Chapter 1: Introduction

A well-known effect of having an airport in the region is the positive impact it has on the regional economy. The on-going activities at the airports make an economic contribution to the region and or country. Economic impact is often measured in employment, income and contribution to GDP (InterVISTAS, 2015). Several papers investigated if the effect was really significant, others first divided it into sub-effects. But let’s first look at the former case.

A study conducted this year compared the economic data from multiple metropolitans in the US, of which half had an airport and the other half did not, by performing a multiple regression analysis. It turned out that when one matched regions with similar social and economic structures and compared them, the ones which have an airport had an economic output per capita that was significantly higher. The airport effect remained significant even when regional size, unemployment; industrial and educational structures as well as climate were controlled for. Another finding was that size and scale also matter; larger airports have a bigger positive effect on regional development (Florida, Mellander, & Holgersson, 2015).

Bleumink and van der Zanden quoted in Gordijn et al. (2009) focused on the fact that an important part of economic development is employment. BCI compared regional European airports on the basis of traffic volume and direct employment effects and linked these to the characteristics of the airport. They found a similar result as in the study above, the bigger the airport the more jobs, so a bigger positive effect on regional development. They also looked at other factors which might influence the economic effect of a regional airport on the region. They concluded that having a Homebase at an airport had a positive effect. Something else that had a positive effect was having a wider economic function as an airport, for example also serving as a business centre or shopping location. These effects were measured while the number of passengers was kept constant

The consulting company InterVISTAS was asked to conduct a study for the ACI (Airport Council International). The study is about the economic impact of European airports; the study split up the effect into different parts. Also this study found that having an airport in the region can generate a lot of jobs, which leads to extra income and in this way to a higher GDP. The study found some more interesting things. The direct employment generated by airports is decreasing with additional units of traffic; the employment generated by a 1000 extra units for small airport is greater than for a larger airport. It also turns out that LCC generate less direct jobs; they might have lower staffing levels and no food on the planes. Therefore the conclusion is that the direct employment generated by airports is affected by the size of the airport and the mix of traffic handled. The scale of the impact of an airport can be enormous, this report found that European airports contribute to the employment of 12.3 million people earning 356 billion euro annually, and generate 675 billion in GDP each year, equal to 4.1% of GDP in Europe (InterVISTAS, 2015). These outcomes of the study are visible in figure 2.



Figure 2: Summary of economic effects European airports, Source InterVISTAS

Economic impact is built up out of different things; each next level has a wider effect as can be seen in figure 2. There is direct, indirect, induced and often forgotten catalytic effect. They will be discussed below.

Below the different parts of economic impacts of airports will be discussed:
Direct economic impact: “The extra jobs, income and GDP that are generated by and associated with activities at the airport, this includes other types of firms that are located at the airport and airport related activities elsewhere near the airport”. The most important sectors/jobs/companies here are airline services (pilots and flight attendants), ground handling (cargo operators, ramp crew and fuelling) and air traffic control. (InterVISTAS, 2015). Airports these days get an increasing portion of their income from non-aviation related businesses taking place on the airport. Think of property development, property exploitation and the concession payments that come with that. Regional airports seem to fall behind in this development while it would be a good thing for them as the income from LCC’s is usually not as high. Indirect income from parking and renting out of property development will be needed more in the future (Gordijn et al., 2009). You see this happening a bit more; a good example is the Airport Boulevard in Eindhoven.

Most studies use the same method to calculate the direct economic impact. Let the method of InterVISTAS serve as an example. The study looked at all airports in Europe, and surveys were sent out to gather information. The survey entailed different questions, from the question of how many employees there are to the question which function they have and what their salary is. The passenger volume and cargo volume also has to be known. When the responds rate is high enough, the direct effect can be calculated from this and one can see if there is a correlation with the size of the airport (InterVISTAS, 2015).

The indirect and induced effects are usually estimated by using economic multipliers.

Below in the figure 3 the employment effect in explained, it includes direct, indirect and induced employment. The employment causes the income and the income the GDP so in a sense it explains how the economic impact of an airport works (InterVISTAS, 2015).

