Logan Airport in the Boston Regional Economy: A REMI Analysis
Logan Airport Team Final Presentation 11.482J Regional Socioeconomic Impact Analyses and Modeling
Professor: Karen R. Polenske Michael Brown, Travis Dunn, Manshi Low
Isabelle Yi Xu, Hongliang Zhang
Massachusetts Institute of Technology December 8, 2004
Dec 2004 1 MIT 11.482J Logan Airport Team
Agenda
Logan Airport Overview
Research Questions
Methodology
Analysis (3 Scenarios)
Conclusions
Dec 2004 2 MIT 11.482J Logan Airport Team
Logan Airport
Logan has one of the country’s highestpercentage of business travelers
Logan is the nation’s 19th busiest airport,serving 23 million travelers annually
About 90% of Logan passengers use Logan as a destination (as opposed to a hub)
Boston’s growth sectors account for the largest industry demand and share for air service
Demand for air service will outpace overall economic growth
Opportunity to tailor services to best meet the needs of industries with the greatest demand
Dec 2004 3 MIT 11.482J Logan Airport Team
Logan Airport: Seasonal Variation
Logan Passenger Volumes
3
2.5
2
1.5
1
0.5
0
Mill
ions
of p
asse
nger
s
98 99 00 01
02 03 0498 01 0201 01 02 02
0398 98
03 0403
0499Oc
00Oc -00 - - - - -- - -99Ju
-9 9 -00Jun- n- n- n- n- n-n-r r rr l- t r r t t t- r-- -
Ju-
Ju- ul- ul-JaJu
l l l l
Oc t t
Ap Oc Ap Oc Ap Oc ApAp Ap Apa a aa a a J JJ J JJ J J
Month
Source: Compiled using data from Massport, Statistics for Logan Airport, “About Logan,” www.massport.com.
Dec 2004 4 MIT 11.482J Logan Airport Team
Logan Airport: Seasonal Variation
Monthly passenger volume change relative to previous year
60%
40%
20%
0%
-20%
-40%
-60%
Perc
ent c
hang
e fro
m p
revi
ous
year
's v
olum
e
-99 -01 2 -03 040 01 -02
0399 9n-0
0
n-01 1
n-02 03
3n-0
400 040 20099Ju t 9 t 0 t 0t 0 -0r- r-r- r- r-ul- ul- ul-n- n-l
Jul
JulprAp Ap Ap Ap ApOct aa Oc Oc Oc Oca a aaJ J JAJ J JJ J J
Source: Compiled using data from Massport, Statistics for Logan Airport, “About Logan,” www.massport.com.
Dec 2004 5 MIT 11.482J Logan Airport Team
REMI 5-County Region
Source: Adapted from University of Texas Perry-Castaneda Library Map Collection and U.S. Census Bureau
Dec 2004 6 MIT 11.482J Logan Airport Team
Logan Airport Industry SectorsUnforeseeable Events
Research Questions
Explore interactions between the Boston regional economy and Logan Airport over 20 years. Specifically:
– The impacts of industry expansion on Logan airport output and jobs
– The impacts of unforeseeable events, e.g., terror warnings on air travel and regional economy
Logan Airport Unforeseeable Industry Sectors Events
Dec 2004 7 MIT 11.482J Logan Airport Team
Research Questions
Baseline forecast
Growth scenario
– Consider growth 5% above baseline in identified sectors and use REMI to determine impact on air transportation sector
– Consider growth 10% above baseline in identified sectors and use REMI to determine impact on air transportation sector
Security uncertainty scenario
– Consider impact of Homeland Security “Orange” alerts on air travel and use REMI to determine impact on regional economy
Dec 2004 8 MIT 11.482J Logan Airport Team
Methodology:Criteria for Identifying Sectors
Sector’s share of the regional economy and growth trends – Share of jobs (%) – Growth in job share
Sector’s reliance on air transportation services – Air travel cost as a percentage of total industry revenue – Employee annual air travel trips
Sector’s significance to the air transportation-services industry – Sector spending on air services as a percentage of total output of air
services
Dec 2004 9 MIT 11.482J Logan Airport Team
Methodology:Job-Share for Selected Sectors, 2000
Job-share for selected industries in 2000:Suffolk County, Boston Metro, and US
(%)
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
l USSuffo k County 5-County Metro
FIRE Medical Prof. Service Education Comp, Electr Air mfg Tranportation
Source: Authors' calculations based on the baseline regional and national controls in REMI 5.4, © 2003
Dec 2004 10 MIT 11.482J Logan Airport Team
Methodology: Job-Share for Selected Sectors 2020
Job-share for selected industries in 2020:Suffolk County, Boston Metro, and US
(%)
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
l USSuffo k County 5-County Metro
FIRE Medical Prof. Service Education Comp, Electr Air mfg Tranportation
Source: Authors' calculations based on the baseline regional and national controls in REMI 5.4, © 2003
Dec 2004 11 MIT 11.482J Logan Airport Team
Methodology: Industry Reliance on Air Services
Index of industry spending on air services as a proportion of total revenue, 1996
Data Source: US Department of Commerce and BTS in EDR Group, 2001 Logan International Airport’s Evolving Role in New England Economy.
