There is a clear link between a region’s ability to attract investment and whether or not it is a major air hub. However, a new vision of an air hub – an 'aerotropolis' or 'airport city' – is rapidly gaining traction to make that link explicit and maximise its benefits as new air hubs are established and old ones revamped.
An efficient aerotropolis includes planning for aviation-related industry, as well as for service and financial industries that require considerable business travel. It may also allow for offices, hotels, conventions, shopping and traveller-friendly uses, or even medical tourism.
Amsterdam’s Schiphol Airport and South Korea’s Incheon are often cited as prime examples. Aerotropolises are under consideration in Denver, Johannesburg, Moscow’s private Domodedovo airport, and dozens of other cities around the world. Incheon’s plans to attract international business include creating “a world-class entertainment resort for leisure, shopping and other businesses” with a golf course and water park.
Denver, in the US state of Colorado, has six districts for technology, logistics, aviation and military use, as well as hotels and offices, on the drawing board. Its plans were revealed in April as part of the Airport Cities World Conference, which was held in Denver and drew 800 attendees from 30 countries.
At the centre of growth
An expert on the concept of the aerotropolis is Dr John Kasarda of the University of North Carolina, who frequently advises on such planned developments. Mr Kasarda describes the aerotropolis as an airport city with outlying corridors and clusters of aviation-linked businesses and associated residential development. It may stretch up to 30 kilometres from the airport at its core.
Older air hubs grew organically and often without a focus on attracting specific industries that could benefit from proximity to an airport. The aerotropolis combines economic, urban and regional planning to spur development. “It is not a question of whether [an air hub] will attract development,” says Mr Kasarda. “It will be done, but will it be done efficiently or in a disorganised, haphazard way? You need market forces that are channelled, which is why the planned aerotropolis can generate tremendous returns.”
For an aerotropolis to succeed, Mr Kasarda says it needs a strong and growing airport at its heart, sufficient surrounding land that is vacant or able to be redeveloped, multimodal access by rail, highway or ferry (as in Hong Kong), as well as strong support from political, business and public sector leaders.
While the aerotropolis may be the future for some regions, existing air hubs continue to demonstrate their economic pull.
Ease of passenger travel is a key factor in determining where international companies do business and invest, and is one reason delays at Heathrow and other London airports, which are expected to reach full capacity in 2030, are of such concern to the UK.
Hartsfield-Jackson Atlanta International Airport in the US, the world’s busiest passenger hub, is a case in point. The airport handled 92.4 million passengers in 2011, well ahead of its closest rivals, Beijing (77.4 million) and Heathrow (69.4 million), though Heathrow headed the list of airports serving international passengers, with 64.7 million. Other major international passenger hubs are Paris's Charles de Gaulle, Hong Kong, Amsterdam, Frankfurt, Singapore, Bangkok, Incheon, Madrid and London's Gatwick.
Atlanta’s airport created 58,000 directly related jobs and $14.6bn in business revenues and an additional $43.6bn through 376,000 indirect and induced jobs in the metropolitan area, a 2009 study calculated. Studies of other major hubs also report significant job and revenue benefits.
Atlanta’s airport hub is probably the number one reason why companies, domestic and foreign, select Atlanta as a location for their operations, says Jorge Fernandez, vice-president for global commerce of the Metro Atlanta Chamber of Commerce. The chamber counts 2800 internationally owned facilities in the area, representing more than 60 countries and employing 130,000 residents of the state of Georgia. The top investor countries include the UK, Germany, Japan, France, Canada and the Netherlands.
“From a foreign company’s perspective, it is important to have a direct air connection to its home country. But even more important is the connection to its clients in the US, because its primary interest is to expand its business in the US,” says Mr Fernandez.
City officials also hope to grow the airport as an air cargo hub, citing Atlanta’s excellent access by road and train to other US states as well as the nearby ports of Savannah and Charleston.
Air cargo represents up to 40% of the total value of EU exports and up to 55% of US exports, according to a 2011 study by the International Transport Forum and the Organisation for Economic Co-operation and Development (OECD). It also accounts for 28% and 33%, respectively, of imports into those regions. Globally, air cargo is a $60bn business that carries 35% of the value of international trade, according to the International Air Transport Association.
The busiest air cargo hubs in 2011 were Hong Kong, Memphis (FedEx’s main US hub), Shanghai, Incheon, Anchorage (Alaska), Paris, Frankfurt, Dubai, Tokyo and Louisville, which is UPS’s main US hub. However, the growing importance of air travel and air cargo, and the emergence of developing countries as destinations and origins for both, is creating a financial crunch.
The world needs to spend $2200bn on airport infrastructure between 2009 and 2030 to keep up with projected demand, according to a report published by the OECD in March. That amounts to an average of $70bn a year between 2009 and 2015, and $120bn a year thereafter. And it will be competing against other transportation sectors that the OECD calculates require an additional $9000bn in investment.
According to the report, air passenger traffic could double in 15 years and air freight triple in 20 years. “Most of the current gateway and corridor infrastructure could not handle a 50% increase,” let alone the projected boom in air traffic demand, the report states. It urges countries to establish national policy frameworks to determine how strategic infrastructure is to be developed and financed. While government funding will continue to play an important role, it proposes the use of innovative financing arrangements, as well as expanded use of private sector investment, especially from public-private partnerships.
“In the future, given expected limitations on public funds, increased private sector investment will be essential,” says the report.