11.11.2010 « A Post Election Thought: Just How Many Commercial Air Service Airports Do We Really Need? »
It is hard to imagine a mid-term election like the one that took place last week. For this independent, I am most happy to see a balance of power restored. The 24 hours after the first poll closed also proved to be significant if you were an airline industry watcher. First, the Delta flight attendants voted to stay non-union, dealing a blow to the Association of Flight Attendants (AFA-CWA). Hours after learning of AFA’s defeat, the news that Jim Oberstar did not get re-elected in the 8th District of Minnesota hit the wire (my home district growing up). I needed an asbestos glove to pick up my iPhone with the Oberstar rejection. How ironic that it was a former Northwest pilot that defeated airline labor’s favorite congressman.
For the U.S. airline industry, the election results would seem to assure a more sympathetic ear to issues important to the carriers on Capitol Hill. The current Congress has been anything but sympathetic, making the airline industry the whipping boy on issues important to labor and advocates falling under the broad umbrella of consumer protection. But where does it go come January 2011? There are many issues that could be revisited now without the representative from Minnesota’s destructive rantings, but there is one issue that also can finally be considered.
Maybe with Oberstar gone, we can actually have a cogent conversation on just what air service is essential. After all, it was the Congressman that generally refused to revisit the Essential Air Service Program and make alterations to language drafted 30+ years ago. Does an airport really require subsidized air service when an alternative airport is 70 miles away and offers better hub connections? The Congressman would say that the community had air service when we deregulated the industry in 1978 and we promised the community would have service in perpetuity. Absolute insanity. Oberstar’s office was the incubator of such entitlement thinking.
Over the past year I have delivered the following message to many airport groups and conference venues. Not a popular message for some, mind you, but the day of reckoning is coming. Ninety-seven percent of U.S. domestic air service demand is concentrated around 40 percent of mainland commercial air service airports. Should the remaining 60 percent of airports comprising just three percent of demand be enabled to compete for infrastructure dollars better spent in obviously more critical markets? A global trend is emerging as air service concentrates around the most populated areas. Forty-five percent of passengers in China only want to fly to and from Beijing, Shanghai and Hong Kong. While not as dramatic given the maturation of the U.S. market, similar statements can be made here.
With no replacement aircraft for the 50-seat jet on the drawing board as of today, and with nearly 500 of those aircraft coming off lease between now and 2016, there are communities that are going to be disenfranchised from the U.S. air transportation grid. The highway will be their first access point to the air transportation system. That is already true today for many small communities where consumers can/and do drive to a larger airport with more service options – particularly those airports with a low cost carrier present.
So, scaling back airport service won’t be an economic disaster for these smaller communities that, in many cases, get only minimal attention from airlines anyway. That means essential air service shouldn’t be a concern – and won’t be unless there is a Congressman or Senator trawling for votes, determined to keep the “prestige” of the airport for his or her constituents, even though that airport provides little or no incremental value to the quality of air service in the U.S. And, in reality, little economic benefit for the community.
An unspoken fact is Southwest Airlines has long been the nemesis to small airports around the country. Why has Southwest not entered Cincinnati? Because it doesn’t have to. The 69 cities Southwest serves envelopes no less than 242 markets of all sizes – or more than one-half of all mainland commercial air service airports. Southwest can access Cincinnati’s traffic with its existing services at Louisville, Indianapolis or Columbus.
Each of the three markets is within a two-hour drive of Cincinnati. This fact could also be a reason why Delta has drawn down the Queen City’s hub as pricing is indirectly influenced by low-cost carrier service. Paired with the fact the 50-seat jet cannot generate sufficient revenue at $87 per barrel oil makes Cincinnati difficult to serve economically. Cincinnati is not losing its hub because of Delta’s merger with Northwest; rather it is losing hub breadth because of economics -- low fares and high oil prices.
Let’s take some examples where markets encompass smaller cities currently receiving air service. Today, within a 2-hour drive of Columbus, OH are: Dayton, OH; Parkersburg, WV; Akron, OH; Cleveland, OH; Huntington, WV; Toledo, OH and Cincinnati, OH. Now, I appreciate that passengers from some of these cities would probably not drive to Columbus, but I bet passengers from Parkersburg, Huntington and Toledo might, and probably are, doing so to some extent today.
Another middle of the country example is Detroit, MI. Today, within a 2-hour drive of Detroit are: Toledo, OH; Flint, MI; Jackson, MI; Lansing, MI; Midland/Bay City/Saginaw, MI; and Kalamazoo, MI. We have also just identified two markets that envelope Toledo, a market hanging onto to air service by its very last fingernail.
If you look at those examples from a regional perspective, it’s hard to figure why it’s necessary to maintain such redundancy. Or why cities with overlapping airports should claw to hold onto non-competitive air service, forced into adopting dramatic programs to retain carriers – and passengers – using dollars they can’t afford. All the while draining important federal infrastructure funds from more critical needs.
