faa economic impact rpt 2011

8/12/2019 Faa Economic Impact Rpt 2011

1/52

The Economic Impactof Civil Aviation on theU.S. Economy

August 2011


2/52

Contents

Foreword

Overview

Introduction

Economic Impact of Civil Aviation Highlights

Current Outlook

Impact of the Recession on U.S. Airlines, Coping Strategies and

Future Outlook

National Impact of U.S. Civil Aviation

Methodology

Types of Economic Impacts

Measures of Economic Impacts

Update

Results

Aviations Contribution to Gross Domestic Product

Real Change from the Previous YearManufacturing

General Aviation

FAA Spending Overview

Enabling Impact

Passenger Expeditures

Freight Flows

Freight Exports

Domestic Air Freight

Conclusion

Appendix Supplemental Tables

Glossary of Economic Terms

3

4

6

6

8

12

18

18

19

19

20

20

25

2628

30

32

36

38

38

40

40

42

44

48


3/52

2011 Report

Look around. In todays ever-changing and innovative world, aviation providesa vital link to economic opportunities at home and abroad. In the wake o globaleconomic and financial uncertainties, runways have become the new main streetsor cities and towns to get down to business and soar once more.

In , civil aviation supported over million jobs, contributed . trillion intotal economic activity and accounted or . percent o total U.S. Gross DomesticProduct (). Civilian aircraf engines, equipment and parts also contribute billion toward the U.S. trade balance. Civilian aircraf engines, equipment andparts have been the top net export or the past decade.

Our economic success clearly depends on the success o aviation. So the FederalAviation Administration () is committed to providing the saest, most efficientaerospace system in the world. As we move orward, the will continue toinvest in airports, and build the Next Generation Air ransportation System(NextGen). NextGen is a transormation o the National Airspace System. It willadd a suite o st century technologies and procedures to make air travel moreefficient and green. s Destination will provide the strategic bridge toaccomplish the NextGen vision.

Tis concise report, ideal or policymakers and industry officials, offers the latestdata on the economic impact o civil aviation. Tis version contains several newpoints o analysis including the economic impact o ederal spending on aviation

and hard-to-quantiy economic enablers such as speed, cost, flexibility, reliabilityand saety.

Over the decades, civil aviation has been a catalyst or commerce. Where it takesus rom here, only our imagination knows.

Foreword

David GrizzleChief Operating Officer

Air Traffic OrganizationFederal Aviation Administration


4/52

4 | The Economic Impact of Civil Aviation on the U.S. Economy

Enabling American Commerce in theGlobal Marketplace

Te civil air transport industry has a crucial rolein ostering trade and making any place on theglobe easily and quickly accessible. U.S. industryand consumers depend on the vital services o airtransportation, which continue to maintain and

vitalize the U.S. economy.

In , air carriers operating in U.S. airspacetransported million passengers over ,.billion revenue passenger miles ().

More than billion revenue ton-miles ()o scheduled reight passed through U.S. airportsin .

Te U.S. civil aviation manuacturing industrycontinues to be the top U.S. net exporter. Accordingto data rom the U.S. International radeCommission (), the U.S. civil aviation

manuacturing industry supported a positive tradebalance o over billion.

Overview

New research using data rom shows that airtransportation enables economic activity in othersectors o the economy through:

- Air-traveler spending o . billion on goodsand services

- Freight valued at . billion transporteddomestically or to other countries

Te Federal Aviation Administration () spentmore than billion on air traffic operations,acilities and equipment, and grants in tosupport the National Airspace System (). Teseexpenditures supported additional spending in theeconomy totaling . billion and nearly ,

jobs with earnings o . billion.

U.S. Department o ransportation, Bureau o ransportation Statistics (BS), - Segment. System revenue ton-miles.


5/52

2011 Report

International Air ransport Association. State of the Industry, June .NBC News. American Airlines Gets Creative to Save Fuel.

http://www.nbcdw.com/news/business/American-Airlines-Gets-Creative-to-Save-Fuel-.htmlInternational Monetary Fund, World Economic Outlook Database, October .

http://www.im.org/external/pubs/f/weo///weodata/index.aspxU.S. Department o Commerce, Bureau o Economic Analysis. National Income and Product Account ables. January .

http://www.bea.gov/national/nipaweb/Index.aspU.S. Department o Labor. Bureau o Labor Statistics (BLS), Labor Force Statistics rom the Current Population Survey. February .

http://www.bls.gov/

Economic Survival DuringUncertainty

Even during tough times, the efficiency o our airtransport network serves commerce and supports jobsthat maintain and revitalize the strength o the U.S.economy. oday, despite the lingering effects o therecent recession, there is cautious optimism in the airtransport sector o the U.S. economy.Te industrycontinues to be flexible, developing new, innovativeways to lower costs and increase revenues.

For example, as the price o jet uel climbs, aircarriers are finding innovative ways to conserveuel and lower costs by: replacing old, heavy drinkcarts with new lighter versions, removing seat backtelephones, installing lighter seats and V monitors,applying new coating on airrames to improve

airflow, and purchasing more tugs to reduce engineuel use.

Investment in air transportation inrastructure leadsto smart growth and job creation. Te AmericanRecovery and Reinvestment Act o providedunding to invest million in acilities andequipment and . billion in grants-in-aid or airports.

Te Aerospace Forecast expects a .percent increase in between fiscal years and , and projects average annual growth rateso . percent per year through or U.S. airlines.

Sustaining Economic Developmentand Growth

From live traffic reports sent rom helicopters to just-in-time delivery o lie saving organs or transplant,civil aviation has become an integral part o the U.S.liestyle and commerce. In challenging economictimes, the services that air transportation provides areessential among the building blocks or recovery andeconomic growth. Te financial crisis and ensuingrecent recession affected the whole world. Global real growth slowed rom . percent to . percentbetween and ,while real growth in theU.S. dropped rom . to zero percent during thesame period.

Although June marked the end o the recentrecession in the United States, real growth ell by

. percent by the end o and unemploymentrates reached double digits. However, despite thedramatic slowdown o the economy and impact onthe aviation industry, the U.S. economy produced. trillion in value-added economic activity andsustained million jobs.At the same time, civilaviation economic activity:

Supported . million jobs Contributed . trillion in total economic activity Accounted or . percent o total U.S.


6/52


Economic Impact ofCivil Aviation Highlights

What Is New?o keep abreast o all o the changes with greateraccuracy, the has incorporated new governmentdata, methodologies and an updated version o theRegional Input-Output Modeling System ( ).

Along with the economic-impact estimate, the has taken the opportunity to revise its impactestimates or the years through , providingusers with a consistent time series, using the newmethodologies and data. Te most current officialeconomic data available is or calendar year .

Federal spending to maintain and upgrade the haslong been ignored in understanding the ull economicimpact o the aviation industry. Accordingly, thisyears report contains an extensive study o the impacto spending (e.g., payroll, nonpayroll, grants)on national and state economies. Te impact o this

spending is reported by total output, earnings and jobsat the national and state levels.

Also included in this report is an analysis o theenabling impact o aviation, a concept developedby Massachusetts Institute o echnology ()researchers. Te concept envisions transportationservices in terms o the ollowing characteristics:

speed, cost, flexibility, reliability and saety. Tesecharacteristics are not easily quantifiable, but the has taken a first step at quantiying somemeasures o enabling flows or .

Introduction


7/52


8/52


Current Outlook

Tere is growing optimism or aviation industrygrowth. Te overall health o the aviation industry istied to the U.S. business cycle, and the airline industryremains very responsive to overall changes in theeconomy (Figures and ).

As commonly stated in s and s economicliterature, every time America sneezes, the rest of theworld catches pneumonia. Tis old adage can also beapplied to todays aviation industrys relationship withthe overall U.S. economy. As shown in Figure , aferderegulation and throughout the s, the demandor air travel consistently increased or decreased asterthan the economy. In the s, the economy anddemand or air travel became more linked than in theprevious decade and grew at more consistent rates.

However, afer September , , the link betweenthe economy and the airline industry decoupledand the impact on the demand or air travel is againexhibiting an increase in sensitivity to economic andglobal events.

Te economy grew . percent in , but afer theevents o September , the demand or air travel ell. percent. Te subsequent years continue to exhibita similar pattern. Air travel demand increased .percent in , just over three times the growth rateo the economy (. percent), whereas in , airtravel demand dropped by . percent, twice that o

the economy (-. percent). However, preliminarydata coming out o the recent recession show that theeconomy and demand or air travel growing at similarrates in , . percent and . percent respectively.

Te aviation industry has shown flexibility andingenuity, adopting innovative resource-savingand revenue-enhancing techniques during thesechallenging economic times. U.S. flagship air carriershad roughly billion in , a . percentincrease over . Te seat mile capacity o U.S.flagship air carriers grew by . percent rom .billion available seat miles () in to .billion in . According to the Bureau oransportation Statistics (), the average round-trip air are (including taxes) increased . percentrom in the ourth quarter o to in theourth quarter o .Te change in average areswas beneficial or airlines as they removed seat milecapacity rom their networks and were able to postthe highest profit margins since .

