700 jobs are directly associated with the manufacturing of the C-17 Globemaster III. Production of the C-17 is expected to continue for several more years. In addition to manufacturing, there are a significant number of jobs in the transportation and services sectors. The transpor - tation sector includes the employment of airlines, freight carriers, small aviation firms, maintenance and fueling operations, and ground transportation such as shuttles and limousine services. These jobs are typically an important component of any commercial airport and represent 15 percent of all jobs within the complex. The retail and wholesale trade employment largely reflects aviation-related businesses. The automotive services and parking employment reflect the activities of rental car businesses and parking garages serving the airport. In health, legal and educa - tional services, there are a significant number of businesses engaged in these sectors. The Kilroy Center houses SCAN Health Plan and other office buildings house physicians, clinics and other healthcare providers. Educational enterprises include: education-related aviation, such as, flight schools and flight training operations; universities, DeVry University, Keller Graduate School of Management, and University of Phoenix: as well as other educational enterprises. In the category other services, there are a wide variety of firms providing professional services including accounting, consulting, membership organizations, and other services. Table 7. Average Payroll Comparisons Georgraphical Area Long Beach Airport Area Complex and Los Angeles County, Average Payroll 2011 Long Beach Airport Area Complex $78,165 Los Angeles County $51,772 Table 7 compares the average payroll in the Long Beach Airport Area Complex to the average payroll of Los Angeles County. The average payroll in the Airport complex, at $78,165 is 1.5 times as large as that of Los Angeles County. This reflects the large amount of high value-added manufacturing jobs in the complex. The concentration of relatively high-valued jobs is an important source of economic strength of the City s economy. Table 8. Total Direct Impacts of the Long Beach Airport Area Complex, 2011 Jobs Payroll Output Impacts 17,973 $1.4 billion $6.2 billion Table 8 arrays the total direct impacts of the Long Beach Area Airport Complex of 18,000 jobs and output valued in excess of $6 billion. By way of comparison, in 2003 the Long Beach Area Airport Complex had 15,940 jobs or approximately 2,000 fewer jobs than in 2011. There are several different factors that account for the higher levels of employment. First, the quality of the datasets has improved over time and some firms may have been omitted from the prior study. Second, in 2003 Boeing had just begun developing Douglas Park and there were no enterprises at this site. While still under development, approximately 170,000 square feet have been added to the site and the vast majority of space is already committed. Third, some of the reductions in Boeing staff at the site did not occur until 2012. Lastly, the office buildings within the Long Beach Airport Area Complex have historically been one of the 11

most attractive sites for firms seeking to service clients in Orange and Los Angeles counties. Even during the steep recession and weak economic recovery, this office market area performed better 1 than other areas within Long Beach and the South Bay. In 2011, payroll earnings were $1.4 billion or $365,000 higher than the 2003 value of $1.04 billion. The value of the output was $6.2 billion or $2.1 billion higher than $4.12 billion in 2003. The cumulative increases over the period are well above the cumulative inflation affects over the same period and, as such, reflect increases in real earnings and values. Indirect and Induced Impacts (Multiplier Effects) In this section, we analyze the total economic impacts of the economic activity at the Long Beach Airport Area Complex. To generate our estimates, we break down the direct impacts described earlier into 87 different industry categories. This data is then entered into the IMPLAN model, which calculates the corresponding indirect and induced impacts for the Southern California region. These results are displayed below. Table 9 reports the aggregate results. Table 9. Total Economic Impacts: Long Beach Airport Area Complex, 2011 Direct Indirect Induced Total Employment 17,973 8,554 16,440 42,967 Payroll $1.4 billion $.5 billion $.7 billion $2.6 billion Output $6.2 billion $2.1 billion $2.5 billion $10.8 billion As can be seen from the table, the Long Beach Airport Area Complex generates almost 43,000 jobs within the region, a clear testimony of its economic importance to the region. The total payroll of these jobs is $2.6 billion, which yields an average payroll of over $61,000. The average payroll number remains significantly higher (17.3 percent higher) than the average payroll countywide of $52,000. Both in terms of direct jobs as well as the total jobs created, the Long Beach Airport Area Complex is an important source of high paying jobs. The dollar value of the goods and services produced directly by the airport businesses was over $6 billion and the total value of goods and services (direct, indirect and induced) within the region was almost $11 billion. 1 Boeing has recently consolidated its Southern California workforce and vacated 200,000 square feet of office space within the Long Beach Area Airport Complex. Despite the location and the attractiveness of the space, it will take some time for the market to absorb this space. 12