No politician wants to play God and determine which airports should be closed to commercial air service and which airports should remain open – at least not any who want to get re-elected or re-appointed. Still, it needs to be done and I would argue it is a more important intermediate action for Transportation Secretary Ray LaHood than building railroads – or at least talking about building railroads. We should be rationalizing and streamlining the air transportation grid. That might let the government be smarter about where infrastructure dollars are spent. Not just at other airports, but on prioritizing the highway and bridge repairs necessary to access the air transportation system. And, yes, we might even build a rail line or two.
Like many things aviation in the U.S., we put off difficult decisions until it is too late. Labor needed to be making bankruptcy-like changes to collective bargaining agreements decades ago. Instead, it feels as if it all happened at once - and was exponentially more painful. The hard truth is, the economic expectations of deregulation - where inefficiencies and uncompetitive costs were wrung from the system - has largely played out over the past ten years (and not the first 22) because people avoided the inevitable – including airline companies. If the market were left to its own devices, my guess is many of the efficiencies found in the last decade would have been found earlier, or companies would have simply failed.
Swelblog’s opinion of small airport closings has wide implications. Implications for the Regional Airline Association and the sector of the industry it represents. Implications for mainline labor as they rethink how regional flying should be performed and who should do that flying. Implications for smaller community air service. Implications for how infrastructure dollars are allocated. Implications for government leaders thinking about transportation policy on a medium to long-term planning horizon. Implications for network airlines that have made smaller community air service critical to the makeup of their route structures.
There is a new essential - and it is not Oberstar’s essential - when it comes to air service. Regionalization of air service sounds scary, but at the end of the day, would you rather fly a Bombardier C-Series to a hub/gateway with multiple service options from Columbus or a Cessna from Toledo. That is where we are headed over the next five to seven years.
Give the small airports time to think about what their business model should be when the day of reckoning happens. There is still time and there is still the need for those airports to play their parts inside the system – just not in receiving direct air service.
Maybe we should be thinking of it as the Non-Essential Air Service Program?
Reader Comments (7)
It seems inevitable that aircraft such as the CSeries will reduce the number of small markets that get airline service.
Couldn't some of the smaller markets get one-stop flights to hubs instead of non-stop flights to the hub.
All of the examples that you used in this post are in the east. Would you support subsidized service to small markets in the west where the distances are greater and the markets thinner?
Bill, Roger was right to think I might need some vodka in order to get through your latest post. Enjoyable, as always, but I feel the need to point out that, in my highly scientific and expert opinion, you are what they call “out of your d*mn mind. “
Picking on the most egregious airports in the EAS program has become the proverbial low-hanging fruit. I know it is very hard to resist the delicious temptation of picking on the program due to a few airports among its roles that are actually so close to a nearby hub that one might throw a rock at them. Underhand. However, that’s nothing more than a distraction. At its core, the program is designed to serve a variety of airports of different distances-to-hubs; many of them over a six hours’ drive away from another source of commercial, scheduled air service.
That said, you may be surprised to learn that RAA does not object to regionalization on its face, and certainly, we believe a rewrite of eligibility criteria that reflects modern highway systems and increased speed limits deserves careful consideration. "Regionalization" is actually an attractive idea to me, though I don't speak for my carriers when I say that. Were regionalization undertaken in a circumspect manner with input from community and air service stakeholders, it could prove to be key to reforming the program. Unfortunately, regionalization on merits or economics alone is implausible. The process would be inherently political. In fact, its long been acknowledged in EAS circles that we need something tantamount to a base-closing commission to make meaningful eligibility changes. Even then, the NIMBY (or its lesser known relative, “you’d-better-keep-it-in-my-backyard”) factor is in play, carried out by powerful Senators and a handful of Congressmen and women, who will always protect "their" airports.
If you look back over my most recent testimony (before the House Approps Committee), I state that RAA is not the primary opponent of moving the driving distance from, say, 60 miles to 90 or even 100 miles. The opposition there is from lawmakers, not airlines. Airlines want to save the program and are willing to make reasonable adjustments to do so. Of course, when you start to talk about moving drive times to two hours (what is that, 130 miles?), then you start to talk about disconnecting people from air service, and I think that’s unreasonable, (as well as unfair, inequitable, and just plain wrong). Should I tell you how I really feel?
While it may be tempting to dismiss the economic claims of a community who lacks or loses air services, you really are glossing over the compelling economic need a community has of reliable air service. Tell me which business would consider a two-hour drive to the next nearest airport as an acceptable part of its relocation or start up plan? With security lines, parking, and other hassles, a trip to the airport suddenly takes as much as four hours, and that's before one sets foot on an airplane. If, as you say, folks should just drive, do you have a plan for when highways turn into parking lots during holidays and other high volume travel times? Do you recognize that driving is statistically more dangerous?
And what about the law of unintended consequences? Competition from the car has already been debilitating to some smaller regional airlines and has also had broad, negative network implications for all airlines. Consider that three-quarters of our nation’s airports rely on us exclusively for service. What kind of relevance does any airline – major or otherwise – have in the United States when it gives up on three-quarters of its domestic market? Mainlines are already cutting domestic service. While its true that these points are not currently EAS points, it is important that they remain protected.
