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?