Flying the subsidized skies
I was born and raised in Michigan’s Upper Peninsula. I still refer to the UP as “home” and love returning to God’s country whenever my schedule and money permit. The UP is one of the most beautiful parts of our country (even when the forecast high temperatures are about 10 degrees Fahrenheit!).
Whenever I travel home, I’m both thankful and amazed to fly right into my hometown of Kingsford, MI. I’m thankful, of course, because there are no long drives after the plane lands. I’m amazed because commercial air service into Kingsford, MI doesn’t make economic sense.
The population of Kingsford and its sister city Iron Mountain is about 13,000. It’s the land of Green Bay Packers fans; deer hunting; and outdoor beauty. There are a lot of trees and lakes around Kingsford, but there isn’t enough commerce to justify commercial air service. Air service in Kingsford shouldn’t exist. And, in the absence of government meddling, it wouldn’t exist.
But Kingsford, like 100 small US cities around the country, is classified as an “Essential Air Service” provider. EAS funds distribute about $200 million per year to small airports to assure people in rural areas access to commercial service; in the absence of federal subsidies, many carriers admit they wouldn’t provide service in the EAS market, and
In its most recent agreement, which lasted from 2010-2012, Kingsford received a subsidy of $2 million to fly people to Detroit. The airport averaged annual traffic around 20,000 people over the two-year period, so taxpayers paid about $100 per passenger to support flying from nearby.
The federal subsidy is just part of the cost of keeping the airport open. Since Kingsford is providing commercial service, the Transportation Security Administration must be involved in screening about 30 passengers per day. Whenever I’ve traveled out of Kingsford, I have observed no less than four TSA officers and one sheriff’s department employee, which means there is one TSA screener per every seven passengers! Besides TSA, the local airport relies on local taxes to support maintenance and basic operation.
When taken as a whole, the Essential Air Service program is not an investment in community, but, rather, a transfer of resources. Proponents of the program sell the economic benefits of local air service, but the alleged benefits are exaggerated and pretty tough to find when one surveys the list of EAS airports.
The fact EAS programs are costing us taxpayers may not even be the worst of it: By distorting the market for air travel and shifting people to local airports, the program makes it harder for major airports to be profitable. Lower profitability at the major airports means fewer options for travelers and, when air travel demand slumps, more subsidies for the large airports too.
Take the Northwest Alabama Regional Airport up in Muscle Shoals, Alabama, for example. It provides four flights to Atlanta per day, and the airport is propped up by about $1.5 million dollars of EAS money. If the EAS program were to be eliminated at Muscle Shoals, there would be fewer local flights over to Atlanta; in fact, in the absence of EAS subsidies, the airport would probably be shut down to commercial air service.
Many local fliers would shift to Memphis, Birmingham, or Huntsville, the last of which is just 70 miles away. An increase in demand for Birmingham or Huntsville could mean more flights per day and more options for many more travelers.
Without EAS in the way, there would be more flight options for travelers and schedules would reflect a more rational, fair approach to commercial air travel. Some people would be disappointed with the end of the subsidies and many would be on the losing end of the deal, but the net effect for the economy and taxpayers is positive.
The fact some travelers and some communities will be made worse off by ending EAS should not stand in the way of clear economic thinking: The Essential Air Service program should be scrapped from the federal budget because the program’s benefits are less than the costs to taxpayers. Despite the program’s name, transferring money from some to others to make travel easier is not a sound economic policy and should never be thought of as an essential activity of any federal government.
Scott Beaulier is Executive Director of the Manuel H. Johnson Center for Political Economy at Troy University.