Optimizing airport infrastructure for a country: The case of Greenland

In November 2018, the Greenlandic Parliament decided to extend the runways at two cities, Nuuk and Ilulissat, making them the main airports for international air traffic and to build a third regional airport. The decision is the result of 40 years’ discussion, which is outlined in the paper. The paper places the final decision in a theoretical framework of Greenland as a peripheral and very remote country for which air travel is the only way of mobility.

Literature from the latest ten years shows that improvement in air travel can contribute to economic development. On the other hand, the investment in the new airports is economically risky considered the small size of the economy. The paper therefore uses cost benefit analyses (CBA) to assess if the decision is cost-effective even without the induced and wider economic effects of the new airports, which are difficult to forecast.

Based on several CBA developed over the years, the decision on the airport package seems to be cost-effective in case some of the induced effects are taken into account. For the capital Nuuk, the decision is clearly cost-effective without including induced effects. For Ilulissat, the effect depends on to what extent an airline is willing to follow up and establish a new direct connection from Europe or the American east coast.

Therefore, airport authorities are also recommended to ‘sell’ the new airports to airlines. During the 40-year long process of discussion, the authors’ institute was 15 years ago asked to develop an optimization model for air traffic in Greenland. This model (the TGB model) is described in the paper and it is concluded that it would be possible to improve the network and save annual subsidies to the internal service traffic (PSO).

Unfortunately, the model was never implemented. The authors recommend to update and improve the model that is currently outdated and to use it to optimize the network when the new airports are finished.