United to Renew Denver to London Daily Flight

Thankfully, not all of the news out of DIA these days is about turbulence and retrenchment. United Airlines is planning to restart the Denver to London flight next spring.

Short Term Turbulence for DIA

Happy Halloween. It has been a truly ghoulish month for the economy.

(photo provided courtesy of Denver International Airport)

One of the central themes of this blog is that Denver International Airport (DIA) serves as a powerful economic engine for the Denver Region and Colorado. However, as jet fuel costs have increased, airlines have scaled back their flights and the U.S. macro economy declined, it has been a tough stretch for DIA and other airports around the country.

1) Frontier entered bankruptcy and reduced its flight schedule.

2) DIA's international ambitions have been curtailed, at least temporarily, as Lufthansa has ended its daily non-stop flight between Munich and Denver and United ends its daily non-stop service between Denver and London. British Airways will continue to fly the Denver to London route and Lufthansa will provide daily non-stop service between Denver and Frankfurt.

3) DIA has put its plans to expand Concourse C on hold in anticipation of declining flights and passengers as airlines cut back their routes. Additionally, the construction of an airport hotel will likely be delayed and/or scaled back.

Despite these developments, there are still reasons to be sanguine about the airport's prospects. First, DIA has achieved record monthly air volumes in 2008 including breaking the 5 million passengers per month threshold for the first time ever in July. Southwest continues to expand its flights at and destinations served from DIA. Also, to date, the airport has not lost any major hub carriers unlike some other airports around the country. Recently DIA's bond's have been given strong ratings indicating the airport is financially well positioned to weather the current turbulence.

In the long term, as the broader U.S. economy improves, I believe DIA will continue to be a powerful economic growth driver for the region and the airport will resume its upward financial and operational trajectory.

The Aerotropolis and Global Competitiveness

Happy New Year.

I just spent 10 days in Metro Denver and really enjoyed the seasonal cheer and winter weather.

For my first blog entry in 2008, I wanted to provide a link to an article in Fast Company magazine from the July/August 2007 issue written by Greg Lindsay titled "Rise of the Aerotropolis" (www.fastcompany.com/magazine/107/aerotropolis.html ).

"In the relatively obscure world of urban planning, [John] Kasarda, a professor at the University of North Carolina's Kenan-Flagler Business School, has made a name
for himself over the past decade with his radical (some might say bone-chilling)
vision of the future: Rather than banish airports to the edges of cities and
then do our best to avoid them, he argues, we should move them to the center and
build our cities around them. Kasarda's research has laid bare the invisible
plexus of air-cargo networks that have shrunk the globe (much as railroads did
for the American West). " (Lindsay, Fast Company).

The importance of Denver International Airport (DIA) to Metro Denver's global competitiveness is an ongoing theme of this blog so I found this article very interesting. Lindsay does a nice job of describing the myriad economic benefits that flow from airport connections. He also summarizes the development of multibillion dollar "airport cities" in places like Hong Kong, Beijing, Soul, Bangkok and Dubai, pointing out that, for the most part, U.S. metro areas have not made new investments on the scale of these Asian cities.

He briefly mentions the decommissioning of Denver's Stapleton Airport as an example of how local politics in the U.S. hinder the expansion of existing U.S. airport facilities. Of course, I think he is misses the more important point that the closure of Stapleton coincided with the launch of DIA (http://www.flydenver.com/) as one of the few new airports built from the ground up in North America in the last 20 years and one of the few airports in the U.S. with space for runway and terminal expansion. At 54 square miles, DIA covers more land area than all of Manhattan or the City and County of San Francisco.

After reading this article, I am even more convinced that the upcoming expansions at DIA (FasTracks commuter rail to the Union Station, a new terminal, on-site hotel, expanded gates and a commuter jet facility) mentioned in my blog from July 30, 2007 (http://aviewoftherockies.blogspot.com/2007/07/dia-expansion-fullfilling-vision.html) are critically important investments in Denver's international competitiveness.