Dec 2004 12 MIT 11.482J Logan Airport Team
Methodology: Industry Reliance on Air Services
Annual air passenger trips per employee (by industry), 1998
Business service
Management service
Manufacturing/ High tech
Communications
Finance
Retail Trade
Other Services
Construction
Education
Health Service
Values reflect averageannual air passenger trips
per employee Real Estate
0 1 2 3 4 5 6 7 8 9
Data Source: Massport in EDR Group, 2001 Logan International Airport’s Evolving Role in New England Economy.
Dec 2004 13 MIT 11.482J Logan Airport Team
Methodology: Industry Reliance on Air Services
The regional Boston economy’s dependence on air services is increased by transition towards a knowledge-based economy, which includes
– Professional services (e.g., engineering services, legal services) – Financial services – Technology (Information Technology, Biotechnology) – Education
Boston exports services of knowledge-based sectors
Finance, professional services, and computer manufacturing are among the industries that purchase the most air services
Employees in the education and healthcare sectors purchase air services at an average level; however, non-employee travel (e.g., student and patient travel induced by the sectors) not included
Dec 2004 14 MIT 11.482J Logan Airport Team
Methodology: Industry’s Significance to the Air Services Sector
l i
i
i l i
i ls
li
ini i i
il
iti
iti
/el i
Ai ion
i i
(% )
Industries with high share of total air service demand in Boston Metro
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
Real estate
Insurance
Ambulatory hea th care serv ces
Construct on
Educat ona serv ces
Hosp ta
Pub shing
Adm strat ve, support serv ces
Reta trade
Monetary author es, et al.
Wholesale trade
Secur es
Computer ectronic manufactur ng
r transportat
Profess onal Serv ces
Source: Authors' calculations based on data from REMI Policy Insight Version 6.0.100, © 2004
Dec 2004 15 MIT 11.482J Logan Airport Team
Methodology:Key Sectors Identified
Key sectors for Boston's economy and the air-services industry include:
FIRE, professional services, healthcare, education, and computer/electronics manufacturing.
The five sectors jointly account for more than one-third of total jobs in Boston Metro
Each of the five promising key growth sectors has a greater than average or average reliance on air services
They together account for nearly half of the industry demand for air services in the region (industry represents about 1/3 of total passenger demand)
Dec 2004 16 MIT 11.482J Logan Airport Team
Scenario I: Base Case Assumptions
REMI data for 2002-2020 forecast is based on historical trends and data gathered from the Bureau of Economic Analysis, Bureau of Labor Statistics, and US Census Bureau
No significant shocks to regional economy or air transportation sector
Jobs in “air transportation” sector are directly associated with air transport at Logan Airport
Demand structure for Logan Airport service remains constant (e.g., proportion of travel for business)
Dec 2004 17 MIT 11.482J Logan Airport Team
Scenario I: Base Case Results
Scenario I: Air transportation sector baseline REMI forecast, 2002-2020
12
10
8
6
4
2
0
Jobs (000's)
Output ($ billions) Output (1996 $ billions) Jobs (thousands)
220
0 3 420
520
620
0 7 820
920
0 120
1 2 320
1 4 520
1 6 720
1 8 920
2 000 00 00 01
01 01 01 010 0 0 1
2 2 2 2 2 2 2 2
Year
Source: Authors' calculations based on data from REMI Policy Insight Version 6.0.100, © 2004
Dec 2004 18 MIT 11.482J Logan Airport Team
Scenario I: Base Case Results
Total job loss of 1,400 in air-services sector (Boston Metro) by 2020 (~13%)
Output nearly doubles
Perhaps reflective of increasing automation of in-airport services and location of airline service jobs in remote locations
Because Logan is a destination airport and not a hub, increase in output likely reflects increasing demand for travel from within Boston and to Boston from other locations
Dec 2004 19 MIT 11.482J Logan Airport Team
Scenario II: Growth in Knowledge Sectors Assumptions
Assume higher growth than in the baseline forecast, as represented by the following industries: – Hospitals – Education services – Securities, common contracts, and investments – Monetary authorities – Insurance – Professional Services – Computer and electronics manufacturing
