How Airlines’ Decisions Can Boost – or Hinder – Local Economic Growth

Written by Amanda Maher

In the past eight years, Boston’s Logan Airport has added 17 nonstop international flights to cities including Mexico City, Hong Kong, Dubai, Istanbul, Panama City, Tokyo, Tel Aviv and Beijing. For travelers, these additional flights bring the benefits of easier access to intriguing destinations, but residents also benefit from the boost these flights provide to the local economy. Increased national and global connectivity provides businesses with access to new markets, boosts exports, increases competition and consumer choice, facilitates foreign direct investment and encourages the flow of a global workforce.

Though technology has made communication easier across distances, face-to-face communication is often crucial for businesses; direct flights make it easier for CEOs to ink deals in person. Economist Allan Pred noted this as far back as 1977 when he stated:

The time and cost savings available in large urban centers are compounded by the superior air-transport connections those places possess…Centers which do not have a wide variety and great number of daily nonstop flights to the leading metropolitan complexes with a given system of cities are not particularly attractive…because they do not permit nonlocal personal contacts…to be carried out…efficiently.

Sacramento learned this lesson in 2012, when the region’s largest publically-traded company relocated its headquarters to Texas, citing the need for better direct service to cities like Memphis, Des Moines and Raleigh. “This was an issue for us, being a coast-to-coast, border-to-border company,” said Waste Connections CEO Ron Mittlestaedt.

At least five mid-sized U.S. cities - Nashville, St. Louis, Columbus, Cleveland and Indianapolis – are vying for the one remaining slot that British Airways has offered for nonstop service to London. Some cities are taking more aggressive approaches than others. The newly-established Nashville Air Service Coalition, comprised of political, business and tourism leaders, was formed to aggressively court airlines, including British Airways. Coalition members include the Vice-Chancellor of Vanderbuilt University and CEOs from local banks, law firms and healthcare companies. Meanwhile, Columbus 2020, an 11-county economic development group, traveled from Ohio to London to pitch to British Airways in person.

In North Carolina’s Research Triangle, a group of business leaders have partnered with the Raleigh Durham International Airport with the goal of raising five hundred thousand dollars to support the fight for more flights. Despite the fact that the region is home to three large universities and several multinational corporations, the airport only has one flight that travels outside of North America – an American Airlines flight to London. That flight was put in place in the early 1990s after pharmaceutical company GlaxoSmithKline lobbied and provided incentives to American Airlines in exchange for the daily service. Today, the lack of flight service might be costing the region, economically – the poor flight service was said to be a major reason auto manufacturer Mercedes-Benz chose to cite its new U.S. headquarters in Atlanta instead of Raleigh.

“In this industry, you hear lots of demands because everyone wants to have connectivity and nonstop service,” explained Andres Conesa, chief executive of Aeromexico. “There is never a second chance to make a good first impression. You can really feel it when people want you there and they are really making an effort to get you.”

Ultimately, however, airlines do not make route decisions based upon this “air audience development.” Instead, airlines determine where to fly based upon consumer demand and demographics of a given catchment area.

The interdependency between flights and commerce creates an interesting catch-22. While international corporations such as Mercedes Benz often choose areas based on the availability and convenience of flights, airlines generally choose to increase flights in areas with thriving local economies.

For policymakers, the best decision may be to focus on routes where they are already highly competitive. For instance, Boston’s business and educational climate makes it more attractive than a city like Pittsburgh when competing for direct air service to Abu Dhabi. Pittsburgh may be better positioned to attract additional domestic service, thereby strengthening its business climate and later, its international attractiveness. In the meantime, when Boston is competing with larger cities like New York, Washington, D.C. and Miami for international service, it would be well-suited to send a high-profile delegation to advocate on its behalf.

“When you have a trade mission and you have the governor, you pay particular attention to that project versus other ones,” Aeromexico CEO Conesa told the Boston Globe. In fact, it was then-Governor Deval Patrick who is credited with Boston’s besting of London and Paris for new Aeromexico flights late last year. Doing so is expected to open economic opportunity, expand commerce and add local jobs.

For policymakers, attracting and increasing flights requires a unique combination of luck, cachet and diplomacy. For large and small corporations, easy access to other parts of the world is essential. This connectivity is critical for the strength of urban economies.