08-Mar-2022 2:38 AM

Hamilton Airport issues economic impact study – others should follow suit

Analysis

Airports have historically encouraged the preparation of economic impact studies to prove how their existence is beneficial to local communities and even to non-local ones, especially in terms of job creation.

There have been few of them during the past two years or so, and one of the first to pick up the reins is John C. Munro Hamilton International Airport in southern Ontario, Canada, which competes with Toronto's Pearson International - the country's biggest gateway by some margin.

Although the findings are a little indeterminate, in that it is not revealed what precise economic growth took place during the first two years of the pandemic but rather, that of a longer period, there is no doubt that many airports stand to benefit by reiterating the positive impact they have on their communities, in order to challenge the consistently negative ones connected to the environment.

Summary

John C. Munro Hamilton International Airport in Ontario, Canada, has released an economic impact study, one of the first since the start of the COVID-19 pandemic.
The study shows that the airport has added jobs and generated economic output, primarily between 2017 and 2019.
The airport has positioned itself as a low-cost facility and a major cargo airport, contributing to its economic impact.
The airport's success in the cargo segment is driven by e-commerce growth and its status as the largest domestic overnight express cargo airport in Canada.
Infrastructure investments and expansion projects by airport partners have further contributed to job growth and economic activity.
The airport's economic impact extends beyond the immediate region, benefiting the province of Ontario as a whole.

Summary

Ontario's John C. Munro Hamilton International Airport presents an economic impact study, one of the first such studies since the coronavirus pandemic started.
It shows an overall gain in jobs related to the airport since the last report, although most of them came in 2018 and 2019.
The airport has established itself as an important low cost facility for a wide area of more than nine million people...and even more so as a cargo airport.
It will become more so still for e-commerce shipments as the city-region's industrial/commercial focus continues to shift.
An airport city development on nearby land will further enhance its economic impact on a wider area of southern Ontario.
Other airports could benefit from copying Hamilton's example.

Economic impact studies can generate indistinct results but carry weight in the community

In the airport sector studies of 'direct', 'indirect' and 'induced' economic impact have long been used to prove the value of an airport to the municipality (especially when taxpayers help fund it), and sometimes to justify expansion. That requirement has increased as a function of the escalation of objections to airport expansion (and just to the existence of airports themselves) that has emanated from environmental pressure groups.

There have been few such studies lately. The main concern of airports has been with survival, of somehow toughing out the COVID-19 pandemic until better times return, which they are now doing, slowly, in many parts of the world.

And in any case, using economic statistics to underpin an airport's value to the community during the past two years might be thought of as being as pointless as trying to justify a war by the number of casualties.

So it is intriguing to learn that the Toronto John C. Munro Hamilton International Airport (hereafter 'John C. Munro Hamilton') has released the results of a recent economic impact study.

Hamilton Airport is a rare private sector lease in Canada

The Hamilton airport is one of few examples of private sector-operated facilities in Canada, where the main airports are operated by 'not for profit' stakeholder boards, usually consisting of public sector interests, and occasionally with some minor degree of private sector involvement.

The City of Hamilton relinquished operation of the airport to TradePort International Corp on a 40-year lease in 1996.

TradePort was a consortium of a local businessman and builder, Tony Battaglia of WestPark Developments, together with the operational expertise of the Vancouver Airport Authority in its YVR Airport Services external development division guise.

In 2007 YVR Airport Services, (now Vantage Airport Group), took over 100% of TradePort in a CAD13 million deal. Vantage Airport Group currently manages a network of 10 airports, of which three are in Canada.

The second international airport for the Toronto area

The airport acts as the de facto secondary international airport for the Toronto area (overlooking the Billy Bishop airport - see below - which is a STOLport hosting limited range aircraft) on account of the failure to make any progress with the 'official reliever' airport at Pickering, to the east of Toronto. It was in the 1970s that the Greater Toronto Airports Authority (GTAA) and the Government of Canada planned a second international airport for Toronto in Pickering.

Supporters of the plan argued that Hamilton was too far from Toronto to be a reliever, while the opposition pointed out that (for example) relief airports for several airports in the US - notably for Logan International Airport in Boston (T. F. Green State Airport and Manchester-Boston Regional Airport) - are farther from the city itself, downtown Boston, than John C. Munro Hamilton is from downtown Toronto.

In Oct-2017 the Pickering City Council supported the development of an airport in Pickering during its joint bid with the rest of Greater Toronto to host Amazon's 'HQ2' (the second headquarters project, which eventually went jointly to Arlington, Virginia and the Queens borough of New York City).