There is more to the economic impact than this. A lot of research has also shown that there is a fourth force called catalytic impacts. These are impacts you might not think about in the first place, but which can have a rather large and far spread effect. Another term for this impact, which might tell you more, is “wider economic benefit”. Most studies focus on the first three types of impacts because they are relatively easy to measure and quantify. Ironically catalytic impacts represent the most important function of an airport (York Aviation, 2004) and literature often calls for a better understanding of them. There are two main types, not everyone acknowledges the second one.

To calculate catalytic impacts some research papers take both types into accounts, others only one of them. It is difficult to measure catalytic impacts. Data is needed for the majority of business in the country, so working with surveys is not an option. Statistical analysis and historical data are needed, and other factors that contribute to economic growth, such as education, need to be controlled for. This last step is very difficult to actually perform in practice because catalytic impacts do support the economy but it is hard to isolate the impact of the airport from other factors that play a role in generating economic growth. The national economy works in a complicated way and it is hard to say which factors exactly caused what effects (InterVISTAS, 2015).

The first type of catalytic impact works in four different ways.

-Trade: Airports increase the trade between different countries as air transport provides connections to export markets for goods and services. For goods this makes intuitive sense but maybe the effect for services is even higher. There is globalization these days and people exchange information and services with people all over the world. Because of the advances in communication these greater quantities of information can be transmitted across space at much lower costs. But at the same time the information and knowledge often needs to be transmitted through face-to-face contact because of the increased complexity. Workers who travel do so mostly to meet potential clients, attend conferences or negotiate sales and this is very important for the business. Airports can decrease the distance between places and it makes face-to-face interaction across long distance possible (Oort, 2015; Gaspar & Glease, 1998). A study of the UK institute of Directors researched this, they surveyed over 500 businesses and for almost three quarters of them the results showed that if the amount of air travel they undertook would decrease significantly their business would be adversely affected (Patterson, 2008).

-Location: The presence of airports also influences the investments of companies; they take the proximity of an airport into account when deciding where to locate offices, plants and warehouses. Some companies prefer an international airport where others prefer to be close to a regional one. At international airports the mainport-argument is there, with all the intercontinental destinations the area of Schiphol is attractive for European head offices or European distribution centres. Other company’s often only need to fly to European destinations and therefore a regional airport is good enough while having the benefit that it is often faster to fly from there. Because of these advantages of working close to an airport one can see a lot of airport city-like developments where business parks develop close to the airport. Examples in the Netherlands are Flight Forum at Eindhoven, Maintenance Boulevard at Maastricht, Business park Rotterdam the Hague Airport at Rotterdam, even the small Eelde has its own plaza (Gordijn et al., 2009). A paper by Bel & Fageda provides new evidence that air services are a significant factor in location choice of businesses. A 10 percent increase in the number of flights at an airport caused a 4 percent increase in the number of big firm headquarters who located their business close to the airport. These firms in turn contribute to urban growth (Bel & Fageda, 2008).

-Tourism: Air service facilities also greatly impact tourism in a positive way. These tourists spend money which supports a lot of different tourism-related businesses like hotels, recreation facilities.

-Productivity: “Businesses located near an airport can increase their productivity as air transportation creates access to new markets which in turn makes sure greater economies of scale can be achieved. Air access also enables companies to attract and retain high quality employees” (InterVISTAS, 2015).

Most studies on catalytic impacts neglect this side of things and only put focus on regional economic competitiveness. This type of catalytic impact is more relevant for airports in more remote areas than for city airports. Airports have a positive impact on the region because they are able to secure access to the region, in this way people get the opportunity to travel to work (so the number of paid jobs increases) and maintain a social, educational and healthy life. A study in Norway focussed on this topic, the data was applicable as Norway is a big and spread out country with some remote areas. The study looked at two different airports, one of the airports is small, it lies in a relatively remote area and its direct flights only go to destinations inside Norway, the other one is a bigger airport that offers direct flights to other European destinations. The results showed that in the remoter region airports are significantly more important for residents location choice and retention; the airport facilitates have a more important role there. Trip frequency to access health services is significantly higher in the more remote area, while in the region that has a bigger airport the trip frequency for holidays is significantly higher (Halpern & Brathen, 2011).

