Not-so-friendly skies: Airline industry faces immense problems, but there are solutions -- By Neil McCabe, The Washington Examiner

It has been 35 years since President Carter signed the 1978 Airline Deregulation Act, but the measure’s promise of lower cost, more convenient commercial air travel and a wider range of choices for consumers have in many respects gone unmet.

Before 1978, commercial travel had the glamor of a cruise ship, with passengers dressing up and swanky cocktail lounges in the first-class cabins of larger aircraft. But it was also a private reserve for corporate fliers and the well-to-do. Not anymore.

As more people have taken to air travel, the practice of “capacity discipline,” or “right-gauging,” has resulted in airlines scheduling fewer flights, and those flights that are on the schedule are typically packed to the gills.
Right-gauging flights leads to right-gauging routes, as airlines cut direct flights from medium-sized airports and feed more flights into central hub airports.

There are now 29 hub airports that account for at least 1 percent of the country’s total air traffic volume. Airports outside that elite circle of 29 are finding it increasingly tough to remain economically viable.

For the nation’s smaller airports, a federal subsidy program helps keep them open, even if there is little demand. In Colorado, for example, three airports that feed passengers to Denver International Airport — San Luis Valley Regional Airport, Pueblo Memorial Airport and Cortez Municipal Airport — receive a combined $6 million annually to keep the runway lights lit. Nebraska has seven airports receiving Essential Air Service payments. Alaska has more than 40.

The airports receiving EAS payments are small and used only sparingly, so cutting the program would not impact a huge number of people.

But the real problem of isolation is not with the 150 hobbyist airports that secured a place at the feeder. Rather, it is the many larger airports that generate less than 1 percent of the nation’s total annual commercial air traffic, but more than enough to make them ineligible for EAS subsides. These airports are trapped in the middle between the hubs and the hobbyists.

As Michael Wittman and William Swelbar note in a study published by MIT earlier this year, the biggest factor in determining where airlines locate flights is always profitability: “At the end of the day, the airlines' individual route profitability will continue to decide which airports are served and which are not. Financial incentives may attract service for several months, but only economically viable routes will survive.”

In other words, it’s not enough to offer tax incentives and related cost-reduction incentives to airlines. The nonhub airports — all of which are publicly owned — must somehow persuade more travelers to use them, while lowering costs and boosting revenues for the airlines providing flights.

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