However, a GTAA report in Dec-2017 suggested that an airport in Pickering was not necessary at that present time and that Pearson could meet demand until 2037.

Hamilton's claim to retaining its status is based on accessibility, and that it charges 30 to 50% lower fees to airlines than Pearson, and that its compact size makes travel quicker for passengers and allows aircraft to spend less time on the ground, which is of course a requirement of the LCCs that make up its clientele presently.

Hamilton's success did not come easily at first

Hamilton has not had an easy time of it.

Located on the south-western edge of the Toronto metropolitan area in the Ontario province it is in direct competition with the Pearson International Airport, which is only 65 km (40 miles) distant by road, and to a lesser degree with the Billy Bishop Toronto City Airport close to the Toronto central business district and with the small Region of Waterloo Airport 60km to the northwest.

It has tried to carve a niche for itself as a 'low cost' facility supporting mainly LCCs, and it has undeniably been successful at that. As of the week commencing 28-Feb-2022 its three airlines are all budget ones.

And this policy has, at least in part, led to resurgence in business. After seven years (2010-2016) in which only two of them experienced traffic growth, passenger numbers grew by a staggering 80% in 2017, 21% in 2018 and 32% in 2019 as a succession of LCCs and ULCCs chose it as their Toronto gateway.

Toronto John C. Munro Hamilton International Airport: passenger numbers/growth, 2010-2020

That made Hamilton the 18^th busiest airport in Canada in 2019 and also in 2020, based on the statistics supplied by all airlines (in two cases, no data has been published).

Traffic did fall by 65% in 2020, the first year of the pandemic and the last for which data has been provided, but that was to a lesser degree than at Pearson International (-73.6%).

One of Canada's major cargo airports

But it is in the cargo domain that Hamilton has really proved its value, growing to become one of Canada's largest airports for domestic air cargo distribution and thereby a strong economic driver for the city and region.

With approximately 25% of the annual cargo tonnage of Canada's busiest cargo airport (Toronto Pearson), Hamilton has consistently ranked as the third or fourth busiest cargo airport in Canada over the past decade, behind only Toronto-Pearson, Vancouver and Montréal-Trudeau.

Just less than 75% of cargo is domestic, the remainder international, and all but 0.8% of it is carried on designated freighter services (both figures valid as of the week commencing 28-Feb-2022). Cargo airlines operating there, or which have operated, include Cargojet Airways, Castle Aviation, SkyLink Express, and the parcels carriers DHL and UPS.

Internationally, North America (i.e. the US) and Europe account for all but 2% of cargo volume.

The chart below is of total system cargo volume and growth between 2010 and 2020 (again the most recent figure available).

Toronto John C. Munro Hamilton International Airport: cargo volume/growth, 2010-2020

First shipment of COVID vaccine was into Hamilton

The spike in 2020 invites comment.

During the COVID-19 pandemic, while Hamilton saw a reduction in passenger services, peak levels of cargo operations were maintained. The airport was a key entry point for imported medical supplies into the country, including Canada's first shipment of the Pfizer-BioNTech vaccine in Dec-2020 from Cologne, Germany, by UPS Airlines.

The City of Hamilton is a port city with a population of 536,917 and its census metropolitan area, which includes the Burlington and Grimsby townships, has a population of 767,000. It is on the fringe of the Greater Toronto metropolitan area - one of the most heavily populated (ranking #4) in North America, with 9.8 million people in what is known as the 'Golden Horseshoe', an urban agglomeration surrounding the western end of Lake Ontario.

Location of Hamilton, Canada

The city is built on traditional heavy industries but isn't 'rust belt'

Historically the local economy, which sits in the most industrialised region in the whole of Canada, has been a distinctly blue collar one, led by the steel and heavy manufacturing industries. The city is often cited as being comparable to Pittsburgh in the USA, Sheffield in England and Newcastle in Australia in that respect.

Latterly though, there has been a shift towards the service sector and science and technology, and with the planned elimination of fossil fuels in the western world that shift will likely continue.

All this forms the background to the economic impact study that has recently been published.

It declares that John C. Munro Hamilton International Airport continues to be a key driver of economic activity in the Hamilton Census Metropolitan Area and broader Ontario region. The US consultancy ICF International Incorporated was commissioned to assess the airport's 2021 passenger and cargo volumes, along with capital spending activity, and drew comparisons to the previous study conducted in 2018 (using 2017 inputs).