Another interesting topic covered by Lindsay was the plans for expanding Detroit Metro Airport (http://www.metroairport.com/) into a fully fledged Aerotropolis. Detroit has thousands of acres of woods and greenfields surrounding the airport making it one of the few U.S. airports beside DIA with ample room for expansion. I wonder if the expansion of Metro Airport posses a long term competitive threat to DIA?

Finally, see Figure 1 below taken from the Fast Company website which shows Detroit, Memphis, Dallas-Fort Worth, Ontario and Denver airports as "planned" or "rudimentary" Aerotropolis facilities in the U.S.

Figure 1: "The Aerotropolis Goes Global" from Fast Company (http://www.fastcompany.com/magazine/107/aerotropolis.html)

Infrastructure Investments and Global Competitiveness

The past Thursday evening I was at a Northern New Jersey Urban Land Institute (ULI) meeting where, Bob Dunphy, ULI Senior Resident Fellow for Transportation and Infrastructure, gave a fascinating presentation on infrastructure investment in the United States and around the world. Its incredible how much money China is pouring into new infrastructure projects including high speed rail, airports and local infrastructure. Its also quite astonishing how much deferred maintenance has built up in the U.S. and how large the capital deficits are becoming on our core infrastructure. This has been a challenge in the U.S. since the 1980s and continues to get worse and worse. According to Mr. Dunphy the Federal Highway Trust is going to be bankrupt by 2009 under current policy and funding trends.

Where I live in Northern New Jersey and New York, there are many pressing infrastructure needs such as expanding commercial air capacity, improving freight movement, building commute corridors and strengthening the electrical grid and power supply. This got me thinking how foresighted Metro Denver has been in terms of core infrastructure investment over the last decade or so. Here are a few examples I came up with along with the rough costs of the projects (not in consistent year dollars):

• Building Denver International Airport (DIA) from scratch in the 1980s and early 1990s. The current plans to expand the terminal, build more gates, add rail transport etc. ($5.2 billion + $1.2 billion) See my July 30, 2007 blog entry (http://aviewoftherockies.blogspot.com/2007/07/dia-expansion-fullfilling-vision.html).
• The innovative transportation expansion (T-REX) project which jointly expanded light rail and the I-25 freeway along the same right of way ($1.67 billion);
• The ambitious FasTracks program, over 12 years, to construct 137 miles of new commuter rail, light rail and bus rapid transit service throughout the Denver Metro Area.($6.1 billion);
• The November 2007 infrastructure bond package approved by the voters at the City and County of Denver ($550 Million).

As Metro Areas around the world compete with each other for footloose talent, capital, businesses and jobs, having world-class infrastructure is a key source of competitive advantage. The Metro Denver Area is on a solid path of maintaining and improving its infrastructure and needs to continue moving in this direction in the coming years and decades. This is an issue I hope to follow closely in A View of the Rockies.

United Announces Daily Denver to London Flight

After years of speculation, United has announced the launch of a daily non-stop flight between Denver and London starting March 30, 2008. This is great news on several fronts: it will keep competitive pressure on the existing British Airways Denver to London route, promote global economic and cultural linkages between Denver and other parts of the world, increase Metro Denver’s international competitiveness as a location for global corporate headquarters, provides evidence that recent “open skies” treaties negotiated between the United States and other nations are starting to remove regulatory barriers to expanding international flights and may be an indication that United is planning to expand Denver International Airport’s role as an international hub instead of just using DIA as its second largest domestic hub.

In blog entries from September 23, 2007 (http://aviewoftherockies.blogspot.com/2007/09/relatively-low-international-air.html ) and September 5, 2007 (http://aviewoftherockies.blogspot.com/2007/09/international-air-traffic-at-dia.html) I discussed the relatively low volume of international flights into and out of Denver International Airport She the following Denver Post story for additional details regarding this announcement ( http://www.denverpost.com/business/ci_7345275 ).