Prior to the recent recession, air cargo experiencedconsiderable growth. In , as the impact o therecent recession took hold, U.S. air carriers saw aprecipitous drop in the demand or air cargo services.However, shows a different story. U.S. air carriersmoved . billion revenue ton-miles () o reightin , an increase o just over percent rom the. billion carried in .

Fares based on domestic itinerary ares, round-trip or one-way or which no return is purchased. Fares are based on the total ticket value,which consists o the price charged by the airlines plus any additional taxes and ees levied by an outside entity at the time o purchase.Fares include only the price paid at the time o the ticket purchase and do not include other ees paid at the airport or onboard the aircraf.Averages do not include requent-flyer or zero ares or a ew abnormally high reported ares.

Bureau o ransportation Statistics. Airline Financial Data. www.bts.gov/press_releases//bts_/html/bts_.html.U.S. Department o ransportation. .


9/52

2011 Report

Figure 1 The Economy and Demand for Air Travel

Source:Bureau of Economic Analysis and Bureau of Transportation Statistics

Figure 2 Growth of the U.S. Economy and the Demand for Air Transportation

Source:Bureau of Economic Analysis and Bureau of Transportation Statistics

-10

-5

0

5

10

15

20

19981993198819831978

Pe

rcentChange

Year

Demand for Air Travel

Real GDP

2003 2008

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20082005200219991996199319901987198419811978

0

100

200

300

400

500

600

700

800

900

BillionsofDollars

Year

BillionsofRPM

Demand for Air Travel

(Billions of RPM)

Real GDP

(Billions of Dollars)


10/52


For decades, American-made aircraf have been inhigh demand both domestically and internationally,and sales o airrames, aircraf engines and partsboosted the economy. Due to the high quality o U.S.aerospace products, global demand continues to addto overall economic growth and job creation withinU.S. borders. One way to measure how the U.S.aircraf manuacturing industry is aring in todaysglobal economy is to estimate the net value o goodsexchanged between the United States and the rest othe world.Te net value o goods exchanged betweenthe countries is characterized as the balance o tradeand is defined as the difference between the value oexports and imports.

According to the , the value o the U.S. tradebalance in goods was -. billion in . Tetotal U.S. trade balance has been negative since ,

driven significantly by net imports o petroleum andmotor vehicles, undermining U.S. competitiveness inthe world market (Figure ). However, or the pastdecade, the trade balance o the U.S. civil aviationindustry has remained positive. Even as the globaleconomic downturn continued into , the civilaviation industry remained a net exporter o U.S.goods to the world, contributing to a lower overallU.S. trade balance.

Te highly volatile price o uel continues to be amajor concern or the airline industry and overalleconomy. In the summer o , jet-uel prices

spiked to record highs, ollowed quickly by aprecipitous drop in the autumn (Figure ). Oil marketspeculators drove the increase as did flat U.S. crudepetroleum field production, cuts in U.S. refiningcapacity, declines in Strategic Petroleum Reservestocks, decreases in Organization o PetroleumExporting Countries () production targets, andpolitical uncertainty in the Persian Gul, Venezuela,Algeria and Nigeria.Prices subsequently ell duringthe remaining months o to per barrel inFebruary a percent decline. Tis decreasewas mainly due to the delayed impact o alling overall

demand or oil as a result o the recession.With theupturn in the economy, the price o jet uel has slowlyrisen. In January , the price o jet uel averaged per barrel. Recent political turmoil in North Arica andthe Middle East has led to urther price increases.

While many analysts believe that the oil market willreturn to more amiliar patterns, it should be notedthat the increased demand rom China, India, Braziland other emerging economies will likely placeupward pressure on the price o energy aced byairlines and by their customers. Moreover, as in allorecasts, some events cannot be oreseen. Recentunrest in the Middle East and Arica has created moreuncertainty or all transportation-related services anddampened economic expectations. From December, , through March , , the spot price oU.S. Gul Coast jet uel, according to the U.S. Energy

Inormation Administration, rose cents per gallonto ., versus an increase o cents per gallon orall o .

United States International rade Commission. www.usitc.govU.S. Department o Commerce, Bureau o Economic Analysis (). Balance o Payments. now measures Civil Aviation Aircraf, Engines, Engines, Equipment and Parts separately rom Aerospace Products.Joseph Kowal, Antonio Lombardozzi, Scott Sager and William Snyders. . Producer Inflation Accelerates in Due to Rising Prices

or Energy and Foods.Monthly Labor Review. Volume , Number (July ). http://www.bls.gov/opub/mlr///artull.pd; U.S.Department o Energy. Energy Inormation Administration. . Short-erm Energy Outlook Supplement: Why Are Oil Prices So High?http://www.eia.gov/emeu/steo/pub/special/-oil-prices.pd

Joseph Kowal, William Snyders, Antonio Lombardozzi and Lana Borgi. . Producer Prices Reverse Course in .Monthly LaborReview. Volume , Number (July ). http://www.bls.gov/opub/mlr///artull.pd


11/52

2011 Report

Figure 3 U.S. Trade Balance by Industry, 2009 (Best Five and Worst Five)

Source:U.S. International Trade Commission

Figure 4 Monthly Fuel Prices

Source:U.S. Department of Energy, Energy Information Administration

-250 -150 -50 0 50 100-100-200 150

Oil and Gas

Motor Vehicles

Broadcasting and Wireless Equipment

Audio and Video Equipment

Electronic Computers

75

18

16

16

15

-26

-34

-34

-53

-199

Plastics Material and Resins

Semiconductors

Soybeans

Waste and Scrap Metals

Civilian Aircraft, Engines, Equipment and Parts

Billions of Dollars

0

20

40

60

80

100

120

140

160

180

2010 20112009200820072006200520042003

DollarsperBarrel

Year/Month

Jet Fuel

Crude Oil

Recession


12/52


Impact of the Recession onU.S. Airlines, Coping Strategiesand Future Outlook

Te financial crisis that began in the United States dueto problems in the financial and housing sectors quicklyspread to the rest o the world, resulting in the recentrecession. Te National Bureau o Economic Research(), the watchdog o business-cycle contractions(recessions) and expansions (recoveries), determinedthat the recent recessionofficially began in December and, despite continued high unemployment in theU.S., ended in June with the resumption o positiveeconomic growth in the overall economy.Althoughunemployment remained high throughout , stated that based on analysis o previous business cycles,the slow return o employment is a lagging characteristico deep recessions.

Te allout o the financial- and housing-sector crisescrimped the aggregate demand o businesses andindividual consumers or goods and services, as wellas the availability o new money or investment. Asthe crisis continued to unold, the economy abruptlyslowed, causing the recession. Te lower wealth levelsresulting rom the all in home prices and loss oincome among the newly unemployed led to even lowerexpenditures, including spending on air transportation.

Tis recession was labeled the Great Recession by the news media in the U.S., not by . An official definition or the term does not exist.National Bureau o Economic Research. www.nber.orgYear-over-year growth rates are percent changes rom the previous year or period.All monthly and quarterly data are seasonally adjusted, at annual rates. Real , published by the , is constructed rom seasonally adjusted

data. Seasonally adjusted retail sales, industrial production and employment are published by the Census Bureau, the Federal Reserve and theBureau o Labor Statistics, respectively. Along with quarterly real , also publishes annualized quarterly percent changes in real .Tese quarterly percent changes are different rom the year-over-year percent changes presented here.

At the business-cycle peak, December , employment stood at . million. Tereore, employment ell by . million rom December to December .

U.S. Department o Labor, Bureau o Labor Statistics, Labor Force Statistics rom the Current Population Survey. February .

The Overall EconomyRecent movements in real , retail sales andindustrial production suggest that the economy is inrecovery. Year-over-year growth ratesin real ,retail sales and industrial production have turnedpositive and, although employment and the housingmarket remain challenged, signs o improvementare suracing.

Te first part o the recession, rom December through the first quarter o , was characterizedby positive but declining economic growth. Real ,retail and ood service sales, industrial production andemployment continued to grow during this period,but at lower rates (Figures and ).Subsequently,rom the second quarter o to mid-,growth rates turned increasingly negative. Industrialproduction shrank in April , ollowed by a drop

in employment in May . Although growth inretail sales slowed in the first period, it did not turnnegative until September . Te economy seemedto turn the corner by the end o the second period,with annual growth in real reaching a low o -.percent in the second quarter o . June wasthe low point o the economic trough, signiying theend o the recession.

As the economy started to recover, real growthremained negative but was slowly improving. Growthturned positive in the ourth quarter o , as didgrowth in retail sales in November . Industrial

production exhibited strong positive growth inJanuary and continued to grow thereafer.Employment reached a low o million persons inDecember but is currently growing slowly on amonth-to-month basis. In February , employmentstood at . million.Employment is recoveringslowly because employers do not wish to add newworkers until recovery is more certain.


