Airport Hubs and Growth

Connectivity is at the heart of what makes airlines successful. Regional airlines feed to national hubs. International airlines take on and ferry travellers across continents. But how does the success of airlines relate to the success of the places where they base their hubs?

The globalised economy and rapidly developing new cities (in particularly in Asia and Africa) requires connections to thrive and prosper. The emergence of the ASEAN, EU, MERCOSUR and NAFTA  regional trade blocks accelerates this need.

For example Dubai have capitalised on its location between the West and the Rest to develop a profitable airline, Emirates, which in 30 years has become one of the largest airlines by passenger numbers in the world, and at the same time generated local growth with both jobs in the airline industry and by becoming the most connected location also generating growth in many other business sectors. Not only destination tourism boosts Dubai´s growth, but also travel-and-transport-intense trade, ICT and hi-tech industries which base business out of Dubai.

A couple of years ago, a very interesting book, Aerotropolis: The Way We’ll Live Next, labelled the new airport hub phenomenon Aerotropolis and gave us a glimpse of the way we will live in the near future, and the way we will do business too. The book argues that not so long ago, airports were built near cities, and roads connected one to the other.

This pattern with the city in the centre and the airport on the periphery, shaped life in the twentieth century, from the central city to surrounding urban sprawl. The book argues that today, jet travel, round-the-clock workdays, overnight shipping, and global business networks has turned the old pattern inside out. The new paradigm will be the airport at the centre and the city will be grow around it, to keep workers, suppliers, executives, and goods in touch with the global market.

In our recent strategy project with the city of Uppsala in Sweden, this trend was clear. Uppsala is a strong centre of life sciences industries and local manufacturing is exported throughout the world by air from Sweden’s main airport, Arlanda, which is located closer to Uppsala than to the national capital Stockholm.

Successful cities have always been founded because of trade, from the ancient Ur to New York and the Chinese cities on the old Silk Road. These are places where people exchange goods, money and ideas. Meanwhile, the shape of cities has always been defined by transportation. Liverpool, Antwerp, Gothenburg and Boston, to name a few, were built around harbour docks, and modern cities like Chicago was built around the railroads and Los Angeles around the car.

The urbanisation trend continues and the world is destined to build literally hundreds of new megacities as three billion people urbanise over the next forty years.

So where would you locate a new city today? And how would a city in for example western China, connect to the world? The answer is the airport. In a global economy, where trillions of dollars in goods and billions of people follow digital bits around the world, sooner or later we would end up building cities defined by their airports, because in the connected world, the only geography that matters is the economic geography.

Lets take another example. Heathrow is Britain’s only international hub airport. It serves 82 long haul destinations around the world, and these are only financially viable because of Heathrow’s success as a hub airport, which allows airlines to supplement domestic demand by also serving transfer passengers, and by having these connections, London and adjacent cities like Reading, Oxford and Cambridge becomes strong hubs for industries which depend on travel and air transport.

Given all this logic for the development of Aerotropolis and a multitude of connections, I was surprised to read a new blog article on The Economist website. In the article The Economist asks if hub airports boost growth, and quote research which says that the number of other cities to which the cities’ airports connected directly appears to have no relevance for growth. What matters is the sheer flow of passengers in and out of a city.

There are two possible explanations for this. The first is that investment goes to cities that are attractive in their own right, rather than because they are easy to get to for businessmen. The second is that air travellers do not mind having to connect flights in a foreign hub as much as they did in the past, because it is now easier to work on the go using tablet computers, smartphones and the like. To know for sure, more research is needed.

We live in a changing world where knowledge is the key advantage to success. Being a consultant, I very much enjoy the numerous topics for interesting research and analysis which are needed out there, as location and historic strengths provide opportunity, but knowledge and competent place management is required to capitalise success. Also, in a world in rapid change (where both the international dynamics and the competitive advantages of a growing place is in flux) making sure the target markets out there understands what a place is about, focused and strategic place branding has become essentially more important.