IV. Commercial and General Aviation and Related Services The Long Beach Airport The Economic Impact of the Long Beach Airport, 2011 Civil aviation is an integral part of the U.S. economy and accounts for a total economic impact of over $1.3 trillion and 10 million jobs, representing 5.3% of gross domestic product. 2 Commercial aviation s contribution is 94% of the total economic impact and general aviation represents 6% of these activities nationally. The United States has the world s most extensive airport system, which includes over 19,000 airports of which 5,300 are public facilities. This system of airports not only facilitates the movement of passengers and cargo but also is an essential element in national defense. Beyond the national economic impact, civil aviation fosters the interdependencies necessary for the efficient performance of the global economy. As the global economy continues to expand, the competitiveness of the U.S. economy relies on its transportation infrastructure. As a consequence, national, regional, and local economic growth is linked to the aviation industry. The Long Beach Airport, established in 1923, was the first municipal airport to serve Southern California. Initially, the airport was named Daugherty Field after Earl Daugherty, one of Long Beach s pioneer aviators. At present, the airport covers 1,166 acres and has five runways. The Long Beach Airport is defined as a small hub airport. The airport is also recognized as one of the busiest general aviation airports in the world. The entire airport in Long Beach operates within a Noise Compatibility Ordinance, which was the outgrowth of extensive litigation resulting in a settlement in June 1995 approved by the Federal District Court. Under the terms of the settlement, 41 commercial and 25 commuter daily flights are permitted, with some limited additional growth if noise is maintained within the 1989 baseline framework, as established by the settlement. Commercial Air Traffic Despite the long and rich history associated with the Long Beach Airport, it is only in the most recent decade that the Airport has emerged as a regional airport hub. As recently as 1980, the airport served fewer than 200,000 passengers annually. By 1984, passenger traffic had increased to over one million passengers and peaked in 1990 with 1.4 million passengers. During the early 1990s, there was a steep slide in passenger traffic that was directly linked to the major recession experienced by the Southern California regional economy as well as the ongoing litigation associated with the City s noise ordinance. Despite continued efforts to market and attract air carriers to the Long Beach Airport, passenger traffic continued to decline and finally bottomed out in 1995 with approximately 425,000 passengers. In June 1995, the Federal District Court approved the settlement concerning the noise ordinance and, with an improving regional and national economy, passenger traffic steadily improved at the airport from 1996 to 1999. Figure 2. Long Beach Airport Total Commercial Passengers, 1988-2011 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2001 2012 2 The Economic Impact of Civil Aviation on the U.S. Economy, August 2011. http://www.faa.gov/air_traffic/publications/media/faa_economic_impact_rpt_2011.pdf 13

In 2001, passenger traffic declined in response to the national recession as well as the horrific events of September 11, 2001. Since 2002, the Long Beach Airport has seen a sharp and dramatic increase in passenger traffic, serving approximately 3 million passengers in 2004. This sharp increase in passenger traffic is, in part, related to post 9/11 trends in the air transportation industry. These trends include the emergence of lower cost carriers who concentrated operations in less congested airports; increased focus on fares by business and leisure travelers; excess capacity and financial difficulties of legacy air transportation carriers; and an increased demand for regional jets. JetBlue is one of the more prominent low cost carriers that concentrated operations in less congested airports like Long Beach, and its success is well-documented. Although the number of flights is limited 3, it is expected that passenger traffic at Long Beach will continue to grow as the national and regional economies continue to expand; however, growth will ultimately be constrained by the flight limits imposed by the Airport s Noise Compat - ibility Ordinance. By 2030, the Southern California Association of Governments, which is the region s major transportation planning agency, forecasts passenger capacity for the Long Beach Airport (LAX) of 3.8 million passengers annually. The increase of approximately 925,000 passengers assumes that the Long Beach Airport will grow by approximately 1% per annum. It is expected that these increases will be supported by higher load factors on the 39 commercial flights, a change in the fleet mix, as well as increased utilization of commuter flights and not through an increase in the number of daily flights. Table 7 provides a distribution of the domestic passenger traffic among the region s primary airports. Los Angeles International Airport (LAX) is the region s dominant airport. While LAX does not have a rival with respect to international travelers, regional airports have consistently increased market share relative to LAX in recent years. In addition to competitive fares, regional airports are oftentimes less congested; passenger travel to and from regional airports is less costly; negotiating the modern security system is less time-consuming; and, since regional airports are less heavily utilized, the on-time performance of the air carriers servicing regional airports is better. All of these factors work in favor of smaller regional airports. Table 10. Domestic Air Passenger Traffic Share by LA Basin Airports Year Los Angeles Ontario Orange Burbank Long Beach 2006 63.88% 9.98% 13.92% 8.24% 3.99% 2007 63.47% 10.12% 14.02% 8.32% 4.08% 2008 64.77% 9.36% 13.50% 8.00% 4.37% 2009 66.26% 78.2% 13.93% 7.34% 4.65% 2010 67.35% 7.51% 13.53% 6.97% 4.65% 2011 68.70% 6.9% 13.10% 6.55% 4.72% As can be seen from Table 10 the Long Beach Airport saw its share of the region s passenger traffic rise from 4.0 to 4.7 percent from 2006 to 2011. This is especially remarkable given the depth of the 2007-2009 recession. Other regional airports have been less fortunate as their share declined. While Los Angeles International Airport (LAX) share increased, it has not returned to its pre-2001 peak of over 67 million passengers served. In the most recent calendar year, passenger traffic at LAX was 61.8 million passengers. Table 11 displays the annual passenger traffic at Long Beach and load factors. To put the load factors into perspective, the FAA forecasts that load factors should rise to 77.2 percent by 2020 to support anticipated air traffic growth. The Long Beach values clearly exceed this level over the last ten years. 3 The flight restriction is 41 commercial and 25 commuter slots. The current commercial usage is 39 air carrier flights and 2 air cargo flights. Of the 25 commuter slots, only 9 are allocated. 14

Table 11. Total Passengers and Load Factor for Long Beach Airport (LGB), 2000-2011 Year Total Passengers Load Factor 2000 637,853 56% 2001 587,473 68% 2002 1,453,551 74% 2003 2,875,525 80% 2004 2,926,873 79% 2005 3,034,032 84% 2006 2,758,362 80% 2007 2,906,556 85% 2008 2,913,926 79% 2009 2,909,307 79% 2010 2,978,426 79% 2011 3,099,488 81% The Long Beach Airport, like other airports, draws the bulk of its clientele from the geographical area in close proximity to the airport. Approximately 60% of all enplaned passenger tickets purchased are purchased by individuals or firms in Los Angeles County. Orange County accounts for 35% of all tickets sold, with other counties accounting for the remaining 5%. Individuals and firms in the Greater Long Beach Area 4 account for 16% of all tickets sold. Air Cargo While air cargo does not receive much attention in the public s view of airports, it is an increasingly important component to the just-in-time inventory strategy of most firms. Freight shipped via air tends to be higher dollar-weighted goods than freight sent by other modes of transportation. Table 9 lists the volume of air cargo, measured in 1,000 pounds, over the last ten fiscal years. Of the 41 daily flights operating from the Long Beach Airport, just 2 are cargo flights. Table 12. Air Cargo at Long Beach Airport, 2004-2011 Year Metric Tons Percent Change 2004 51,744 2005 49,248-5% 2006 45,302-8% 2007 46,849 3% 2008 41,961-10% 2009 31,618-25% 2010 26,085-17% 2011 25,440-2% 4 We define Greater Long Beach to include Long Beach, Lakewood, Los Alamitos, Seal Beach, Sunset Beach and Surfside. 15

