Former GTAA Strategic Planner on Economic Impact: What's the Big Deal?
Former GTAA Strategic Planner Tom Driedger Questions Economic Impact from Island Airport Expansion TORONTO - Airport economic impact studies are used by PR departments to demonstrate the importance of an airport to a number of audiences and by marketing departments to demonstrate the value of new routes to government regulators. The study conducted on behalf of the TPA measured five impacts in the aviation related sector of the economy: employment; employment income or wages earned by employees; output or business revenue; value added output or GDP; and all forms of taxes. Impacts are measured from a number of perspectives. Direct impacts are an immediate consequence of the airport. They may be located on or off the airport. Examples include airline and airport staff, car rental companies, food service and catering companies. Indirect impacts are created when firms supply goods or services to firm generating directly from the airport. Induced impacts occur when employees spend their wages. There are also catalytic impacts that are created by improved connectivity. Examples include tourism, trade or conventions. When a number is quoted it is important to be aware of the perspective. The report conducted for the Toronto Port Authority concluded that in 2012 there were 1,700 jobs directly associated with the airport that contributes $203 million in direct GDP. (For comparison the GTAA is currently reporting that Toronto Pearson generates directly 40,000 jobs). The city estimates full time employment to be 1.028 million with GDP of $144 billion. Thus the TPA contributes .17% and .14% of Toronto’s employment and GDP respectively. And, there are questions over the true nature the airport’s impact. Are the jobs merely displaced from other firms on or off the airport once Porter began service? If Porter stopped serving the airport would other firms fill the employment void? (aviation businesses in Buttonville will be looking for a new home when that airport closes) Would workers find employment in other sectors? Good connectivity or linkages to the outside world can spur economic activity in other sectors, the catalytic impacts. This is harder to measure but will be greater in situations where connectivity is poor. Such is not the case in Toronto. The city can be reached by frequent service with several different modes of transportation. A new entrant is more likely to capture business from other transportation companies than increase the number of travelers thus leaving the total catalytic impacts on the tourism and hospitality industries largely unchanged. Transportation is a “derived” demand. People do not travel for the sake of the journey; they travel for a purpose – to conduct business, visit friends and relatives or to see the sights. The real economic generators are the diverse population and businesses that provide that underlying demand and income to employees for personal travel. The economic activity attributable to air transportation is secondary and flows from or is derived from satisfying the demand for transportation created by businesses. In the absence of a purpose for air travel there would be no need for airlines. Expanding the runways to accommodate long haul routes will not increase the underlying demand. The last full year of activity data released by Porter was for 2012 when it reported a 62.0 % load factor. For 2013 Air Canada and WestJet reported system wide load factors of 82.8% and 81.7% respectively. Thus, Porter has considerable room to increase passenger activity with is current operations that will not generate incremental economic activity. Given the high degree of connectivity to the city currently provided by other airports and modes of transportation, lengthening the runways to accommodate long haul flights will not increase the region’s economic activity to any noticeable degree. As with the introduction of short haul flights, the proposal will not significantly increase the size of the economic pie but merely divide it up in a different way. Additionally, one time economic activity created during construction or manufacturing does not justify the runway expansion project if there is no long-term activity at the airport. There are better ways to spend infrastructure money in Toronto and the sale of a few aircraft to Porter would not be pivotal to the success of the Bombardier C Series program; it would however be pivotal to the success – or lack of success - of the waterfront area.…unless of course they flew from Pearson. In summary, while Porter makes a constructive contribution to the city’s economy it is not large. If it ceased operations or failed - as airlines are prone to do - the loss would amount to .17% of the city’s employment and .14% of its GDP and that only in the unlikely event none of the economic impact was replaced by other businesses. The incremental economic impact of the expansion itself would be less. ______________________ Background and Disclaimer:
Tom Driedger worked in the airport industry for over 40 years. Beginning with Transport Canada in Ottawa he held positions in Vancouver and Edmonton before moving to Toronto and later transferring to Greater Toronto Airports Authority in 1996. He retired in 2013 as Senior Manager, Strategic Planning. NoJetsTO met with Mr Driedger. In his view Porter’s project has its four distinct elements, each with it own set of problems (runway expansion, long haul flights, larger capacity aircraft and jet powered planes) making it inappropriate for the type of airport he envisions. In his words “the objective is not to find ways of creating the biggest airport and shoehorning it into a confined space. Rather it is to define the size and type of airport most compatible with the best overall plan for the city & local area and then live within those bounds.” Given the considerable common ground between our views and those of Mr Driedger, we are posting some of his background notes. These views are his and his alone. They do not represent the views of Transport Canada, and/or the GTAA .