13/52

2011 Report

Figure 5 Real GDP Year-over-Year Growth by Quarter during the Recent Recession and Recovery,Seasonally Adjusted at Annual Rates

Source:U.S. Department of Commerce, Bureau of Economic Analysis

Figure 6 Key Monthly Economic Indicators during the Recent Recession and Recovery,Seasonally Adjusted at Annual Rates

Sources:Bureau of Labor Statistics, Federal Reserve Board and Census Bureau

Year-over-YearPercentChange

Recession

Year/Quarter

-5

-4

-3

-2

-1

0

1

2

3

4

2010Q32010Q12009Q32009Q12008Q32008Q12007Q32007Q1

-15

-10

-5

0

5

10

20112010200920082007

Year-o

ver-YearPercentChange

Recession

Year/Month Employment

Retail Sales

IndustrialProduction


14/52


The Air Transportation IndustryEconomic recovery in the air transportation industrydepends heavily on the economic recovery o the resto the economy, the willingness and financial ability oindividuals and businesses to undertake travel, and theneed or air-reight services. As the overall economyimproves and as more individuals and businesses arewilling and able to travel, more arrangements are madeor trips to be completed at a uture date. Tereore,economic movements in the air transportationindustry generally lag movements in the rest othe economy. Te recent growth in the economy isleading to increases in airline operating revenues and,but not industry employment. Airline industryemployment is in decline and could continue to alleven as the industry recovers. Airline employment hasallen since reaching a peak in , beore the onseto the U.S. recession in and the ensuing terrorist

attacks on September .

Te decrease in airline employment may reflect long-run changes within the industry, as the structure othe industry changes and airlines seek to increaseproductivity. In recent years industry output andemployment began to move independently o oneanother. Airline industry employment peaked in theourth quarter o at over , employees andell sharply to about , employees by the thirdquarter o (Figure ), a decrease o . percentover years, or approximately . percent per year.Over the same period, rose . percent per year,

rom . billion to . billion.

Why is employment declining so drastically whileoutput is rising? Tere are three reasons or thisapparent contradiction. Te first reason is that manyairlines are replacing directly employed workers withworkers supplied through contracts with outside firms.According to annual data rom , maintenanceemployment ell percent rom , in to, in (Table ). Te drop in employmentstemmed mainly rom changes in employment atthe network carriers. Among seven network airlines,employment decreased rom , to ,.At these

carriers, the average number o maintenance workers

per aircraf ell rom . in to . in , andthe percentage o maintenance expenses outsourced toother firms rose rom . to ..

Second, low-cost carriers (), which employar ewer maintenance employees per aircraf andoutsource a higher percentage o maintenanceexpenses, grew as a share o the industry during thisperiod. In , the number o workers was, while the number o maintenance employeesper aircraf and the percent o maintenance expensesoutsourced stood at . employees and . percent,respectively (Table ). s maintenance activityis lower because these carriers utilize newer aircraf.According to calculations using the Aircraf Inventorydata rom , the average age o s aircraf was .years versus . years or network carriers in .Also noteworthy is the increase in industry share

o domestic flight operations. According to , theannual number o domestically scheduled flights bynetwork airlines ell rom . to . million between and , while the number o flights amongs increased rom . to . million. Furthermore,in response to the recent recession, airlines employedewer maintenance workers and reduced outsourcedmaintenance expenses. Comparison o the and data shows a . percent decline in theemployment o maintenance workers, all attributableto a decrease in employment at network airlines(Table ). Te data also show a . percentage-pointdecrease in the share o maintenance expenses that

were outsourced.

Te third reason or the all in industry employmentis the substitution o technology or tasks previouslyhandled by employees. For example, more travelers areusing the Internet instead o contacting airline ticketagents to book, price-compare or check in or flights.Digital technology also has brought about greaterefficiencies in handling airline tickets and luggageat airports.

One is equal to one paying passenger transported one mile.Te number o employees is defined as ull-time equivalents (), seasonally adjusted. are at seasonally adjusted, annual rates.Te seven network carriers are: Alaska, American, Continental, Delta, Northwest, United and US Airways.U.S. Department o ransportation, Bureau o ransportation Statistics, . Form Financial Report, B-.Samantha Bomkamp. . Airline Staffs Hits Record Lows, With Room to Fall. Washington Post. April , .


15/52

2011 Report

2000 2008 2009

Passenger Airlines*

Maintenance employees 64,248 46,075 42,774

Maintenance employees per aircraft 13.0 8.9 7.9

Percent maintenance expenses outsourced 29.6 45.2 43.1

Network (7 Airlines)




Low-Cost Airlines**




Table 1 Airline Maintenance Employees and Outsourcing

Figure 7 Airline Employment Trend, 2000 2010

Source:Air Transport Association of America (ATA)

Source:U.S. Department of Transportation, Bureau of Transportation StatisticsAll scheduled passenger air lines repor ting annual employment numbers to BTS: 30 in 2000 and 37 in 2009.Nine airlines in 2000 and seven in 2009.

350,000

400,000

450,000

500,000

550,000

600,000

20102009200820072006200520042003200220012000

Year/Quarter

Recession Recession

AirlineEmployment

***


16/52


Like the overall economy, the history o the airtransportation industry during the recent recessioncan be divided into two distinct periods. Te earlyperiod was characterized by positive, but declining,growth; however, unlike the overall economy, thisprocess began in the first quarter o , not in late. At the beginning o the second period (thethird and ourth quarters o ) growth in airlineoperating revenues, and employment turnednegative and continued to all (Figure ), reaching alow point during the first and second quarters o .In the first quarter o , growth bottomedout at -. percent; in the second quarter, growthin airline operating revenues ell to a low o -.percent. Afer the recession, negative growth persistedbut began to moderate. Airline industry revenuesbegan to grow in the first quarter o . Te entireeconomy began to grow in the ourth quarter o ,

suggesting that the industry lags the overall economyby one quarter. Tus ar, except or employment,the first part o was characterized by gains inindustry operating revenues.

Airlines ended with a ourth quarter operatingprofit o . billion, which quickly turned to a losso . billion in the second quarter o (Figure ). Tese losses resulted rom a substantialincrease in jet-uel prices rom late to mid-,and slowing demand or air transportation. Jet-uelpricesrose about percent, rom . per gallonin December to . per gallon in July .

In response to this run-up in uel prices, many airlinesadopted hedging strategies to limit their exposureto uture price increases. Instead, when the globaleconomy collapsed, uel prices plummeted rapidlyand the costs o these strategies significantlycompounded airlines losses during this period.

Airlines also adopted various strategies to deal withthe recession-induced decline in air travel, includingcapacity reductions through the retirement o old andless efficient aircraf, deerral o outstanding aircraforders, reduction o unprofitable routes, renegotiation

o leases, and workorce reductions.Regionalcarriers began operating aircraf with more than seats, flying more routes between hubs rather thanthe typical regional carrier routes between hubs andsmaller cities, and reducing workorce.

Other strategies included ancillary-revenueenhancements such as la carte services and bundled-service packages. la carte services are separatelypriced services such as snacks, check-in luggage, selectseating, early boarding, extra leg room and loungeaccess. Bundled-service packages represent bundles oseveral different services.

Te response o the civil aviation sector to the recentrecession was innovative. Te Boeing Companyreported in July that it was cautiously optimistic:

Te world market is doing much better than lastyear, but there are still challenges. Looking at, we see a world economy that continues torecover. We expect the world economy to growabove the long-term trend this year. As a result,both passenger and cargo travel will grow this year.Airline revenue and yields are up, but uel pricesremain volatile. Te inclusion o the high traffic-growth levels in , ollowing the recession, isdriving our cargo orecast upward ... oday, aboutone-third o all airline traffic touches the Asia-Pacific region, and as a result o the growth in thismarket, by almost percent o all traffic

will be to, rom, or within the region ... However,the strength o the industry and its growth willcontinue to be driven by sound undamentalsspeed and reliability, consumer product innovationand global industrial interdependence.

Randy inseth,Vice President o Marketing, Boeing

Te next section presents the results o the sectors hardwork in , and reviews the methodology to estimatethe impact o civil aviation on the U.S. economy.

New York Harbor kerosene-type jet uel, as published by the Energy Inormation Administration.U.S. Department o Energy. Energy Inormation Administration. . Petroleum and Other Liquids: Spot Prices.Aaron Karp. . Losing Bet on Hedging.Air ransport World. Page .Adrian Schofield. . U.S. Airlines Remain Optimistic Despite Ominous Signs.Aviation Week & Space echnology. February , .Andrew Compart. . U.S. Regionals Seek Course Corrections.Aviation Week & Space echnology. May , .apping the Ancillary Revenue Wall.AW Online. March , ; Michele McDonald. . Bags, Boarding and Booking Fees: Ancillary

Revenues Grew in .AW Online. August , .Source: Te Boeing Company, July , .


17/52

2011 Report

Figure 8 Key Airline Economic Indicators during the Recent Recession and Recovery,Seasonally Adjusted at Annual Rates

Source:U.S. Department of Transportation, Bureau of Transportation Statistics

Figure 9 Airline Profits during the Recent Recession and Recovery,Seasonally Adjusted at Annual Rates

Source:U.S. Department of Transportation, Bureau of Transportation Statistics

-25

-20

-15

-10

-5

0

5

10

15

20

2010200920082007

Airline Operating

Revenue

Demand RevenuePassenger Miles

Airline Employment

Recession

Year/Quarter

Year-Over-YearPercentChange

-15000

-10000

-5000

0

5000

10000

15000

201020092007 2008

Year/Quarter

Recession

MillionsofDollars


18/52


Civil aviation has far-reachingeconomic impacts.