Assume uniform percentage change in export growth across the 5-county region (5% and 10%)
Assume new travel associated with growth in knowledge sectors is business travel (e.g., induced demand for air travel is negligible) – Except for CEM sector, whose demand for air travel is mostly cargo-related – Assume 75% of new growth is business-travel growth
Dec 2004 20 MIT 11.482J Logan Airport Team
Scenario II: Growth in Knowledge Sectors Variables
Exogenous Change Change in REMI Variables
Additional growth in exports as 5% or Output Block
10% of industry output >> Industry Output
>> Industry Sales / International Exports (share)
Dec 2004 21 MIT 11.482J Logan Airport Team
Scenario II: Growth in Knowledge Sectors Individual Results
Growth in Air Transportation due to 5% growth in knowledge sectors individually
Perc
ent G
row
th in
Out
put o
f Air
Tran
spor
tatio
n Se
ctor
0.9%
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%
0.0%
-0.1%
ing
iti
i i
l
iti
l
i ls
i ii
l i
G
Computer Manufactur
Secur es
Profess onal Servces
Who esale Trade
Monetary Author es
Educational Services
Retail Trade
Rea Estate
Insurance
Hosp ta
Adm nistrat ve & Support Servces Ambu atory Servces
Oil & 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
Source: Authors' calculations based on data from REMI Policy Insight Version 6.0.100, © 2004
Dec 2004 22 MIT 11.482J Logan Airport Team
Scenario II: Growth in Knowledge Sectors Joint Results
Impact on Air Transportation of growth in selected knowledge sectors
6%
5%
4%
3%
2%
1%
0%
Output Growth (10% Scenario)
Job Growth (10% Scenario)
Job Growth (5% Scenario)
Output Growth (5% Scenario)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
Source: Authors' calculations based on data from REMI Policy Insight Version 6.0.100, © 2004
Dec 2004 23 MIT 11.482J Logan Airport Team
Scenario II: Growth in Knowledge Sectors Results
Under 5% growth of knowledge sectors, total job loss in base case is offset somewhat by addition of about 300 jobs in 2005. By 2020, reduction in jobs is fewer than 1100.
Under 10% growth of knowledge sectors, total job loss in base case is offset by addition of 600 jobs in 2005. By 2020, reduction in jobs is fewer than 900.
Proportion of business travelers shifts slightly for years 2005-2020 according to table below:
Base Case 5% Growth 10% Growth Scenario Scenario
Leisure (%) 44.0 43.1 42.4
Business (%) 56.0 56.9 57.6
Dec 2004 24 MIT 11.482J Logan Airport Team
Scenario III: Orange Alert Assumptions
Homeland Security implemented a color-coded terrorism advisory system in March 2002
Terror levels have remained at yellow, or “elevated,” except for 5 periods when the alert was raised to orange, or “high.” These occurred: – September 10-24, 2002 – February 7-27, 2003 – March 17-April 16, 2003 – May 20-30, 2003 – December 21, 2003-January 9, 2004
Relative declines in passenger volumes at Logan Airport were observed during these periods, as compared to the historical share for the months involved.
Dec 2004 25 MIT 11.482J Logan Airport Team
Scenario III: Orange Alert Assumptions
Monthly Share of Passengers
Si l98-00 Average
nce Orange A ert
Orange-alert periods
11.0%
10.5%
10.0%
9.5%
9.0%
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
Shar
e
2 2 3 3 402Aug
02 02Feb
03Aug
03 03Feb
04Aug
043 4
r-0 0 r-0 0 -00 0
ct- ct-n c- un- c- -
un-prp pDe eu O OA A ADJ J J
Month
Source: Data compiled from Massport, Statistics for Logan Airport, “About Logan,” www.massport.com
Dec 2004 26 MIT 11.482J Logan Airport Team
MIT 11.482J Logan Airport TeamDec 2004 27
Scenario III: Orange AlertAssumptions
0.0020.0700.068February-04
-0.0020.0630.065January-04
0.0070.0790.072December-03
0.0000.0800.081November-03
0.0030.0950.092October-03
-0.0040.0790.083September-03
0.0010.0980.097August-03
0.0010.0960.094July-03
0.0010.0910.091June-03
-0.0030.0830.086May-03
-0.0020.0840.086April-03
-0.0030.0810.085March-03
-0.0020.0660.068February-03
0.0020.0670.065January-03
0.0060.0780.072December-02
-0.0050.0760.081November-02
-0.0020.0910.092October-02
-0.0030.0800.083September-02
0.0040.1010.097August-02
0.0010.0960.094July-02
0.0020.0920.091June-02
0.0010.0880.086May-02