The section above looked at the benefits an airport can have on a region, these benefits were expressed in jobs created and added value to the GDP. One should look at this relationship with care because it is not so clear-cut that the airport actually causes these effects. Airports create new jobs, but to help the region it also has to decrease structural unemployment. If there are no unemployed people that qualify for the new jobs, the employees are just shifting from one job to another. This is something to keep in mind when looking at research results (Gordijn et al., 2009). Next to this it is unsure if aviation has an influence on GDP or the other way around, the classic “chicken and the egg” problem. Aviation increases GDP in different ways, all explained earlier. But one could also reason the other wat around and say that GDP increases airport activity. The reasoning goes as follows; airports tend to locate in larger places where the economic development and demand for their services is higher. And in turn these conditions are more likely there in places where GDP is higher (Florida et al., 2015)

In this chapter the theoretical concepts described in the chapters 2 and 3 will be used to discuss to regional airports in the Netherlands; RTHA and Eindhoven Airport. What are the characteristics of these airports and how do they compare to the general characteristics of a regional airport. The positive and negative effects of these airports are looked into and compared.

The two regional airports in Eindhoven and Rotterdam are very different in some aspects, as they want to attract different type of customers and they are growing at different rates. In 1997 Rotterdam was heading to 500,000 passengers a year, while Eindhoven had not even reached 300,000 passengers. By now Rotterdam’s number has tripled to almost 1.7 million but Eindhoven really had grown even more and now has a passenger number of over 4 million (CBS, 2015). A big reason for this is that RTHA is located really close to the city and with respect to sound emission regulations cannot offer more flights. Next to this they cannot plan the yearly flights in a way that the sound limit is almost reached as the airport is the homebase for the government and royal flights. These flights are mostly unplanned but still add to the total sound production (www.ad.nl/ad/nl/1012).

Both airports aim for different kind of customers, Rotterdam aims to be a business airport while Eindhoven mainly has holiday passengers. There are different ways one is able to see this. First of all the kinds of airlines they have contracts with but also the kinds of destinations, Rotterdam wants to have more class and please the business traveller while Eindhoven wants to serve the people who look for a cheap holiday with the LCC’s. Eindhoven also offers flights for the business traveller but it is not its main goal. Rotterdam’s most important carrier is Transavia which is a bit more than a LCC and further has more higher quality airlines such as Britisch Airways and Lufthansa (www.rotterdamthehagueairport.nl). Eindhoven is mostly connected to LCC’s such as Ryannair, Corendon and Wizzair (www.eindhovenairport.nl). At the moment about half of the flights in Rotterdam are business related, a few years ago this number was about 25 percent but the flights from British Airways and Lufthansa who focus more on business brought change (Derksen, Kandel, Korving, & Karrenbeld, 2014). The destinations also differ; percentage wise Rotterdam offers more business destinations. Rotterdam’s most frequent flights go the economic centres like London and Munich and the port partner Hamburg. Eindhoven has a lot of destinations; mainly holiday destinations, like Spanish and French coasts. But these days it is hard to make a real differentiation between business and pleasure destinations, Madrid or London are suited perfectly well for both. Therefore it is really difficult to further increase the amount of business travel in Rotterdam, the airport can decide the destinations but not the kind passengers who buy a ticket. Eindhoven has grown a lot, did this have to do with the LCC it has contracts with? From 2002 Ryanair and later other LLC started flying from Eindhoven airport. From this point onwards point there the airport really started growing, the introduction of the LLC’s could have been the reason.

The airport accessibility in these cases corresponds to the characteristics of a regional airport. Public transport is not the best in both cases but by car they are easily accessible. RTHA is located centrally in the “Randstad area”, by car via the 15 minutes from Rotterdam and half an hour from the Hague. Parking places are all in walking distance and there are no capacity problems. Public transport is creating somewhat more of a problem. There is a bus which takes about 20 minutes from Rotterdam CS or one from Randstadrail Meijersplein which takes a shorter amount of time. Building a direct connection to the airport with for example the metro is not profitable. A good option would be tailor made work, for example shuttles between companies and hotels (www.rijswijk.nl). Eindhoven lies outside the Randstad area in Brabandt, 10 km west from Eindhoven, easily to be reached by car via the A2. At this airport one also has to take a bus from the Central Station (CS), a ride of about 20 minutes. Recently an Airport shuttle with extra baggage space and no stops has started driving between the airport and the CS. Because the airport is growing the municipalities, province, government and airport will invest 90 million in the connectivity over the coming years. Connectivity by road is improved but there is also better public transport information and tuning to passengers and frequency (www.rijksoverheid.nl).