Although some o civil aviations impacts cannotbe measured quantitatively, this report attempts tocapture all the economic activity generated by directand indirect air transport o passengers and cargousing the best data available rom government andprivate sources. A special effort was made to includethe contributions o General Aviation () to theeconomy. While operates in a large and remarkablerange o communities across the United States, exactdata on the vital economic activity generated by thissector o aviation is sparse. Numerous survey studieswere used and special attention was paid to operations to estimate its economic contribution.

Methodology

Te total economic impact o an industry is the

summation o primary impacts (direct and indirect)and induced impacts o spending on that particularindustry. Tis definition is standard or economic-impact studies and is used to estimate aviations uniqueeconomic contribution to the national economy. Tedata used to measure the primary economic impacts ocivil aviation were collected rom reliable governmentand private sources. Tis study estimated those impactsby looking at industry output, earnings and jobs. Tesedata were entered into to derive the secondaryimpacts. Primary and secondary impacts were thensummed to produce a measure o civil aviations totalimpact on the U.S. economy.

National Impact ofU.S. Civil Aviation


19/52

2011 Report

Types of Economic Impacts

Primary Impacts:Te primary impacts o aviationare a summation o direct and indirect impacts o civilaviation on the U.S. economy and include:

Air transportation and supporting services Aircraf, aircraf engines and parts manuacturing ravel and other trip-related expenditures by

travelers using air transportation

Direct:Direct impacts o civil aviation are createdthrough manuacturing and air-transportation activitiesas measured by the employment, payroll and sales/output associated with the ollowing industries/entities:

Scheduled and nonscheduled airlines(passenger and cargo) and air couriers

Airport and aircraf service providers(including and other government services) Air cargo service providers (noncommercial) aircraf operators

(including flight schools) Aircraf and components manuacturing

Indirect:Indirect impacts result rom the expenditureso air passengers, other than airares and associatedcharges paid directly to airlines or travel arrangers.Visitor expenditures translate into sales, payroll andemployment or the ollowing industries:

raveler accommodations (hotel, motel, etc.) Food and beverage providers (restaurants, bars,

ast-ood outlets and stores) Arts, entertainment and recreation

(museums, theaters, amusement parks) Visitor travel services (sightseeing and other

tourist services, travel agencies) Ground transportation (to and rom airports) Other on- and off- airport purchases o goods

and services (souvenirs)

Induced or Secondary Impacts:Induced impactsresult rom expenditures made by industries identifiedin the measurement o primary impacts to supportingbusinesses and entities, as well as the spending o directand indirect employees. Induced impacts capture thesecondary impacts to the economy as direct/indirectsales, and payroll impacts are circulated to supportingindustries through multiplier effects.

Measures of Economic Impacts

Direct and indirect expenditure estimates are inputinto to estimate the secondary effects o thoseexpenditures on the U.S. economy. Te output o includes the secondary effects on economicoutput, earnings and jobs.

Output:Te current dollar production o goods orservices by a production unit and measured by totalsales or receipts o that unit, plus other operatingincome, commodity taxes (sales and excise taxes)and changes in inventories.

Earnings:Wages and salaries, other labor income,benefits and proprietors income paid to all employedpersons who deliver final demand output and services.

Jobs:Te number o people employed in the industrythat provide civil-aviation services, manuactureaircraf and aircraf engines, or work in other industries

that are indirectly affected by activity in the civil airtransportation sector.

Output includes the sum o all o intermediate goods and services used in production, plus value added by the industry itsel. Tisdistinguishes output rom , which only counts value added.


20/52


Update

Every year, the most current available model anddata are used to support the best possible estimates.Te Bureau o Economic Analysis () recentlyupdated by incorporating the U.S.Benchmark Input-Output (-) table and most currentemployment data. One significant enhancement to is the addition o value-added coefficientsrom the - table. Tese coefficients are usedto estimate the contribution o civil aviation to U.S.. Te new methodology or value-added estimatesis a significant improvement rom the previousmethodology utilized in past editions o this report.Accordingly, the updated model was used to estimatenew results or and and to revise estimatesrom previously published reports.

Te U.S. Census Bureau just completed and publishedthe results o the Economic Census. TeseCensus results, as well as revisions o Census dataprior to , were incorporated into this report.Further, as the airline industry has sought new waysto increase revenues, ancillary ees have become animportant revenue enhancer or airlines. o capturethis trend, baggage ees reported to were addedto the airline estimate.

Along with new estimates or and ,estimates or the years - are included in thisreport. Te same methodology is used or all years

calculated, assuring the reader o a consistent and wellscrutinized measure o civil aviations contribution tothe U.S. economy in the current century. Te resultsare reported in the next section. (More detailed resultsare available in the Appendix Supplemental ables.)

Results

Table summarizes the total impact o U.S. civilaviation on output, earnings and jobs. Economic activityattributed to civil aviation-related goods and servicestotaled . trillion in , generating . million jobswith . billion in earnings. Aviation accountedor . percent o , the value-added measure oeconomic activity.

Te impact o the recent recession on civil aviationscontribution to began in as the percent o contribution started to drop rom previous years.In , the percent o contribution or civilaviation was near levels, when civil aviation wasstill recovering rom the twin effects o September and the recession. Overall, civil aviationscontribution to U.S. ranged rom . to .

percent over the past decade.

Table reports the revisions to previously published economic-impact estimates or civil aviation.About one-hal o the increase in - outputis due to the new visitor-expenditures methodology.New Census Bureau data lowered manuacturingtotal output estimates; the update o airtransportation and airport multipliers accounts or theremainder the increase.

Te new employment coefficients calculatedor the manuacturing and service sectors showed lower

job creation induced by spending in these sectors. Withthe ever-changing global economic climate, moregoods and services are produced overseas and importedinto the United States. Tereore, investment andexpenditures do not create as many jobs as estimated inprevious models.


21/52

2011 Report

YearOutput

($Billions)Earnings($Billions)

Jobs(Thousands)

Percentof GDP

2009 1,311.2 394.4 10,186 5.2

2008 1,437.1 432.6 11,138 5.5

2007 1,409.7 423.7 10,901 5.6

2006 1,307.8 393.5 10,149 5.4

2005 1,206.3 363.4 9,413 5.3

2004 1,106.2 333.4 8,641 5.2

2003 1,012.9 305.1 7,876 5.0

2002 1,003.1 301.1 7,740 4.7

2001 1,077.8 323.6 9,383 4.8

2000 1,131.0 339.5 9,891 5.2

OUTPUT

YearPrevious($Billions)

Current($Billions)

PercentDifference

2007 1,315.3 1,409.7 7.2

2006 1,223.3 1,307.8 6.9

2005 1,134.2 1,206.3 6.4

EARNINGS

YearPrevious($Billions)

Current($Billions)

PercentDifference

2007 396.3 423.7 6.9

2006 369.1 393.5 6.6

2005 342.7 363.4 6.0

JOBS

YearPrevious

(Thousands)Current

(Thousands)Percent

Difference

2007 11,512 10,901 -5.3

2006 10,778 10,149 -5.8

2005 10,055 9,413 -6.4

PERCENTAGE OF GDP

Year Previous CurrentPercent

Difference

2007 5.6 5.6 0.0

2006 5.6 5.4 -0.2

2005 5.5 5.3 -0.2

Table 2 Summary - Impact of Aviation onU.S. Economy 2000 2009

Table 3 Revisions to Previously Published Estimates


22/52


Table reports real primary expenditures or outputin dollars. Primary output is used to calculatethe total economic impact o civil aviation. o isolatechanges in civil aviation spending rom inflationaryeffects, the nominal primary output measures aretransormed into constant dollars.

Between and , real primary output or

civil aviation ell . percent. Commercial aviationoutput dropped . percent during the same period,and primary output in dropped . percent.During the height o the recent recession, commercialaircraf manuacturing and airport operations werethe only industries registering positive growth inoutput between and . Commercial aircrafmanuacturing was buoyed by global demand, andairports operations were shored up by the AmericanRecovery and Reinvestment Act o ().

As stated above, primary output estimates are usedto estimate the secondary effects o spending in the

economy with the updated . Results rom are reported in Table and show the ollowing:

Airline operations accounts or the bulk o civilaviations economic contribution, with operationsgenerating . billion in total output in .