During recessions, one expects volume levels to fall off. Long Beach saw steep declines associated with the national downturn and is unlikely to return to pre-recessionary levels as the number of air cargo slots has been reduced to two. In the past, as many as 4 slots were used for air cargo. The changing allocation to commercial slots reflects the move to a higher value-added activity. Most of the air cargo handled at the Long Beach Airport arrives and leaves via dedicated transport, either FedEx, or UPS. The expectation is that air cargo at the Long Beach Airport will continue to be a component in the overall operations of the airport but will not become a major feature of the airport. General Aviation, Air Taxi, Air Carrier and Military Despite the fact that the Long Beach Airport is one of the busiest airports in terms of general aviation, the airport has seen a steady decline in usage as measured by takeoffs and landings, as can be seen in Table 13. While it would appear that general aviation is declining at the Long Beach Airport, a more plausible explanation is related to the changing composition of general aviation usage at the airport. Table 13. General Aviation and Related Takeoffs & Landings, 2000-2011 Year Gen. Aviation & Air Taxi Military Air Carrier Total 2000 398,546 1,385 12,623 412,554 2001 351,337 764 9,913 362,014 2002 337,858 83 11,973 349,914 2003 310,739 929 27,702 339,370 2004 310,321 808 28,093 339,222 2005 323,454 618 28,939 353,011 2006 343,255 650 25,833 369,738 2007 371,126 671 26,636 398,433 2008 5 290,032 447 22,484 312,963 2009 265,930 864 30,285 297,079 2010 240,876 713 29,078 270,667 2011 259,356 763 26,619 286,738 Nationally, the FAA lists 224,000 aircraft as general aviation aircraft, with 68% of these aircraft used for personal use. In recent years, urban airports, including the Long Beach Airport, have become relatively more expensive (in terms of hangar rental, land costs, etc.) compared to outlying airports such as Fullerton, Chino, El Monte, etc. Much in the same way that housing costs encourage the population to migrate to more affordable areas, personal aircraft owners behave in a similar pattern. In fact, the decline in general aviation is observed at other area airports such as Bob Hope, John Wayne, and Ontario. National data indicates that approximately 17% of general aviation aircraft are owned by corporations or businesses. The Long Beach Airport is likely to experience an increase in general aviation of corporate and business-owned aircraft, since this usage is related to business travel and tends to be less price sensitive than personal usage. In addition, fractional ownership of aircraft, which spreads the fixed cost over a large group of owners, is likely to increase the use of aircraft by corporations and businesses. 5 Data available through October only. 16

Aviation Provision Impacts The Economic Impact of the Long Beach Airport, 2011 The Long Beach Airport, like other airports, has four principal functions or activities that generate direct on-site expenditures. These include: Airlines: Major and Regional Air Carriers (Alaska, Delta, Frontier, JetBlue, US Airways); Charter Airlines; General Aviation; Air Cargo (FedEx and UPS); and Military Aviation Operations. Other Airport Tenants: Food & Beverage Concessions; Retail Concessions; Fixed Base Operators; Ground Transportation; Rental Cars; and others. Airport Services: Insurance; Leasing/Financial/Sales; Telecommunications; Aircraft Maintenance; Fuel & Oil; Ground Handlers; Planning; Engineering; Construction; and other. Airport Administration: Federal and Local Government Services. These Airport on-site firms support passenger (commercial and general aviation) and air cargo activities. Listed below are the activities and expenditures associated with Airport usage. Airlines: Major and Regional Air Carriers (Alaska, Delta, Frontier, JetBlue, US Airways); Charter Airlines; General Passengers: Transportation/Parking; Hotels/Restaurants; Tourism/Attractions; Retail Purchases; Travel Agents; Financial Services; and Conferences/Convention. Air Cargo: Suppliers; Freight Forwarders; Transportation Services; and Warehousing. General Aviation: Corporate Aircraft; Private Aircraft; and Fixed Base Operators. Security & Emergency Usage: Helicopter usage by Long Beach Police Department and Los Angeles Sheriff s Department. The Airport on-site firms, coupled with the activities associated with the movement of people and goods, generate a total economic impact in terms of earnings, employment, and taxes. These total impacts are composed of direct, indirect and induced impacts. Direct Impacts This is a subset of airport dependent firms that includes only firms that are engaged in commercial and general aviation activities, as well as directly-related enterprises such as car rentals, hangar rentals, airline fuel delivery, etc. This subset of firms excludes all manufacturing enterprises. Table 14. Long Beach Airport Area Complex and Commercial & General Aviation & Related Activities Compared, 2011 Long Beach Airport Area Complex Commercial & General Aviation Related Activities Establishments 417 60 Employment 17,973 2,915 Payroll $1.4 billion $0.2 billion Average Payroll $78,165 $61,407 Output $6. billion $0.6 billion When we restricted our sample of firms within the airport area to only those in air transportation and directly related activities, we found 60 establishments. These establishments generated direct employment of about 2,915 jobs. These airport dependent jobs generate an estimated payroll of $179 million. Air Transportation jobs carry an average payroll of almost $62,000, about 20 % above the Los Angeles County average payroll. 17