The airport added 1220 jobs in 2021 compared to 2017

The study found that airport passenger and cargo operations in 2021 supported 4720 jobs and generated CAD1.5 billion (USD1.2 billion) in economic output for the City of Hamilton.

The airport added 1220 jobs (+35%) and CAD385.7 million (USD304.3 million) in industry activity compared to 2017. (2017 was selected as the comparison point for the reasons mentioned above; 2019 might have been preferable as the last 'normal' year and one in which cargo, and notably passenger, performance was better than in 2017).

The growth in both passenger and cargo segments and the attendant increase in jobs and economic impact "demonstrates the positive impact that the airport has on the City of Hamilton".

2021 Economic Impact Study Results: Employment, Labour Income, Value Added and Industry Activity

Jobs were lost during the peak of the pandemic but the overall trend over four years has been upwards

The devil, as always, is in the detail; the economic growth took place between 2017 and 2019 rather than in 2020/1, as might be expected.

The passenger activity peaked in 2019, whereas the past two years have seen dramatic fluctuations in passenger air travel due to the impacts of the global COVID-19 pandemic.

After 2019 the airport's growth in passenger activity was muted by declines between 2020 and 2021, which removed 120 jobs (a -9% decrease) to 1,190 jobs. However, indications that activity planned for the summer of 2022 may resemble 2019 levels "remains promising for the recovery of this important segment".

Reported job growth related to air cargo activities has been noteworthy

The story is slightly different for the cargo segment.

In 2021 John C. Munro Hamilton experienced steady organic growth in its cargo activity due to the rise of e-commerce, and then further accelerated by pandemic relief.

As Hamilton is the largest domestic overnight express cargo airport in Canada, cargo operations continue to exhibit the greatest overall impact by generating 2,770 jobs (+29% increase over 2017) and CAD1 billion in industry activity.

Infrastructure investments generated a 1800% increase in jobs

Similarly, spin-off capital investments have continued to grow as a result of cargo facility development and other airport infrastructure improvements.

Several expansion projects by airport partners included DHL and KF Aerospace, who increased capacity to address their respective growth needs. Spending on the airport's capital investments in turn generated 760 jobs - a notable +1800% increase from 2017.

Airport City development project on nearby land was approved almost 10 years ago

According to the CAPA Airport Construction Database, in 2013 the Ontario Municipal Board approved the development of 555 hectares of land around the airport into an Airport Employment Growth District (AEGD) by 2031. The approval was part of a 10-year process to open up approximately 720 hectares around the airport to long term development.

At the time the City of Toronto stated that the project would provide 80,000 jobs and bring CAD70 million per year in taxes by 2031. The proposal, which would reportedly cost CAD350 million, would represent the single largest urban boundary expansion in the history of Hamilton.

At the time of writing only a small part of the anticipated development has actually taken place, and it remains one for the future.

Economic impacts "felt well beyond Hamilton"

ICF (the US consultancy) further concluded that impacts would be felt beyond the immediate Hamilton region, creating a greater impact province-wide (although no evidence for this was offered in the press release; 'indirect' and 'induced' economic impacts are usually regarded as potentially tenuous unless convincing verification can be provided).

For example, when the economic impacts to Ontario are factored in, no less than 9,810 jobs and CAD2.7 billion in economic impact is attributed to activity related to John C. Munro Hamilton, which "further validates its strength as an important economic engine for the City and the region."

There are many ways to spin a story. The remark immediately above, about the indirect impacts of the airport activity on the wider province, would be more convincing if data could be provided specifically for 2020/21, which would help in assessing the airport's impact in comparison to the very stern lockdown and travel restriction policies enacted by the Canadian government, which have been some of the most aggressive in the world, and some of which continue today.

It would also be useful to see year-by-year data on passenger and cargo activity contrasted with job creation or losses during those periods, even month by month.

Many other airports could benefit from following suit

However, looking at the big picture here, the airport and its management is to be congratulated for commissioning such a report when the outcome could have been both negative and dispiriting.

As it happens, the report is neither. It shows that airports can, and did, survive during the worldwide pandemic, and that those that were best prepared by way of increasing operational and investment activity before the pandemic have even 'flourished' in some ways, at least over the five years as a whole.

It could even be argued that it is incumbent upon all airports to commission such studies as soon as possible, in order to bolster their arguments for future expansion. Because as one huge imposition, the pandemic, shows some signs of subsiding - and putting aside the potential for global conflict - another one, the environment, is once again raising its head like a dormant lion rising from its slumber and sniffing the wind for a kill.