Once airline passengers reach their finaldestinations, their expenditures on hotels, rental carsand entertainment contribute billion in totaloutput to the U.S. economy, approximately double

the output supported by the airline operations.

also made a remarkable impact. While smallerthan the impact rom commercial aviation, the contribution still reflects the industrys uniquerole in the nations transportation system. operations contributed . billion to totaloutput. Factoring in manuacturing and visitorexpenditures, accounted or a significantcontribution o . billion. In the U.S., hasaccess to more than , public-use airports anda significant number o private airports, making itone o the largest airport users.

provided supplemental unding o . billion in grants-in-aid to airports. Budget Highlights, Fiscal Year .U.S. Department o ransportation, Federal Aviation Administration.Administrators Fact Book. (September ).

http://www.aa.gov/about/office_org/headquarters_offices/aba/admin_actbook/


23/52

2011 Report

Description2008

($Billions)2009

($Billions)PercentChange

Airline Operations 111.3 90.7 -18.5

Airpor t Operations 22.3 23.3 4.1

Civilian Aircraft Manufacturing 22.2 27.1 22.2

Civilian Aircraft Engine and Engine Parts Manufacturing 9.0 6.6 -26.7

Civilian Other Aircraft Parts and Equipment 22.2 20.9 -5.8

Air Couriers 27.7 24.3 -12.0

Visitor Expenditures 229.5 213.3 -7.0

Travel Arrangements 4.8 4.2 -12.0

Subtotal Commercial 448.8 410.4 -8.6

General Aviation Operations 14.4 11.9 -17.6

GA Aircraft Manufacturing 12.3 8.3 -32.6

GA Visitor Expenditures 4.6 4.2 -7.0

Subtotal General Aviation 31.2 24.4 -21.9

Total Primary Output 480.1 434.8 -9.4

Table 4 Real Primary Output 2008 versus 2009 (2005 Dollars)


24/52


DescriptionAverageEarnings

Airline Operations $45,791

Airpor t Operations $44,727

Civilian Aircraft Manufacturing $51,303

Civilian Aircraft Engine and Engine PartsManufacturing

$49,595

Civilian Other Aircraft Parts andEquipment

$47,375

Air Couriers $33,762

Visitor Expenditures $33,550

Travel Arrangements $34,188

Subtotal Commercial $38,415

General Aviation Operations $45,791

GA Aircraft Manufacturing $51,303

GA Visitor Expenditures $33,550

Subtotal General Aviation $44,599

Total Impact $38,717

Table 6 Average Annual Earnings per Employeeby Activity, 2009

DescriptionOutput

($Billions)Earnings($Billions)

Jobs(Thousands)

Airline Operations 296.6 91.9 2,007

Airpor t Operations 78.9 27.5 614

Civilian Aircraft Manufacturing 84.3 21.5 418

Civilian Aircraf t Engine and Engine Parts Manufacturing 20.9 5.6 112

Civilian Other Aircraft Parts and Equipment 72.2 21.5 454

Air Couriers 72.0 21.5 637

Visitor Expenditures 597.0 178.8 5,329

Travel Arrangements 12.8 4.0 118

Subtotal Commercial 1,234.8 372.2 9,690

General Aviation Operations 38.8 12.0 262

GA Aircraft Manufacturing 25.8 6.6 128

GA Visitor Expenditures 11.9 3.6 106

Subtotal General Aviation 76.5 22.1 496

Total Impact 1,311.2 394.4 10,186

Table 5 Total Output, Earnings and Jobs Estimates, 2009


25/52

2011 Report

Impact TypeValue Added

($Billions)Percentof GDP

Airline Operations 150.5 1.1

Airpor t Operations 44.6 0.3

Civilian Aircraft Manufacturing 39.6 0.3

Civilian Aircraft Engine andEngine Parts Manufacturing

10.2 0.1

Civilian Other Aircraft Partsand Equipment 36.9 0.3

Air Couriers 40.8 0.3

Visitor Expenditures 359.3 2.5

Travel Arrangements 7.5 0.1

Subtotal Commercial 689.3 4.9

General Aviation Operations 19.7 0.1

GA Aircraft Manufacturing 12.1 0.1

GA Visitor Expenditures 7.1 0.1

Subtotal General Aviation 38.9 0.3

Total Impact 728.2 5.2

Table 7 Contribution to GDP, 2009

Table shows the total output, earnings and jobestimates by civil aviation activity or . Te twolargest activities contributing to output, earnings and

jobs are airline operations and visitor expenditures.Civilian aircraf manuacturing, engine and partsmanuacturing, and other aircraf parts and equipmentcontribute a total o . billion and nearly onemillion jobs to the U.S. economy. Increased globaldemand or U.S. aircraf and parts makes this animportant part o the manuacturing sector. Visitorexpenditures contributed the largest single portiono the total impact by ar, with some billion inoutput and over . million jobs. Air couriers, airportoperations and travel arrangements round out the resto commercial aviation, contributing . billion intotal output and supporting just over . million jobsin the U.S economy.

Civil aviation supports job creation and the jobs arehighly compensated. Civilian aircraf manuacturingsaverage salary o , was the highest among theindustry ollowed by the engine and other aircrafparts manuacturers (Table ). Average salaries or

jobs supported by airport operations was nearly,, while jobs supported by air courier andtravel arrangements hovered around ,. At thelowest part o the spectrum, the average salary or jobssupported by visitor expenditures was ,. Te

jobs induced by visitor expenditures are concentratedin the retail and the service sectors.

Aviations Contribution to GrossDomestic Product

U.S. nominal was ,. billion in . represents the sum o all value-added activitiesin an economy, so intermediate goods and servicesused in the production o goods and services are notincluded. In the previous section, total output includedintermediate goods and services that were purchasedas part o the production process. In order to compareaviations contribution to , these intermediategoods and services must be subtracted rom total

output. o estimate civil aviations contributionto , each impact type is calculated separately

using the newly published value-addedcoefficients. Te results are shown in Table . In ,aviation-related value-added economic activity totaled. billion, or . percent, o total .. .

Te largest contributor to the overall economicimpact o civil aviation in was commercialaviation. Commercial aviations total value added tothe U.S. economy was . billion, or . percento . Within commercial aviation, the largest shareo the total is commercial visitor expenditures,. billion, or approximately . percent o . contributed nearly billion to the U.S. economyin , a large number by any measure.

(Table in the Appendix Supplemental ablesreports civil aviations contribution to or theyears -.)

U.S. Department o Commerce, Bureau o Economic Analysis. January .


26/52


Real Change from thePrevious Year

Tree measures highlight the economic contributiono the civil aviation sector: the value o total output,earnings paid to employees and the number o jobsmaintained. Tese measures are shown in Table .

Te values or output and earnings are presented in dollars in order to report growth attributablestrictly to changes in the civil aviation industry ratherthan to inflation. Civil aviations real output dropped. percent between and . According to themost recent release o U.S. economic data, real declined . percent during the same time period.

Overall, yearly real earnings in civil aviation decreased. percent between and . Te recentrecession urther exacerbated employment losses in thesector, which ell . percent. Airline operations outputand earnings dropped . percent and the number o

jobs ell . percent. While the contribution to theimpact is not large enough to cause significant changesto the total output or civil aviation, it should be noted

that the contribution was significantly affected bythe recent recession. Overall, real output, including manuacturing, dropped . percent and thenumber o jobs ell by . percent.

Between and , real airport expendituresincreased . percent while jobs increased nearly. percent. Some o this increase was attributableto , which included . billion in grants-in-aid to airports. Air couriers, the important link orconsumers and business to connect the United Stateswith the rest o the world, experienced drops in realoutput and earnings o percent between and. Air courier output decreased as retail sales andbusinesses were among the first to eel the impacts othe recent recession.

U.S. Department o Commerce, Bureau o Economic Analysis. January .


27/52

2011 Report

Description

2008Output

($Billions)

2009Output

($Billions)PercentChange

2008Earnings($Billions)

2009Earnings($Billions)

PercentChange

2008Jobs

(Thousands)

2009Jobs

(Thousands)PercentChange

Airline Operations 332.1 270.6 -18.5 102.9 83.8 -18.5 2,440 2,007 -17.7

Airpor t Operations 69.1 72.0 4.1 24.1 25.1 4.1 584 614 5.1

Civilian AircraftManufacturing

63.0 76.9 22.2 16.0 19.6 22.2 339 418 23.3

Civilian Aircraft Engine and

Engine Parts Manufacturing 26.0 19.1 -26.7 6.9 5.1 -26.7 152 112 -26.0

Civilian Other Aircraft Partsand Equipment

69.9 65.9 -5.8 20.8 19.6 -5.8 477 454 -4.9

Air Couriers 74.7 65.7 -12.0 22.3 19.6 -12.0 717 637 -11.2

Visitor Expenditures 585.8 544.6 -7.0 175.4 163.1 -7.0 5,678 5,329 -6.2

Travel Arrangements 13.3 11.7 -12.0 4.2 3.7 -12.0 133 118 -11.1

Subtotal Commercial

1,233.8 1,126.5 -8.7 372.6 339.6 -8.9 10,521 9,690 -7.9

General Aviation Operations 42.9 35.4 -17.6 13.3 11.0 -17.6 316 262 -16.8

GA Aircraft Manufacturing 34.9 23.5 -32.6 8.9 6.0 -32.6 188 128 -32.0

GA Visitor Expenditures 11.6 10.8 -7.0 3.5 3.2 -7.0 113 106 -6.2

Subtotal General Aviation

89.5 69.7 -22.1 25.7 20.2 -21.3 616 496 -19.5

Total Impact 1,323.3 1,196.2 -9.6 398.3 359.8 -9.7 11,138 10,186 -8.5

Table 8 U.S. Civil Aviation, Growth of Total Output, Earnings and Jobs (2005 Dollars)


28/52


Manufacturing

Over the past decade, the manuacturing o U.S. civilaircraf reflected changes within the airline industryand changes in consumer demand. At the beginning othe decade, demand or air transportation rose alongwith shipments o both commercial and aircraf.However, due to the recession, the September terrorist attacks and the subsequent shutdown othe air traffic system and adoption o more stringentair-travel security measures, the demand or air travel

ell sharply over the latter part o and .Shipments o new aircraf ell rom to .

