ExpertFlyer Hot Topics — Where the Rubber Meets the Runway
In our final Hot Topics installment with Cranky Flier and Cranky Concierge, Brett Snyder, we’ll do a deeper dive into government programs that are designed to help keep service in place to smaller cities.
By Brett Snyder
Last week I wrote about why small cities were losing service, but can anything be done to prevent it from happening? When pure economics doesn’t work, the government often tries to step in. That’s what we see here, but the programs in place are not helping much.
The federal government has two subsidy programs. The granddaddy of them all is Essential Air Service (EAS). When the industry was deregulated in the 1970s, there was concern that some smaller cities would lose service. To prevent that from happening, the government authorized funding to keep service in those particular cities that were at risk. The result was the EAS program, and just like a zombie, it refuses to die.
This program works well in keeping lifelines open in Alaska, but in the lower 48, it subsidizes the wrong kind of service. Most of the EAS markets are served with very small turboprops on a relatively infrequent basis. Tickets can end up being pretty pricey. Many of the cities are close to other cities which already have broader service. The result is two big problems.
First, many people drive to other nearby airports to get cheaper fares and more frequent flights. So the service that the government is subsidizing to the tune of over $100 million per year doesn’t get used nearly as much as you’d hope. In fact, the recent FAA funding bill that passed Congress decided to eliminate funding for airports that board fewer than 10 people per day and are more than 175 miles from a medium to large hub. You would hope that wouldn’t be a lot, but guess what, it is. Of the 109 airports in the Continental US that rely on EAS-funded flights, 36 of them board fewer than 10 people per day. Of those, only nine are less than 175 miles from a medium to large hub airport so very few will actually get cut.
But that doesn’t paint the full picture of the situation. Hot Springs, Arkansas is a great example. It is more than 175 miles from the nearest medium to large hub so it gets to keep its flights, which take fewer than 10 people a day out of town. But it’s a mere 55 miles from the much larger (if not medium-sized by DOT definition) airport of Little Rock. Most people simply drive to Little Rock while taxpayer funds go to serve the few who stay back.
Second, there are some EAS airports that do serve more passengers. The funds in these airports could end up doing more harm than good. Take Decatur, Illinois. Decatur can’t support service on its own, so it gets EAS funding to maintain its flights to Chicago and St Louis. In the 12 months through October 2011, the airport boarded 6,845 people, or just under 20 per day. In case you were wondering, that’s an average of just over 3.5 passengers per departure.
Meanwhile, just 43 miles west on interstate 72 sits Springfield’s airport. Springfield has struggled like many small airports to keep its flights coming in and out. It doesn’t receive EAS funding, but it could certainly benefit from the passengers that EAS funding is paying to keep in Decatur. Without EAS, Springfield would have more passengers and would be more likely to successfully support its flights. So really, EAS hurts that region more than it helps.
The other federal program is the Small Community Air Service Development Program (SCASDP). SCASDP is meant to provide temporary funding to help small airports fund projects – could be marketing, or it could be a new flight, for example. This program has been much more successful than EAS, actually funding projects that have led to long term sustainable operations. For example, Santa Rosa Airport in Northern California regained its service through a SCASDP grant and the airport now has service to multiple cities without subsidy.
That is the model that the federal government should be using more. It can encourage airlines to try new markets where success might actually occur naturally. The airlines just need that extra push to be willing to take the risk, but the number of opportunities are few and far between.
Many cities and municipalities have done similar programs by funding grants or offering revenue guarantees, but in the end the locals are always more optimistic about a flight than the reality. Many flights under this model fail once the subsidies stop. In other words, the government can help in some limited instances, but ultimately the economics of small city service have changed to the point where there is no easy fix. Short of fuel prices plunging, government regulations softening, or a new incredibly cost efficient small aircraft being introduced, small cities are likely to continue to see painful cuts.