These two cases also show that indeed internal accesibilitty at regional airport is easy, passangers get an airport close to home and there are less recreational option’s. A research showed that in Rotterdam 50 percent of the passengers comes from around the airport and 11 percent even comes from Rotterdam itself (Derksen et al. , 2014). Rotterdam has one café/restaurant and a few small shops, Eindhoven is expanding and gets more ‘horea” and shops, also more parking places (www.nu.nl). Still not to compare to a big airport like Schiphol.

In figure 5, shown below, the main characteristics of the two airports are displayed.

	RTHA	EINDHOVEN
Passengers per year	1.7 million	4 million
Destinations	41	70
Airlines	Small % LCC	Mostly LCC
Public transport	20 min by bus from CS	20 min by bus from CS
Accesibility	Close to A13	Close to A2

Figure 5: summary of the characteristics of the regional airports.

4.2 Costs

There are the negative externalities of the airport, mostly for the close surroundings. Let’s see how these two airports do in these aspects.

Aviation is one of the safest modes of transport. As aviation-related accidents reach the news faster, people are often scared, but statistics-wise, flying is safer than road transportation. Per movement aviation is less safe, but as it usually moves a lot of people at the same time, it is the safest mode of transport per km (www.newsmonkey.be). People around the airport are sometimes scared as the airplanes fly quite low and if something goes wrong there are usually deathly victims. But in the Netherlands, besides the Bijlerramp no external people ever got hurt, this means the fear is mostly irrational. There are not a lot of victims, the number of deathly victims in the Netherlands in the past 50 years lies under a 100, while road travel often causes over 500 deaths per year. The two regional airports or their near locations only had a deathly crash once in 1996, in Eindhoven 34 people died (www.ed.nl1.2079499). The plain got on fire after it landed; there was some bad handling on behalf of the airport. Therefore these days’ stricter regulations and manuals are in place about what to do in these cases, especially for people in the control tower.

Local air quality is another negative externality. It is hard to say anything specific about the emission of the two airports as they are both in areas where the level of emission is high anyways because of the environment and their close location to the highway and industries. But TNO performed a research in 2014, looking at Schiphol, so another airport in the Netherlands, to get more insight into this topic. The subject of the paper was the high concentration of “ultrafijnstof” in the areas around the airport, it turned out this might pose a bigger health risk than expected. The production of it is caused by engines running at low speed when the burning process is not optimal yet, this is the case during landing and take-off. At the moment there is no technical way to reduce this specific problem. It causes a treat to human health because the parts are so small that they can go to deep into the alveoli and reach the blood flow this way. Therefore they can travel through the body and cause inflammations. There is no proof yet, but there are strong clues that this can lead to cancer or heart diseases. The research showed that the concentrations in areas around the airport where till 5 times higher than in area’s without airports. The researchers looked at the number of flights and the wind direction to prove the correlation. (Keuken, et al., 2014). Research should be done in Rotterdam and Eindhoven as well, for now only hypothesis can be made for the situation there. At the moment attention goes to noise pollution but we should look into the health risks as well as they could be big. These health risks should be taken into account when deciding about a possible expansion of the airports. Especially because people do not protest against air pollution as they do with noise.