And it's not just businesses. A relative of mine is a surgeon in a small, Southern city. He could live anywhere, of course, but has chosen not to leave his hometown even though he has at times been tempted to live in a bigger city. Part of his reasoning is that he can fly just about anywhere he wants to go in a reasonable time. While he is willing to drive to a larger airport for leisure flights, he can't always do so, especially not for tightly-timed business trips. If getting to where he needed to go to maintain his profession (and lifestyle) cost him a whole day of driving, just to get out of the vicinity, in order to do business or to go on vacation, his location and lifestyle balance would certainly change. With doctors (and many other essential professionals) already in short supply in more rural corners of the nation, this factor should not be ignored.
And its not ignored. At least, not by some influential lawmakers. Support for the program comes from, and almost always has come from, our friends in the U.S. Senate. There are rural pockets in nearly every state. And while aviation economics are changing, rural realities are not. I've been fighting to reform and save the EAS program for nearly a decade and a half now, and while Mr. Oberstar has been supportive of the program, he's not only or even, arguably, the strongest (at least historically speaking) proponent of the program. During his long and valuable career as a policymaker, Mr. Oberstar's support evolved over the years. And of course, while supportive of the program, Mr. Oberstar also advocated reforms. As with any political issue, we agreed with him on some issues and disagreed on others.
With respect to your claim that the program should not be, "competing for infrastructure dollars," I reckon that’s a straw man argument. Even if EAS is funded at the 200 million and change, we estimate as necessary for continued service to current EAS points, that hardly counts as competition for scarce resources. Even if one expands the debate beyond actual subsidy rates, and include capital expenditures, when an airport falls below the 10,000 revenue passengers threshold, its eligible for just 150K in grants for capital improvements, compared with the 1 million airports above the threshold receive. Truly, Bill, a drop in the bucket. But a very important one. Dollar for dollar, EAS gets more bang for its proverbial buck than many other public subsidy programs in place in this nation.
Aside from these arguments in favor of the program, however, as well as dozens of others I could make, there is another factor to consider, and I think it is one of ethics. Does a promise count for nothing anymore? Back in the halcyon days of deregulation (I say "we" quite liberally, as I was in kindergarten learning the alphabet at the time) we reassured communities objecting by promising them this: until we figure out how to do it economically, we will subsidize your air service. You will never be without air service because we deregulated.
Is it okay to renege on this promise just because thirty-odd years have passed without a better solution?
The one who is out of her mind is Faye! Abuse and pork through the Essential Air Service Program are the norm! I live in Pittsburgh and we have the useless Latrobe and Johnstown Airports nearby that are a testament to the pork power of the now deceased Jack Murtha. People in these towns can drive to Pittsburgh and the tax payer has no business paying airlines to serve these airports!
I used to work in DoT and knew many of the people responsible for the Essential Air Service Program. They were in effect Socialists who believe air service is a utility to be regulated like Gas or Electricity (which are now being deregulated in many States, probably to the great dislike of my former colleagues at DoT.)
As a nation, we voted this month to get rid of pork, waste and government over-reach like the Essential Air Services Program. Our country is broke and can not afford such outrageous pork anymore!
Ms. Black,
I suggest that you drop your last argument about a 'promise' from Congress. Many people would consider a promise that Congress managed to keep for thirty years as remarkable.
Since you were only in kindergarten, you probably did not know that as part of deregulation Congress 'promised' Labor Protective Provisions' also. Never happened!
The world has changed a lot in the last thirty years. The EAS does need a complete review. I went you your website and was astonished to see a proposal of a subsidy cap of $300. per passenger! Maybe in Alaska!
I live in the east and don't think there is as much need for EAS here. I do think that there are many places in the west where is necessary.
To the maximum extend practicable, air service should be limited to where it is profitable on its own. Where it is not viable, the places where subsidies are given should be widely spaced.
In the days prior to deregulation, many of the small markets were served by aircraft with anywhere from 20 to 30 seats. Surely, that was inefficient then, yet more communities had air service then than now - without subsidy. The airplanes flying then have been replaced by more efficient aircraft, and the carriers that operate them fly under contract. Why are they claiming they cannot make money in those communities? And how many air travelers will now be left behind because they are unwilling to travel two hours to the nearest airport?
China is opening more commercial service airports, not fewer. European lowfare air carriers are operating to airports that were not viewed as large enough markets for air service by conventional measures. Allegiant is finding passengers in Minot, ND, which is the classic EAS market. Suggesting we cannot support as many air service airports in this country as we had three decades ago is just another way of saying the US aviation industry is past its prime.
GSB,
I don't think Allegiant in Minot, ND is a good example. I am not sure, but I think they are only providing service to Las Vegas and only one or two flights a WEEK! In many markets, Allegiant operates more like a charter service in that their customers are mostly vacation travelers. In general they don't meet the needs of business travelers.
IMHO, the US aviation system is past its prime, at least in terms of growth in small markets. Fuels costs for small aircraft are expensive and it is hard to make a profit in thin markets. The industry is very mature.
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