Relatively Low International Air Traffic at DIA: Part II

In my September July 13th and September 5th blog entries I discussed the fact that Denver International Airport (DIA) (the 5th busiest airport in the U.S.) “punches above Metro Denver’s population weight” (the 19th largest consolidated metropolitan statistical area (CMSA)) in the United States). However, in my September 5th entry I also pointed out that, domestically, DIA is the 4th busiest airport but for international passengers DIA “punches below Denver’s population weight” because it is only the 22nd busiest airport for international passenger originations. In this blog entry I explore the reasons underlying this dearth of international passengers at DIA.

To validate the data cited earlier on DIA international originations, I reviewed the U.S. Department of Commerce, Office of Tourism and Travel Industries (http://tinet.ita.doc.gov/ ) data on overseas visitors to select U.S. cities. This data is based on the Survey of International Air Travelers (In-Flight Survey) Program and the Visitor Arrivals Program (I-94 Form). According to this data, Denver is the 28th most popular City in the U.S. for international visitors.

I theorize that there are four primary interrelated factors which drive metro areas’ international air traffic density:
1) the location of metro areas within the United States relative to international destinations;
2) the absolute number of U.S. metro area residents with ethnic ties to overseas destinations;
3) the amount of international business linkages between overseas destinations and U.S. metro areas;
4) the amount of tourism between domestic metro areas and overseas destinations.

One of the reasons Denver ranks so high for domestic air traffic is because it is centrally located in the western United States between the large cities of the west coast and the mid-west making it an ideal domestic air hub. However, from an international air traffic perspective, hub cities in the United States tend to be located on the U.S. coasts, closes to the international destinations they serve as a hub for. For example, New York is a large hub for transatlantic European flights, Los Angeles for transpacific destinations and Miami for flights to Latin America, the Caribbean and South America.

Additionally, cities with large absolute numbers of ethnic residents with strong ties back to ancestral homelands have a ready made demand for direct international flights and are likely to have high international flight densities. The City of Denver which is a reasonable proxy for the Metro Denver area as a whole, has the 24th highest percent of foreign born population among U.S. cities. See Table 1 below.

Given that the Denver Metro Area is the 19th largest area in overall population, Denver does not have a large absolute number of foreign born residents driving demand for international flights compared to larger metro areas with higher percentages of foreign born populations.

Table 1: Large Cities Ranked by Percent of Foreign-Born Population in 2002



(Source: http://usgovinfo.about.com/cs/censusstatistic/a/foreignborn.htm)

Another key factor in driving international air traffic to U.S. metro areas is international business linkages between overseas destinations and U.S. metro areas. For example, New York City’s status as a global financial capital clearly drives demand for international air flights to and from New York. One possible proxy for measuring international business linkages is the size and number of multi-national corporations with headquarters located in an area. The State of Colorado is ranked 13th highest among the states in terms of Fortune 500 companies headquartered in the state (most of the Fortune 500 companies in Colorado are in the Denver Metro Area).

Table 2: States Ranked by Number of Fortune 500 Headquarters in 2007



(Source: http://money.cnn.com/magazines/fortune/fortune500/2007/states/CA.html )

Although I have not found good hard data on Denver’s ranking as an international tourist destination compared to other U.S. metro areas, some broad conclusions can be drawn. With its ski industry and year round alpine recreation amenities, Metro Denver and Colorado have a substantial tourism industry. However, Metro Denver is not as big a draw as coastal metro areas in states like California, New York, Florida, and Massachusetts.

Given, Denver’s land locked geographic position in the Western United States, its relatively low absolute number of foreign born residents compared to larger cities and other factors cited above, it is not too surprising that Denver has a relatively low density of international air traffic. There is probably not a “magic bullet” for Denver to rapidly increase the number of international destinations that are served by DIA. Instead, over time, as the Denver economy grows and develops additional international linkages I predict there will be a slow but steady incremental gain in international air traffic ultimately resulting in direct international flights between Denver and the Pacific Rim and additional cities around the world.

If I am missing any of the key reasons for DIA’s relatively low international flight density please send me a comment or email.