In , both commercial and customers tookdelivery o about . billion in U.S.-manuacturedaircraf. By , only . billion in new aircrafwere delivereda decrease o percent. Duringthat time, the number o new commercial aircrafdelivered by Boeing ell rom in to in and the number o aircraf delivered ellrom , to ,.

Subsequently, global demand surged. In ,

global customers took delivery o . billion inU.S.-manuactured aircrafthe peak beore therecent recession. Between and , shipments

o new aircraf rose over percent. However, in demand or orders o new aircraf started todecline. Te value o new aircraf delivered declined. percent to . billion, and the number onew commercial and aircraf deliveries ell by percent and . percent to planes and , planes,respectively. By , the value o deliveries o newaircraf rose by . percent to . billion, with thenumber o Boeing aircraf increasing by . percent

to units. However, the number o aircraf ellmore than percent to ,, reflecting the economicuncertainty during the recent recession.

Table captures how these changes affected the totaleconomic impact estimates. In real terms, the overallloss in output or civil aviation manuacturing in was . percent despite commercial aviations realoutput rise o . percent. Between and , manuacturing experienced a . percent dropin real output and job loss o . percent. Aircrafengines and engine parts manuacturing real outputell . percent and jobs ell percent.

Te Boeing Company, Orders and Deliveries. http://active.boeing.com/commercial/orders/index.cm;General Aviation Manuacturers Association, , General Aviation Statistical Databook & Industry Outlook, able ., p. .http://www.gama.aero/files/GAMA_Databook_.pd.


29/52

2011 Report

Description2008 Output

(2005 $Billions)2008 Earnings(2005 $Billions)

2008 Jobs(Thousands)




Civilian Other Aircraf t Parts and Equipment 69.9 20.8 477

Total Impact 2008 193.8 52.7 1,156

Description2009 Output

(2005 $Billions)2009 Earnings(2005 $Billions)

2009 Jobs(Thousands)




Civilian Other Aircraf t Parts and Equipment 65.9 19.6 454

Total Impact 2009 185.4 50.3 1,090

2008-2009 Percent Change

Description Output Earnings Jobs

Civilian Aircraft Manufacturing 22.2 22.2 23.3

GA Aircraft Manufacturing -32.6 -32.6 -43.6

Civilian Aircraft Engine and Engine Parts Manufacturing -26.7 -26.7 -26.0

Civilian Other Aircraft Parts and Equipment -5.8 -5.8 -4.9

Total Impact -4.3 -4.6 -5.7

Table 9 Real Growth of Civil Aviation Manufacturing: Total Output, Earnings and Jobs


30/52


General Aviation

provides a vital service to all in times o need aswell as leisure activities and agricultural services.From law enorcement, medical transportation,border control, and search and rescue missions todisaster relie and emergency evacuation, is thereto provide a helping hand to those in need and themost vulnerable.

However, despite s substantial contribution tosociety, according to the and Part ActivitySurvey, overall flight hours dropped nearly percent between and (Figure ). Mosto the decrease in flight hours is due in part tothe dramatic drop in flight hours by piston engineairplanes. Piston engine airplane flight hours droppednearly percent between and , whileturboprop, jet and rotorcraf airplanes increased by percent, . percent and . percent, respectively,during the same period.

However during the recent recession, the average

annual growth rate o total flight hours ell by justover . percent each year, or an overall drop o .percent between and . During the same

period, annual flight hours or piston engine airplanesdropped by . percent, while flight hours conductedby turboprop, jet and rotorcraf airplanes declinedby . percent, . percent and . percent, respectively.

Compared to the level o operations, the economiccontribution o to the economy has remainedairly stable over the past decade. Overall, visitor

expenditures remained roughly the same, but theeconomic output o operations and manuacturingdramatically slowed between and duringthe recent recession (Figure ; Appendix Table ).Rising uel costs and aviation security changes aresome o the reasons or the decline.


31/52

2011 Report

Figure 10 General Aviation Flight Hours by Type of Aircraft

Source:U.S. Department of Transportation, Federal Aviation Administration

Figure 11 General Aviation Economic Contribution to the U.S. Economy between 2000 and 2009

Source:U.S. Department of Transportation, Federal Aviation Administration

0

5

10

15

20

25

30

35

2009200820072006200520042003200220012000

MillionsofFlightHours

Year

Turboprop

Piston

Jet

Rotorcraft

0

20

40

60

80

100

120

2009200820072006200520042003200220012000

GAAircra

ftManufa

cturing

General AviationOperations

GAVis

itorEx

penditu

res

BillionsofDollars

Year


32/52


FAA Spending Overview

Previous economic impact analyses did notinclude ederal spending on air traffic control andother related activities. Federal expenditures on theprovision o sae airspace and inrastructure are ofenoverlooked actors behind civil aviations successulcontribution to the U.S. economy. Whether by directlyemploying people to oversee our National Airspace

System () or providing the unds necessary orthe development o inrastructure, the has animportant and vital role in the U.S. economy. Evenduring times o economic contractions, the sability to maintain sae skies, finance projects andsupport job creation is even more apparent.

expenditures impact the U.S. economy in ourimportant ways by:

Providing state and local job opportunities Facilitating opportunities or private entities Distributing aid or inrastructure to local

airports through grants Keeping the industry operating efficiently and saely

In order to highlight the importance o the scontribution to the U.S. economy, the economicimpact o spending to the national economy asa whole and to each o the states and the Districto Columbia is measured and reported or fiscal year.Te most important actor driving the levelo expenditures in a particular state is the presence o

large acilities and/or large or multiple airports.Expenditures analyzed include payroll, nonpayroll(e.g., acilities and equipment, operations, research)and grants issued through the Airport ImprovementProgram ().

Updates to this estimate will be released in subsequent reports ocused only on the impact o civil aviation on state-level economies.


33/52

2011 Report

Table shows the number o employees by state.Overall, Caliornia and exas have the highest numbero employees. Oklahoma, third in number o employees, is the home o the Mike MonroneyAeronautical Center (). Te , located inOklahoma City, provides training, logistics, researchand data services or the and attracts a diverse andtalented workorce. Note, although a large number oemployees work at headquarters in Washington,D.C., ew o them call the District home. Mostheadquarters employees reside in Maryland andVirginia and commute to work.

Table reports spending by state. otal spending or the states and District o Columbia orfiscal year was almost billion, approximately. percent o U.S. . Caliornia, Virginia and exasreceived the most spending. All three states are

home to large airports and acilities.

spending not only contributes direct employment,earnings and jobs to states, but also spurs othereconomic activity. Te total impact o spendingon state economies was estimated using .Te total impact o spending on state output,earnings and employment appears in Table andFigure . Te total impact includes primary (direct spending) plus secondary or induced effects.

Te billion in primary spending inducedsecondary spending totaling . billion in total output

and nearly , jobs with . billion in earnings.Caliornia, exas, New Jersey, Virginia and Oklahomamake up the top five states in total output related to spending. Although spending is only one o manyactors contributing to the U.S. economy, the value tomaintaining a sae and reliable cannot be measuredsolely with quantitative measures. Te next sectionintroduces a new methodology or capturing some othese qualitative impacts.

StateFAA

Employees

PercentTotal FAA

Employees

Alabama 249 0.5

Alaska 1,246 2.7

Arizona 492 1.1

Arkansas 169 0.4

California 3,849 8.3

Colorado 1,058 2.3

Connecticut 165 0.4

Delaware 56 0.1

District of Columbia 271 0.6

Florida 2,648 5.7

Georgia 2,381 5.2

Hawaii 373 0.8

Idaho 114 0.2

Illinois 1,843 4.0Indiana 1,019 2.2

Iowa 187 0.4

Kansas 857 1.9

Kentucky 301 0.7

Louisiana 271 0.6

Maine 147 0.3

Maryland 2,080 4.5

Massachusetts 569 1.2

Michigan 695 1.5

Minnesota 981 2.1

Mississippi 320 0.7

Missouri 790 1.7

Montana 138 0.3

Nebraska 125 0.3

Nevada 321 0.7

New Hampshire 747 1.6

New Jersey 1,645 3.6

New Mexico 610 1.3

New York 2,045 4.4

North Carolina 471 1.0

North Dakota 109 0.2

Ohio 1,240 2.7

Oklahoma 3,413 7.4

Oregon 209 0.5

Pennsylvania 785 1.7

Rhode Island 71 0.2

South Carolina 287 0.6South Dakota 68 0.1

Tennessee 804 1.7

Texas 3,825 8.3

Utah 696 1.5

Vermont 48 0.1

Virginia 2,972 6.4

Washington 1,896 4.1

West Virginia 221 0.5

Wisconsin 300 0.6

Wyoming 49 0.1

Total 46,226 100.0

Table 10 FAA Employees by Place ofResidence, FY 2008


34/52


StateTotal Spending

($Millions)

