Airport Study Links Efficiency to Economic Growth, Reveals Nearly 5% Increase in Costs Due to 9/11 Terror Attacks

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Efficient airport operations have a beneficial effect on metropolitan economic development, according to a new study by School of Economics Professor and Chair Patrick McCarthy.

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Efficient airport operations have a beneficial effect on metropolitan economic development, according to a new study by School of Economics Professor and Chair Patrick McCarthy.  McCarthy’s study also provides the first hard data confirming that the 9/11 terror attacks caused significant increases in airport operating costs – nearly 5% on average.

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Efficient airport operations have a beneficial effect on metropolitan economic development, according to a new study by School of Economics Professor and Chair Patrick McCarthy.  McCarthy’s study also provides the first hard data confirming that the 9/11 terror attacks caused significant increases in airport operating costs – nearly 5% on average.

Commissioned by the Federal Aviation Administration (FAA), McCarthy’s “Airport Costs, Capacity, and Metropolitan Economic Development: A Translog Panel Data Cost Function Analysis,” establishes a direct linkage between the marginal cost of commercial airport operations and metropolitan economic development.

“The notion of airports as an important driver of economic activity is not new,” said McCarthy. “But where past studies have typically examined linkages between various measures of airport output (for example, service employment), this study analyzed the relationship between airport operations and economic activity.”

The data revealed that airports that are efficient in handling passengers and thus have higher passenger throughputs correlate to more robust indices for economic development in their metropolitan areas, explained McCarthy.

Specifically, the study showed that, all else constant, decreasing an airport’s real marginal operating costs significantly increases employment, the number of establishments, and real gross metropolitan and state product.

A by-product of McCarthy’s analysis was findings that reveal how much the 9/11 attacks drove up commercial airport operating costs.  Based upon an analysis of 35 large and medium hub airports over a 12-year period, airport operating costs in metropolitan areas that have one commercial airport have increased 4.6% since 9/11.  Atlanta’s Hartsfield-Jackson Airport was an exception, showing a 24.1% increase.  That seemingly outsized surge in costs reflects the fact that Atlanta serves a yearly average of 35 million passengers, nearly four times the average for large U.S. metropolitan areas in the sample. The large number of passengers served accounts for the post-9/11 cost increase that is more than 5 times that of the sample average.

“The cost of post 9/11 airport security has been a significant factor in airport cost structure,” said McCarthy.

The study findings add important knowledge about airports, their costs, and their productivity at a time when infrastructure improvements have been brought to the forefront by the Obama administration.

The study notes that, “Similar to any large enterprise, airports manage a significant amount of resources in providing the necessary infrastructure for air travel and air freight. By allocating its resources more efficiently, an airport reduces time and out-of-pocket costs of individuals and businesses and provides an environment for the metropolitan area and region to strengthen its economic base and develop faster.”

Further, in focusing upon metropolitan growth and development, this study adds to the developing literature on the role of airports in metropolitan growth and will have implications for regional, metropolitan, and local policy makers. With funding from Georgia Tech’s University Transportation Center and the Georgia Department Of Transportation, McCarthy is continuing to analyze the effect of airport operations on metropolitan growth and development.

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Ivan Allen College of Liberal Arts

Categories
Economic Development and Policy
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Keywords
economic development, Patrick McCarthy, school of economics
Status
  • Created By: Lauren Langley
  • Workflow Status: Published
  • Created On: Oct 13, 2010 - 9:59am
  • Last Updated: Oct 7, 2016 - 11:07pm