Off course the surrounding communities of these airports also complain about the noise. In areas around the airport and under the flight routes the noise nuisance is the highest. Most complaints about the noise from people in these areas originate from sleep disturbance. The flights that cause this sleep disturbance are the flights in the early morning 7-8 and late evening 10-1. In principle no flights are allowed in both airports between 11 at night and 7 in the morning. But there are exceptions, the most common one are the delayed flights, they are allowed in till 1. Aircrafts that serve for police use and emergencies, say organ transportation, are even allowed all night. In Rotterdam the total number of these flights per year is between 500 and 950. Flights at night count 10 times as much and the sound limit will thus be reached earlier. Still for surrounding communities it has an effect because the total amount of noise might stay the same, the noise in the evening gives more nuisance (www.rotterdamthehagueairport.nl)

At the moment there are already flights every 15 minutes in Rotterdam and every 10 minutes in Eindhoven and this number will increase if the airports expand. The amount of complaints is really high, but a large percentage comes from only a handful of people. Still a lot of people are disturbed, also because most people don’t bother to complaint because “it would not help anyway”. In Rotterdam 900 people put in one or more complaints in 2013 (Downloads/Jaarrapportage).

Another externality was the negative effect on housing prices. No study has been conducted to research the effects of these particular airports on housing prices; therefore it is hard to say anything about it. Of course the prediction coming from other research is that it will negatively affect the housing prices. But the fact if prices went up or down in the time the airports grew does not have to say anything. If prices went up in Rotterdam this could be because of the attractiveness that cities have these days. If prices went down it could be the crisis. A fact is that the effect is not too big yet as new houses are still being built and sold around both airports. Though the airports are against this as they are fearful these people are the new generation of “complaining people”.

This way the next component is reached, space. This seems to be more of a problem in Rotterdam as it lies in the “Randstad” and there is more demand for space. More people want to live close to the city centre but also like to have some green around them. The area round Rotterdam The Hague Airport seems perfect.

There will always be people that feel the negative side effects of the airport. It is important to keep the conversation alive and find some compromises. There should be parties to mediate and provide accurate information to all parties. In Rotterdam there is a good example of that Committee of Regional Debate (CRO) Rotterdam Airport. In Eindhoven this does not exist but there is a website “samen op de hoogte” which provides information to all parties (www.cro-rotterdam.nl). Solutions that could be looked at and sometimes already have been implemented will be discussed here.
Off course they could decrease the number of flights and in particular the night flights, but both airports look to expand so that does not seem like a viable option. The airports could isolate some houses and therefore decrease the sleep disturbance. Another way is to analyse the complaints and the preferences of people and see what can be done. From surveys and complaints data it is found that around RTHA people do not mind late evening flights in the weekend as much as during the week, therefore these weekend night flights could be increased and in return the flights in the early morning could be decreased. Another possibility, as delayed flights seem to be a big problem for people, would be that airports could fine airlines if they are late because of their own fault.

Air traffic leaves the airport and comes to the airport via fixed routes. The routes are places in such a way that they, where possible, avoid developed areas (Downloads/Jaarrapportage). In both Rotterdam and Eindhoven there are no routes that go over the city centre for that reason. In Rotterdam flights go North-East over Schiebroek and Berschenhoek and South-West over Overschie and Schiedam. In Eindhoven flights also go North-East or South-West to start their journey; then they fly over some small villages. A flight can deviate from its route when it has to for technical reasons. But airplanes from Rotterdam often also have to take a different route because of air traffic from Schiphol. A third reason is that pilots sometimes just don’t stick to the route that precisely. A research in Rotterdam showed that in 201,3 60% of traffic deviated from its route (milieufederatie.nl). Therefore a good way to decrease noise is by letting the airlines follow the routes more precisely where possible and reconsider routes that are used at the moment. For example at Eindhoven Airport they decided to change the route of a couple flights so they do not fly over Steensel and Waalre anymore (www.ed.nl1.3819467). To prevent future complaints, it is currently not allowed to start building projects of over 50 houses around Eindhoven Airport. In Rotterdam new houses were build but buyers had to sign a contract which showed they knew about the airport beforehand and they have to mention this fact when selling again ( www.ad.nl/ad/nl/5597).

As just seen there are a lot of negative externalities for the communities living near the airport.

In Chapter 2 the different economic impacts were shown. Off course there was the direct impact of the jobs on the airport, next to this there were the indirect jobs for supporting service and induced impacts as a way in which the money earned at the airport was spend in the rest of the economy. Last there was the catalytic impact, on the one side the increase of regional economic competitiveness and on the other side the impacts relating to regional accessibility and social development. This last part is not really applicable to the two airports discussed here as they are located centrally and are easily accessible, also by other transportation modes. The regional competitiveness is enhanced by tourism, increased productivity, trade and because location is more attractive for businesses.