Percent ofTotal FAASpending

Alabama 93.5 0.7

Alaska 457.6 3.3

Arizona 201.0 1.4

Arkansas 62.4 0.4

California 1,332.3 9.5

Colorado 261.1 1.9

Connecticut 47.9 0.3

Delaware 17.9 0.1

District of Columbia 395.4 2.8

Florida 599.5 4.3

Georgia 483.6 3.5

Hawaii 103.5 0.7

Idaho 38.0 0.3

Illinois 767.0 5.5

Indiana 212.8 1.5Iowa 59.3 0.4

Kansas 130.2 0.9

Kentucky 75.6 0.5

Louisiana 95.9 0.7

Maine 51.7 0.4

Maryland 467.5 3.3

Massachusetts 413.4 3.0

Michigan 219.8 1.6

Minnesota 225.2 1.6

Mississippi 110.0 0.8

Missouri 234.2 1.7

Montana 48.3 0.3

Nebraska 35.7 0.3

Nevada 105.6 0.8

New Hampshire 127.5 0.9

New Jersey 777.6 5.6

New Mexico 114.5 0.8

New York 478.0 3.4

North Carolina 237.9 1.7

North Dakota 153.6 1.1

Ohio 404.6 2.9

Oklahoma 857.6 6.1

Oregon 80.7 0.6

Pennsylvania 336.2 2.4

Rhode Island 22.3 0.2

South Carolina 69.0 0.5

South Dakota 37.5 0.3Tennessee 229.3 1.6

Texas 975.6 7.0

Utah 154.1 1.1

Vermont 12.0 0.1

Virginia 1,018.6 7.3

Washington 364.0 2.6

West Virginia 55.5 0.4

Wisconsin 100.4 0.7

Wyoming 26.7 0.2

State Total 13,979.2 100.0

Table 11 FAA Direct Spending byState, FY 2008

TOTAL: PRIMARY + SECONDARY

StateOutput

($Millions)Earnings($Millions) Jobs

Alabama 186.4 59.7 1,814

Alaska 730.6 241.4 6,292

Arizona 388.6 132.5 3,486

Arkansas 111.9 34.7 1,112

California 2,781.0 923.0 21,237

Colorado 507.6 167.2 4,278

Connecticut 82.3 26.1 582

Delaware 29.1 7.8 210

District of Columbia 488.0 29.1 646

Florida 1,063.8 354.4 9,820

Georgia 935.3 294.8 8,331

Hawaii 173.0 57.8 1,579

Idaho 61.2 20.3 662

Illinois 1,684.1 554.5 12,732Indiana 372.6 112.1 3,354

Iowa 98.4 30.7 947

Kansas 168.3 46.7 1,461

Kentucky 139.1 40.5 1,281

Louisiana 175.0 57.2 1,675

Maine 94.4 31.7 989

Maryland 817.4 262.3 6,555

Massachusetts 838.6 282.2 6,264

Michigan 433.4 141.5 3,876

Minnesota 401.6 126.2 3,351

Mississippi 196.5 60.4 2,007

Missouri 466.9 137.4 3,939

Montana 82.3 27.6 918

Nebraska 53.3 17.1 501

Nevada 174.1 57.5 1,504

New Hampshire 185.1 53.7 1,494

New Jersey 1,684.1 536.8 11,670

New Mexico 164.2 53.3 1,695

New York 751.8 226.4 5,195

North Carolina 496.9 165.1 4,863

North Dakota 260.3 86.6 2,291

Ohio 836.1 265.1 7,442

Oklahoma 1,609.4 560.2 16,251

Oregon 156.7 49.0 1,334

Pennsylvania 358.1 107.1 3,004

Rhode Island 37.6 11.1 307

South Carolina 133.0 41.4 1,333South Dakota 61.1 19.9 649

Tennessee 464.8 140.7 3,856

Texas 2,077.1 662.4 17,228

Utah 299.8 95.6 2,929

Vermont 19.4 6.2 193

Virginia 1,937.7 618.4 16,342

Washington 638.9 202.1 5,150

West Virginia 86.4 25.6 827

Wisconsin 189.6 61.5 1,750

Wyoming 40.5 13.2 376

State Total 26,223.5 8,335.8 217,581

Table 12 Total Impact of FAA Spending byState, FY 2008


35/52

2011 Report

0 - 1 ,000

1,001 3,000

3001 5,000

5,001 10,000

10,001 20,000

Over 20,000

Jobs

NC

SC

GAALMS

LA

AROK

FL

VA

WV

PA

MD

MA

RICT

NJ

DC

DEOH

NY

ME

NH

VT

INIL

MI

WI

MN

IANE

SD

ND

WY

MT

ID

OR

WA

CA

NV

AZ

TX

HI

AK

MOKS

CO

UT

TN

KY

NM

Figure 12 Total Employment Impact of FAA Spending by State, FY 2008


36/52


Enabling Impact

Troughout the history o aviation, technologicalimprovements have lowered the cost and increasedthe availability o air transportation to an everwider market. Tese improvements include moreefficient, saer and environmentally riendly aircraf,constructed with stronger and lighter materials.Modern engine and aircraf designs mean moreefficient travel and shipping over longer distances.In more recent decades, improvements in computer

technology led to enhancements in the cockpit, onthe ground and throughout the air traffic system.Web access led to revolutionary changes in howcustomers purchase tickets, and digital technologybrought about greater efficiencies in handling airlinetickets and luggage. Furthermore, digital technologytransormed the way reight is delivered amongcities. In essence, all o these technological changesare embodied in the assets used within the airtransportation industry, reducing capital input costs.In turn, these cost reductions lead to expanded flightavailability, increasing business and personal air traveland enabling other industries to transport goods less

expensively by air.

Air transportation is a key enabler or other industriessuch as tourism or industries that transport goods byair. Low ares and increased flight availability increasepassenger travel, benefiting the tourism industry andother companies that require business travel, and alsohelp industries that rely on air reight to transporthigh-value goods. As technology improves, relativeares and costs all as flight availability rises, acilitatingproductivity and output gains in these industries.

ransportation services provided by air carriersstimulate activity in other parts o the economy. Forexample, when air passengers reach their destinations,they spend money on hotel accommodations and oodservices, entertainment, sightseeing tours and so on.In addition, businesses that produce relatively high-

value or perishable goods may preer to ship theirproducts to customers by air.In , the value ocommodities shipped by air was , per ton, arhigher than any other mode o transportation

Lower capital input costs relative to labor implies that we can produce more air transportation services using the same amount o labor.In terms o value per unit o weight transported, able shows commodities shipped by air in had a much higher value compared

with commodities conveyed by other modes o transportation.


37/52

2011 Report

(Table ). ypically these are manuacturedor technology-oriented goods or agriculturalcommodities. Values o the top commoditiestransported by air appear in Table . Electronicsand machinery are the top two commoditiestransported by air. Without air transportation, manyo these commodities could not be delivered and,thereore, could not be produced; also, without airtransportation, many travelers may choose to orgotrips altogether due to the relative time-intensivenesso the alternative modes o transportation. Teseare called enabled effects the economic activitygenerated by air-passenger destination spendingand the value o goods transported by air.

researchers Mariya A. Ishutkina and R. JohnHansman view transportation services in terms othe ollowing characteristics: speed, cost, flexibility,

reliability and saety.

Speed, flexibility and reliability

are important characteristics or passengers withlimited available time, while speed and reliabilityare important or perishable reight. Since air reightis costly compared to other transportation modes,higher-value goods tend to be transported by air.

Te value o passenger destination services andtransported goods makes up part o what the researchers call enabled impacts or enabled flows,the total economic impact on employment andincome generated by economic activities that aredependent on the availability o air transportationservices. Tis increase induces a eedback effectwhereby the increase in economic activity in turnprovides capital and generates the need or passengertravel and reight, which drives the demand or airtransportation services.

Mode of TransportationValue($/Ton)

Air 72,516

Other Intermodal 8,424

Truck 1,049

Pipeline and Unknown 708

Sea 509

Rail 397

Water 76

All Modes 981

Commodity

Domestic andExport Flows

($Billions)

Electronics 201.9

Machinery 101.8

Precision Instruments 83.0

Misc. Manufacturing Products 40.7

Transport Equipment 37.2

Pharmaceuticals 30.1

Basic Chemicals 10.7

Chemical Products 10.7

Articles-Base Metal 10.7

Plastics/Rubber 6.3

All Commodities 562.1

Table 13 Value of Commodities Transported byMode of Transportation, 2008

Table 14 Value of Commodities Transported byAir, Top 10 Commodities, 2008

Source:U.S. Department of Transportation, Federal HighwayAdministration, Freight Analysis Framework

Source:U.S. Department of Transportation, Federal HighwayAdministration, Freight Analysis Framework

Mariya A. Ishutkina and R. John Hansman. . Analysis o the Interaction Between Air ransportation and Economic Activity: AWorldwide Perspective, MI International Center or Air ransportation, p. .

Ishutkina and Hansman, loc. cit.Ishutkina and Hansman, loc. cit.


38/52


Te driving actors behind the air transportationsystem and the economy described by this researchare shown in a diagram developed by Ishutkina andHansman (Figure ). Tey wrote:

Te air transportation system is defined by itsinrastructure capability, regulatory ramework,

vehicle and airline capabilities. Internal to the airtransportation system is the supply and demandrelationship where airlines provide supply throughpricing and scheduling o flights based on therevenues and profitability o a particular route.Air transportation impacts an economy byproviding employment in the aviation sector andcreating wider socioeconomic benefits throughits potential to enable certain types o activitiesin a local economy because o its distinctivecharacteristics: speed, cost, flexibility, reliability

and saety. Te regions economic activity inturn provides capital and generates the need orpassenger travel and reight which drives thedemand or air transportation services.

wo measures were identified to illustrate enablingimpacts or passengers and cargo: the impact opassenger spending on local communities once theyreach their destinations and the movement o goodswithin the U.S. and internationally.

