Case Study O'Shea Airport

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Case Study O'Shea Airport
  Name Date CHAPTER 1 CASE STUDY RESOURCES The Economic W a y of Thinking The Re a l Cos t  of Exp a nding O’H a re Airpor t The debate over the expansion of O’Hare Airport in Chicago is similar to many debatesaround the country. Improvements in airports, highways, or other forms of transportation canbring tremendous benefits to a region, but often at high costs. As a result, the debate over whether the costs or the benefits are greater is often vigorous. Jon Ash w a rns of po t en t i a l for downw a rd economic spir a l for region Elk Grove Village, IL (Feb. 12, 2004)—A noted aviation expert today warned thatthe escalating cost of expanding O’Hare airport could drive airfares to levels that would economically damage the airport, the airlines that use it and businesses that depend on acompetitive O’Hare.Jon Ash, a nationally respected aviation consultant . . . , warned that if the higher costsand reduced benefits, as outlined in Chicago’s own O’Hare master plan, come true, theairport could become “cost-prohibitive and non-competitive with other U.S. hubs….” The plan could push the airport’s cost per passenger to $20 to $30, many times more than other major hub airports, destroying O’Hare’s competitive position.Ash . . . warned that the plan also could “potentially harm the two current hub carriersat O’Hare.” The two dominant airlines there already are financially struggling, with United Airlines in bankruptcy and American Airlines narrowly avoiding Chapter. 11. In rebuttal toChicago’s assertions that other carriers would gladly take the place of United and American,Ash concluded that “low-fare carriers would not be able to operate at O’Hare because costswould be prohibitive.” The conclusion was based on an economic analysis that demonstrated the strikingly higher costs of expanding O’Hare would be too large for low-fare airlines toshoulder.Those costs, of course, would have to be passed along to passengers. While Ash said that O’Hare’s existing rate structure is competitive with other large hub airports, Chicago’sO’Hare Modernization Program could add $16.26 or more to the fare of the average boarding passenger. …“Should fares to the local passenger have to be substantially increased to cover the OMPcosts, this could create a downward economic spiral, with a loss of economic activity,including jobs, taxes and so forth.”That conclusion directly challenges assertions by airport expansion promoters thatChicago’s expansion will fuel job creation and the region’s economic growth. “It is clear that the damage that O’Hare expansion causes is not just the bulldozing of hundreds of homes and businesses,” said Craig Johnson, Elk Grove Village Mayor. “The loss of O’Hare’scompetitiveness will hurt the freight forwarders, airline and airport vendors, and every other  business that is sustained by a vital and competitive O’Hare…. Excerpt from “Jon Ash Warns of Potential for Downward Economic Spiral for Region” (February 12, 2004.Copyright © 2004 Suburban O’Hare Commission. Used by permission. Economics: Concepts and Choices   Case Study Resources  45 Chapter 1: The Economic Way of Thinking Unit 1 Resource Book      C    o    p   y    r     i    g     h    t     b   y     M    c     D    o   u    g    a     l     L     i    t    t    e     l     l ,    a     d     i   v     i    s     i    o    n    o     f     H    o   u    g     h    t    o    n     M     i     f     f     l     i    n     C    o    m    p    a    n   y C P   Name Date CASE STUDY RESOURCES,  CONTINUED  MAIN IDEAS 1.  What benefits do advocates say the airport expansion will bring? What do critics of expansion say are the costs of expansion? 2.  How might delays in the expansion of O’Hare airport affect the economy of Chicagoand the surrounding region? 3.  Using information presented in the excerpt, create a cost/benefit chart to analyze theexpansion of O’Hare airport. Do you think the benefits outweigh the costs? Explainyour conclusion. 46  Case Study Resources  Economics: Concepts and Choices  Unit 1 Resource Book Chapter 1: The Economic Way of Thinking C P       C    o    p   y    r     i    g     h    t     b   y     M    c     D    o   u    g    a     l     L     i    t    t    e     l     l ,    a     d     i   v     i    s     i    o    n    o     f     H    o   u    g     h    t    o    n     M     i     f     f     l     i    n     C    o    m    p    a    n   y
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