0.0010.0870.086April-02
DifferenceActual share for monthHistorical Average Share for monthMonth
Source: Data compiled from Massport, Statistics for Logan Airport, “About Logan,” www.massport.com
Scenario III: Orange Alert Assumptions
Based on monthly share losses, assume 150 thousand passenger loss per orange alert
Based on historical trend of 5 orange alerts in 2.5 years, assume 2 orange alerts per year from 2005-2010
Based on current volume of ~23 million passengers per year, a loss of 300,000 passengers represents roughly a 1% decline in travel
In REMI, assume a decline of 1% in output of air transportation for each year from 2005-2010 (Suffolk County only)
Measure impacts of this change on the Boston region
Dec 2004 28 MIT 11.482J Logan Airport Team
Scenario III: Orange Alert Variables
Exogenous Change Change in REMI Variables
Decline of 1% in output of air Output Block
transportation >> Industry Output
>> Industry Sales / Int’l Exports (share)
Dec 2004 29 MIT 11.482J Logan Airport Team
Scenario III: Orange Alert Results
Jobs Lost under Orange Alert Scenario
Jobs
0
-20
-40
-60
-80
-100
-120
2005 2006 2007 2008 2009 2010
Ai i
i
i i
r Transportat on Jobs
Food Serv ce Jobs
Adm nistrat ve Support Jobs
Year
Source: Authors' calculations based on data from REMI Policy Insight Version 6.0.100, © 2004
Dec 2004 30 MIT 11.482J Logan Airport Team
Scenario III: Orange Alert Results
Difference in output from base under Orange Alert
Air Transport Output 0
-5
-10
-15
-20
-25
-30
-35
-40
Total GRP
2005 2006 2007 2008 2009 2010 Year
Source: Authors' calculations based on data from REMI Policy Insight Version 6.0.100, © 2004
1996
$ (m
illio
ns)
Dec 2004 31 MIT 11.482J Logan Airport Team
Conclusions
Our Logan Airport team has determined interdependencies among identified industry sectors and the air-services sector using three scenarios
The key growth sectors all have greater than average or average reliance on air services, and together account for more than 50% of industry demand for air services in the region
Interdependence between industries has been explored through linkages between identified industry sectors and the air service sector via 3 scenarios
Impact of Homeland Security alerts is small, but noteworthy. Correlation between alerts and economic performance should be examined in more detail
Further growth in business travel, though modest, implies that a continued focus on business travel-oriented services at Logan is appropriate
Dec 2004 32 MIT 11.482J Logan Airport Team
Selected References
Boston Redevelopment Authority Publication. 1 September 2004. The Boston Economy 2004 Turning the Corner.
Boston Redevelopment Authority Publication. 1 October 2003. The Boston Economy - 2003. Boston Redevelopment Authority Publication. 1 January 2003. Leadership Through Innovation: The
History of Boston's Economy: 1970-2000. EDR Group. 2001. Logan International Airport’s Evolving Role in New England Economy. Harrison, B., and J. Kluver, 1989. “Deindustrialization and Regional Restructuring in
Massachusetts.” In Deindustrialization and the Regional Economic Transformation: The Experience of the United States, edited by Lloyd Rodwin and Hidehiko Sasanami. Boston, MA: Unwin Hyman, pp. 104-131.
Leonard, P., Modicamore, D., and G.W. Perkins, 2004. The Boston Economy 2004 - Turning the Corner. Boston Redevelopment Authority Publication # 599.
Lewis, G., Avault, J., and J. Vrabel, 1999. History of Boston's Economy: Growth and Transition 1970-1998. Boston Redevelopment Authority Publication # 529.
Massport. 2004. Logan Airport Statistics, “About Logan.” www.massport.com. REMI Policy Insight Model, Version 5.4, © 2003. REMI Policy Insight Model, Version 6.0, © 2004. Rickman, D.S. and R.K. Schwer, 1995. "A Comparison of the Multipliers of IMPLAN, REMI, and
RIMS II: Benchmarking Ready-Made Models for Comparison," The Annals of Regional Science, Vol. 29, No. 4, pp. 363-374.
U.S. Census Bureau. 20 December 2003. Population in Metropolitan and Micropolitan Statistical Areas in Alphabetical Order and Numerical and Percent Change for the United States and Puerto Rico: 1990 and 2000. http://www.census.gov/population/cen2000/phc-t29/tab01a.pdf
Dec 2004 33 MIT 11.482J Logan Airport Team