Thank you, Delta Air Lines.
Rarely are those words uttered about our quasi-hometown carrier, and they certainly didn't spring to the lips of many Minnesotans after Delta said it will likely discontinue air service to 24 small cities, including up to five in Minnesota.
But instead of criticizing Delta for abandoning small towns, we should thank the Atlanta-based carrier for highlighting the wasteful federal subsidies that propped up much of that air service in the first place.
I don't want to give the impression that Delta is philosophically opposed to subsidies. Quite the contrary; it's willing to continue serving some of the small cities if the government coughs up even higher subsidy payments. Federal lawmakers should resist the urge to do so and recognize the Delta news as the final clearance they need to kill the costly Essential Air Service (EAS) program.
As it stands, taxpayers are now paying Delta to lose money. The company said it's losing about $14 million a year serving the 24 cities on its hit list, despite receiving about $20 million in federal subsidies annually to serve 16 of those cities.
In Thief River Falls, the subsidy was worth about $492 for each of the 2,500 passengers arriving or departing on a Delta flight. Delta still lost money, however, because, on average, only four of the 34 seats on each flight were occupied.
Congress created the EAS program in the late 1970s. The airline industry had just been deregulated, and Washington wanted to keep airlines flying to some small towns and midsize cities that might otherwise fall off their route maps.
What began as a 10-year program with a total budget of $7 million has become a $200 million entitlement program for about 150 mostly small and rural communities. The size of the subsidy has quadrupled in just the last decade. One carrier, Wyoming-based Great Lakes Aviation, gets almost $60 million a year, or half its revenue, from EAS subsidies.
Politicians and chamber of commerce types say the payments are a lifeline to the outside world, and they warn of all sorts of economic hardship if scheduled passenger air service were to disappear. But other Minnesota communities, including Mankato, Fergus Falls and Worthington, have lost scheduled air service over the past two decades without shriveling up and blowing away.
For Fairmont, the wounds from losing its EAS subsidy a decade ago proved more psychic than economic. In fact, the city recently added a 10-stall hangar to its airport to accommodate the growing number of corporate and private jets that continue to use the facility.
"The reality is we lost scheduled passenger service because not enough people were using it in the first place," said City Administrator Jim Zarling. "The economic impact was minimal."
Underwriting basic air service may be necessary for some parts of Alaska, or even in some remote areas of the Lower 48, where getting to another airport may truly constitute an undue hardship. But many EAS cities are within a reasonable driving distance of larger airports that don't receive federal price supports. Thief River Falls is the same distance from Grand Forks, N.D., as Monticello is from Minneapolis-St. Paul International Airport.
Given the light passenger volumes in many EAS cities, it's likely that many consumers are choosing to drive to bigger, more distant airports, where they benefit from more choices and lower prices. A quick check on Delta's website found these prices for a roundtrip ticket to Boston, departing next week: $516 for travel originating from the Twin Cities; $871 for travel beginning in Thief River Falls, and up to $1,100 for those boarding in Hibbing.
The EAS subsidies are scheduled to expire in 2013 unless extended by Congress. Earlier this year, Sen. John McCain, R-Ariz., introduced a measure to kill EAS altogether. It lost, but now the Senate and House are considering measures that would scale back the service. Surprisingly, one of the co-sponsors of the House measure is GOP Rep. Chip Cravaack, whose district includes two EAS airport cities, Hibbing and International Falls.
But even those measures, which would knock only 10 or so cities out of the EAS program, don't go far enough. If we're serious about reducing the deficit, then there's a phrase to describe the folly of pouring taxpayer dollars into a money-losing business: Plain stupid.
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