Sunday, August 24, 2008

Economic Forces Threaten To Ground Economic Development

In the aerotropolis sweepstakes, Detroit is the first city to take flight.

There, the Detroit Region Aerotropolis has used the nation’s latest economic development big idea as a vehicle for regionalism, bringing together politicians and business leaders from two counties, seven cities, and two airports – Detroit Metropolitan Airport and Willow Run Airport.

Quoting the ubiquitous University of North Carolina professor John Kasarda, Detroit leaders tout 20 square miles of developable land, supportive community leadership and an infrastructure that puts rail, sea and rail within a one-mile radius. Holding up Amsterdam and Louisville as its model, the Detroit aerotropolis professes to be “creating a global logistics hub that moves people, products and information.”

The Cast Of Characters

As for Mr. Kasarda, he’s suggested that the cities with the greatest opportunities for aerotropolisdom are Detroit, Memphis, Dallas/Fort Worth and possibly Kansas city and Phoenix. He’s also cited the presence of FedEx and Honda Aircraft at the Piedmont Triad International Airport as giving Greensboro, Winston-Salem and High Point, North Carolina a chance for aerotropolis status.

Meanwhile, in Memphis, the Chamber-backed aerotropolis initiative continues to lay the foundation for our city to leverage its considerable resources to set the aerotropolis standard for the U.S. where Memphis International Airport becomes a magnet for economic growth, commercial development and neighborhood redevelopment.

Of course, Memphis begins with a major leg up with the dominating presence of FedEx and the motivating leadership of Tom Schmitt, president and CEO of FedEx Supply Chain Services, and that’s reason enough to be optimistic. After all, it is often unappreciated here that FedEx was in fact the inventor of international commerce.

And yet, it alone is not enough to fulfill dreams of Memphis as aerotropolis.

More And More

After all, in Asia, where the aerotropolis phenomenon were first seen, Bangkok’s Suvarnabhumi Airport will have shopping malls, office buildings, hotels, hospitals, an international business center, conference and exhibition space, warehouses and even a residential community. Singapore’s Changi Airport has movie theaters, saunas and a swimming pool.

As it’s prone to do these days, Dubai took the concept and went one better. Its World Central International Airport will have office towers, hotels, a casino, golf course and one of the world’s largest malls.

In addition, any U.S. city with aerotropolis aspirations must engage in the thoughtful development planning that includes direct passenger rail connections between the airport and downtown.

Something’s Got To Give

And yet, ultimately, the greatest challenge to the aerotropolis concept may be that as far as airlines are concerned, something’s got to give. As one of the fastest-growing sources for greenhouse gases and with energy prices portending changes that could be as simple as skyrocketing airfare or as dire as industry collapse.

All of this comes in the midst of uncertainty for the airline industry that is unprecedented. Dipping oil prices are encouraging but likely temporary, doing little to mitigate the looming crisis caused by the fact that the business model for many airlines essentially doesn’t work with oil selling for $135 a barrel. Already, the cost of fuel for airlines is up 80% when compared to a year ago, layoffs and fewer flights are becoming a regular occurrence, and we’re hard-pressed to think of a single airline that’s not at risk.

If some doomsday predictions come to pass, like the one made by a respected Canadian bank economist that gas prices will be $7 per gallon in two years, it will not only result in millions of fewer cars on our roads but significant fewer airplanes in the sky.

Fuel’s Up And Opinion Down

Already, in Europe, the high cost of fuel is changing public opinion toward air travel, with protesters shaming airline passengers and a growing feeling that flying is synonymous with ignoring the imperative to reduce greenhouse gases. There are the first signs of legislative support for higher taxes on air travel and opposition to any new runways.

These days, suggestions that U.S. passengers will be cut in half and that there will only be 50 major airports in less than 20 years (roughly 85% fewer than today) are no longer discounted as inconceivable. Such is the seriousness of the crisis facing the airline industry and the cities that depend on it for major economic activity and employment.

In keeping with the general denial that federal agencies have exhibited during the Bush years, the FAA continues to predict that passengers will double in just over 15 years, which is just short of dumbfounding considering that the number of passengers has already dropped by about three million this summer.

Back To The Future

In the end, it could well be back to the future, with the options conjuring up memories of the 1960’s when our parents dressed us up in our Sunday best to pick up flyers. In those days, anyone traveling on an airplane was special, because air travel was for the elite (the same folks also owned color televisions and FM radios).

If oil prices climb, it may be so again, and cities like ours whose economies are based on a heavy dependency on cheap oil and airlines could be especially hard-hit.

It’s an ominous warning for Memphis, because the $21 billion economic impact created by the airport could be as much risk as opportunity. It’s also why development of the Memphis aerotropolis could be anything but linear, and why its planners need scenarios for a future that could be far different.


Anonymous said...

Wouldn't the loss of air cargo be supplemented by the increase of rail and water cargo? Memphis is really positioned to be a economic engine going forward based upon the fact that our transportation diversity is so strong.

Anonymous said...

Here is another example of Memphis putting all it's eggs in one basket. Air traffic is based on inexpensive fuel. Since 2001 fuel costs have steadily and exponentially risen. After fuel cost shocks from Katrina, we should have been working double time to prepare for inevitable decline of air travel. (Oil costs have only declined recently because of demand destruction resulting from economic recession occuring around the world.)
Here is an article written in December 2007 about air travel. It didn't paint a rosy picture.
Another local blogger commented about this article then. Thanks for bringing the subject back up.

Zippy the giver said...

Airplane engines do not have to run on existing petroleum based fuels, they can run on other fuels.
Chemistry has come a long way and so will petroleum manufacturing. There is a diesel brewery technology that makes it cost 43 cents a gallon right now.
A lack of refineries is the problem, not so much supply. If we had a big refinery, we'd be a player.
How many refineries blew up in Texas in the last 8 years?
How many are back online?
How long have we had propane powered forklifts?
How long have we had electric golf carts?
How long will we stall off REAL electric vehicles from being produced?
I bet it's about a long as it will take to come up with a new fuel formula or refine that cheap diesel.
The technology is already available for use right now.
As long a Utilities are too high Memphis will not have enough investment dollars to get through the very situation SCM has described.
I wonder if I can own a Chinese utility company or a Saudi or Iranian utility company or airline or bank while I am an American citizen.
There shoulda been a law.
The Chinese are beating us with tactics we'd never think of, like people cooperating with the government. Meanwhile I see a lot of nuclear reactor parts rolling down our highways, remember when the US Government would store the waste in your backyard without notifying you? I do.
Maybe a nuclear powered plane will spit radioactive waste into the skys and it will generate a new ozone.
Any takers??

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