Most studies measure employment by Full Time Equivalents (FTE), part time jobs are then expressed in 40 hour workweeks. Only if not possible the numbers of jobs are just counted. As stated before it is hard to express the number of jobs in money added to the economy as it is partly just a movement of jobs. Also the location effect will in reality not add a lot to the economic effect because the offices usually would be located somewhere in the country anyway.

Stratagem and Ecorys research the direct and indirect effect of RTHA on the amount of jobs, in commission by the province of South-Holland. This study is 10 years old but in my opinion still somewhat valid as it states the number of jobs per passengers, this way numbers can be altered to fit today’s situation. They state that there are 700-900 jobs per million passengers. Therefore direct employment now is between about 1200 and 1500 because there were 1, 7 million passengers last year. There is a multiplier for the indirect employment, which makes the indirect employment more than double of the direct employment. 112 FTE are employed by airport itself, this was states in the annual report of Schiphol Group (Strategem, Ecorys and ADECS, 2005).

These same companies also researched these effects for Eindhoven Airport in 2007, in 2012 an update was created. In 2012 the direct employment, found by telephone surveys, was 815 FTE’s, indirect employment was a bit over 1000 FTE, this time they tried to get rid of double counting with direct employment. The annual report of Schiphol Group showed only 35 FTE were directly employed by the airport (Strategem Strategic Research BV, 2012).

In these cases only the first part of catalytic impact is looked at. An area is even more attractive as a location for businesses because of the airport. In and around Rotterdam the big companies Unilever and Shell are located, they often use the airport to fly to London as they have offices are located there. The harbour also uses the airport to keep in contact with their port partner in Hamburg. Also a lot of companies that trade with Turkey benefit from the presence of the airport, as Rotterdam has a large Turkish community (www.rotterdam.nl). In Eindhoven Philips, ASML and DAF Trucks are located, those companies profit from having the airport nearby. Both airports also have a business park where there is over 200.000 m² office space for airport related and non-airport related businesses who see the benefit of being situated close to the airport. The airports also help tourism, which in turn helps the economy. In 2014 14 million foreigners visited the Netherlands; this was a 10 percent increase to the year before (www.annualreportschiphol.com). A big part of them is coming via one of the airports; Eindhoven and Rotterdam have their share in that.

The definition of a regional airport, especially from a European point of view, is that it is an airport with few intercontinental flights. Also it is not a hub-airport and has a lower passenger volume.

But let’s to come to the research question of this paper; what is the effect of regional airports on the local economy? The benefits for the region are more employment, higher wages and an increase in GDP. This is accomplished in different ways. There is the direct economic impact, indirect economic impact and the induced economic impact. There are also the two forms of catalytic impacts. The increased regional competitiveness is there because of increased trade, positive influence on location decision, more tourism and higher productivity. The second form is increased regional accessibility and social development. Research has shown that these paths are really followed and in regions were airports are located, GDP is higher or there are more jobs. For Rotterdam and Eindhoven the exact effects are not known but it is proven that the airports create a lot of jobs, which in turn usually creates extra GDP. These other effects are all proven before in many other cities and airports so it is likely that RTHA and Eindhoven have these effects as well.

Off course there are also costs involved. These costs are mostly social cost for the near communities. These costs are the decreased safety, decreased air quality, noise nuisance, negative effect on real estate and a decrease in the amount of useful space.

A trade-off has to be made when expanding an airport or building a new one. Do the economic benefits weigh up to the social costs. It is also a moral question, is the economy or the living situation of a group of real people worth more. This trade-off for regional airports is even harder than for other airports. When it is a city airport the negative consequences are felt more as there are more houses around the airport and usually also closer to the airport. And when it is a regional airport in a more remote area the regional accessibility is an important benefit that is heavily weight in the equation.

What the effect of a regional airport on the economy will be in the end depends on what trade-off is made, how many flights and passengers the airports have. The more passengers the larger the negative effect but also the bigger the positive effect on the economy. A research did show that direct employment generated by airports is decreasing with additional units of traffic; the employment generated by 1000 extra units for small airport is greater than for a larger airport.

Web References

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