Passenger Expenditures

Results or show U.S. destination spending byinternational and domestic air travelers (the indirect orenabled flows) amounted to . billion (Table ).Using , these expenditures induced additionalsecondary spending or a total o . billion.Spending by travelers alone generated about .million jobs and . billion in worker earnings. Inall, indirect and induced spending was responsible or. billion in earnings and . million jobs.

During , the U.S. welcomed . millioninternational air travel visitors.Destination spending

by oreign visitors alone equaled approximately billion in (Table ). Foreign visitor spending

induced additional spending, so together the indirectand induced flows totaled . billion and generatedabout . million jobs and . billion in earnings.

Foreign visitors tend to travel to only a small numbero states. In , about one-hal o all visitors tothe United States traveled to New York, Caliornia orFlorida and almost two-thirds visited one o thetop-five destination states (Table ).

Te economic impact o destination spending bydomestic U.S. air-travelers was . billion in (Table ). Tis translated into . billion intotal and induced spending. Destination spendingby domestic U.S. air-travelers generated about. million jobs and . billion in indirect andinduced earnings.

Freight Flows

In order to measure the magnitude o air reightflows, data rom the Freight Analysis Framework(), a database constructed by the Federal HighwayAdministration (), are used to constructnational and state totals by weight and value.Te database contains both domestic and oreign flows by

value and by weight or each transportation mode andidentifies the origins and destinations o these flows.

State Percent of Total

New York 20.2

California 17.7

Florida 13.2

Texas 6.3

Nevada 5.8

Table 15 Foreign Travelersto States (top five states), byPercent of Total, 2008

Ibid., pp. .In , destination spending amounted to . billion, supporting . million jobs and . billion in earnings.U.S. Department o Commerce, International rade Administration. . Canadian Visitors to the U.S. by Mode o ransportation One

or More Nights; U.S. Department o Commerce. International rade Administration. . Market Profile: Mexico (AirOnly); U.S. Department o Commerce. International rade Administration. . Summary o International ravel to the U.S.

Tese figures exclude visitors rom Canada. Te data that appear on this table are constructed rom U.S. Department o Commerce.International rade Administration. . Summary o International ravel to the United States; U.S. Department o Commerce.International rade Administration. . Overseas Visitation Estimates or U.S., States, Cities and Census Regions: .

U.S. Department o ransportation, Federal Highway Administration, Freight Analysis Framework, version .

Source:U.S. Department of Commerce,International Trade Administration, FAAcalculations


39/52

2011 Report

Figure 13 The Air Transportation System and the Economy

Source:Mariya A. Ishutkina and R. John Hansman. 2009. Analysis of the Interaction between Air Transportation andEconomic Activity: A Worldwide Perspective, MIT International Center for Air Transportation, p. 29

ForeignTravelers to U.S.

U.S. DomesticTravelers

Foreign andDomestic

Output

Spending by Air Travelers ($Billions) 93.0 156.2 249.2

Total Output ($Billions) 237.3 386.9 636.1

Earnings

Indirect Earnings ($Billions) 27.8 46.8 74.6

Total Earnings ($Billions) 71.1 119.4 190.5

Employment

Indirect Employment (Millions) 0.8 1.4 2.2

Total Employment (Millions) 2.1 3.6 5.7

Table 16 Economic Impact of Destination Spending by Air Travelers, 2008

Source:U.S. Department of Commerce, International Trade Administration andFederal Aviation Administration

Air Transportation System

Enabling Impact(Access to Markets/People/Capital)

Direct/Indirect/Induced Employment Impact

Capital

Travel/Freight Need

Revenue/Profitability

Pricing and Schedule

ECONOMY

AIRLINES

Supply

Vehicle Capability

Regulatory Framework

Infrastructure CapabilityDemand


40/52


Air reight flow data are available at the state andnational levels and include intrastate flows, interstateflows and flows to and rom other countries.

Results show the value o air reight transportedto other countries and within the United States(reight-enabled flows), amounted to . billion(Table ). Based on , these expendituresinduced additional spending and together totaled,. billion. Further, production o these goodsgenerated about . million jobs and . billionin worker earnings. Indirect spending also led toinduced earnings in other businesses and about .million in additional employment. In all, indirect andinduced spending was responsible or . billionin earnings and . million jobs.

Among the individual states, the value o goods

transported by air is the sum o () value o goodstransported to other countries (exports), () valueo goods transported to other states and () value ogoods transported within the state. Across all states, atotal value o . billion in goods was transportedby air. Caliornia ranked highest with . billion.Florida was second at . billion. Out o the topfive states, our (Caliornia, Florida, New York andexas) ranked high due to their size (by state and by population). Te fifh state, ennessee, rankedhigh because it is home to the main hub or FedExCorporation and a supply chain base or manywholesale and retail operations (Table ).

Freight Exports

Te value o reight exports equaled approximately. billion in . Tis induced additionalspending and together, these indirect and inducedflows totaled ,. billion, and generated about. million jobs and . billion in earnings.

At the state level, the level o exports are related tostate and population; our o the top five exportstates (Florida, Caliornia, New York and Illinois)

are among the leading states with respect to andpopulation (Table ).

Domestic Air Freight

Te value o domestic air reight was . billionin . Te indirect spending rom the productiono goods transported by air within the United States,plus induced flows, totaled billion, generatingabout . million jobs and . billion in indirect andinduced earnings. Te value o domestic air reightrom Caliornia accounts or about one-fifh o the

value all domestic shipments, or billion (Table ).Flows originating rom Arizona are second highest at. billion. Air reight rom Arizona consists mainlyo electronics (. billion), namely microprocessors,which are relatively high-value lightweight goods.Intel has two o its largest microprocessor productionplants in Arizona.A majority o the finishedproducts rom these acilities are shipped out o stateby air. ennessee is third at billion, consisting

mainly o precision instruments (. billion) andpharmaceuticals (. billion). Memphis, ennessee,is the main transport hub or FedEx. exas is ourthat . billion (electronics, . billion); the companiesDell Computer and exas Instruments are locatedin this state. Massachusetts is fifh (electronics,. billion; precision instruments, . billion).Massachusetts is home to many high-tech firms.ogether, the top five states account or almostone-hal o the total value o domestic air reight.

Te enabling flows concept offers a new rameworkto analyze the dynamic relationship between air

transportation and the rest o the economy. Only twodimensions o this economic interaction are studiedin this report: indirect visitor expenditures by oreignand domestic travelers and the value o reight flows.Visitor expenditures by air travelers accounted or. billion o total output to the U.S. economy in; this measure was included in previous versionso this report. Te value o reight transported byair contributed more than . trillion to the U.S.economy in , a huge contribution overlooked inprevious analyses.

Intel Corporation. n.d. Intel in your Community: Arizona. http://www.intel.com/community/arizona/index.htm.Ross C. DeVol, Kevin Klowden, Armen Bedroussian and Benjamin Yeo. . North Americas High-ech Economy: Te Geography of

Knowledge-Based Industries. Te Milken Institute. http://www.milkeninstitute.org/pd/NamericaHiechExecSmmry_Final.pd; Route :Birthplace o Te Digital Age. Boston ech Ino. July , . http://bostontechino.bizcloudnetwork.com////route--birthplace-o-the-digital-age/


41/52

2011 Report

FreightExports

DomesticFreight

Foreign andDomestic

Output

Value of Air Freight ($Billions) 387.3 174.8 562.1

Total Output ($Billions) 1,137.6 511.0 1,648.6

Earnings

Indirect Earnings ($Billions) 102.4 46.4 148.7

Total Earnings ($Billions) 300.8 135.6 436.4

Employment

Indirect Employment (Millions) 2.2 1.0 3.2

Total Employment (Millions) 6.4 2.9 9.3

Table 17 Economic Impact of Freight Transported by Air, 2008

Table 19 Value of GoodsTransported by Air toOther Countries (top fivestates), 2008

Table 18 Value of GoodsTransported by Air (top fivestates), 2008

StateValue

($Billions)

California 101.4

Florida 71.6

New York 66.4

Tennessee 41.7

Texas 33.7

StateValue

($Billions)

Florida 65.0

California 62.4

New York 61.4

Tennessee 28.7

Illinois 27.4

Table 20 Value of GoodsTransported by Air within theU.S. (top five states), 2008

StateValue

($Billions)

California 39.0

Arizona 14.9

Tennessee 13.0

Texas 9.8

Massachusetts 8.6

Source:U.S. Department of Transportation, Federal Highway Administration,Freight Analysis Framework

Source:U.S. Department of Transportation, Federal Highway Administration, Freight Analysis Framework


42/52


The civil air transport industryprovides economic benefits for theUnited States and the world.

In a world o decreasing barriers to trade, theU.S. civil aviation industry remains a unique engineor innovation and technological progress, onethat provides inrastructure that keeps the nationcompetitive. Tis report ound that, once all impactsare identified, civil aviation accounted or . percento the U.S. economy in . Aviation contributes

to economic growth and to stronger ties to l

faa economic impact rpt 2011

Documents