Relatively Low International Air Traffic at DIA

Denver International Airport (DIA) was the 5th busiest airport in the United States in 2006 based on the number of passengers on non-stop flight segments originating in Denver per data from the Bureau of Transportation Statistics (http://www.transtats.bts.gov/).

Total Passengers on Non-Stop Flights in 2006

by Originating U.S. Airport

However, as I have flown in and out of Denver over the years, I have always noticed how relatively few international flights DIA has compared to other large airports in the United States. According to the DIA website 18 international cities can be reached from DIA via non-stop flights including London, England, Frankfurt and Munich, Germany and numerous cities in Canada and Mexico. (see http://www.flydenver.com/diabiz/info/research/faqs.asp for the complete list). The Munich flight was just launched in March of 2007. Denver is working to initiate direct flight services to Tokyo and Beijing in Asia.

When you look at the BTS data, it turns out that although Denver is the 5th busiest overall airport in the United States and the 4th busiest airport in terms of originating domestic non-stop passengers, it is only the 22nd busiest airport in the United States in terms of originating passengers on international flights.

Domestic Passengers on Non-Stop Flights in 2006

by Originating U.S. Airport

International Passengers on Non-Stop Flights in 2006

by Originating U.S. Airport

Per the two tables immediately above, there is clearly a large drop off from being the 4th busiest airport in terms of domestic non-stop passengers to being only 22nd busiest for international passengers. This large disparity between international and domestic air traffic densities at DIA merits analysis and discussion which I plan to provide in a future blog entry.

The DIA Expansion: Fullfilling the Vision

There was great news today for Metro Denver economic development wonks. Jeff Leib’s article in the Denver Post, “$1.2 billion makeover for DIA” (http://www.denverpost.com/news/ci_6496074 ), explains that Denver is issuing municipal revenue bonds to pay for major airport expansion items such as new gates, a commuter jet terminal, a new automated baggage system (sound familiar?), the FasTracks commuter rail station at DIA, and additional parking facilities. I plan to devote a future blog about design considerations for Denver’s “Train to Plane” rail connection.

DIA is expanding its facilities and infrastructure to accommodate increasing traffic. This is an important milestone in the history of aviation in Denver. DIA was envisioned as an economic development engine for Denver in much the same way as DFW airport is for the Dallas Metro Area. Building DIA was always a strategically sound idea based on the fact that Denver’s location, between the population centers on the West Coast and the Midwest, makes it a natural transportation hub (see my blog from July 13, 2007, “Spatial Isolation and Punching Above Denver’s (Population) Weight”) . Denver needed an airport farther away from the urban core of the city with room to expand as traffic increased and with space for appropriately sized and configured runways to handle weather related challenges in Denver. DIA is one of the few major airports in the country with plenty of room to expand its facilities and with flight paths into and out of the airport over relatively sparsely populated land. I personally fly Jet Blue out of John F. Kennedy Airport in New York regularly and as Jet Blue has grown and expanded, the airspace around JFK has gotten so congested that flights regularly suffer from serious delays. This summer in particular has been a nightmare. Reducing this congestion will be a really hard thing to do for JFK and most other large airports in the United States because they can’t expand the same way DIA can.

DIA suffered a number of set backs early in its history including the abandonment of the Denver hub by Continental Airlines and problems getting the first attempt at an automated baggage system running. Just as air travel industry was hitting stride in Denver, the events of 911 and the resulting airline financial problems sent the whole industry into a downward economic trajectory. However, Denver’s natural strategic advantages as an air transportation hub have allowed DIA to steadily build into a powerhouse as United Airlines retained Denver as a hub, Frontier Airlines was launched from a base at DIA and has expanded tremendously and more recently as South West Airlines has aggressively entered the market. The airline industry will always have cyclical ups and downs and Denver needs to be prepared for the downturn which will eventually follow today’s boom in travel, but DIA is positioned to play an increasingly prominent role in the national air transport system and to help drive the Denver Metro Area’s economic growth.

Photos provided courtesy of Denver International Airport.