Planes to Nowhere

by on January 2, 2008 at 8:10 am in Economics | Permalink

Imagine an aviation system in which planes fly
two-thirds empty, fares are as low as $46 and the government pays up to
93% of the cost of a flight….that system exists in the USA – and quietly is expanding…

That is from USA Today talking about the millions spent on the "Essential Air Service" program.  Do you think that the program protects small rural communities?  Nah, try small community airlines. 

…as Congress has escalated subsidies through the years, the program has
increasingly paid for flights between major airports and places that
are neither rural nor isolated.  [For example,] in October, the DOT agreed to one of the
program’s largest subsidies ever – $2 million a year to Atlantic
Southeast Airlines. That pays 60% of ASA’s cost to fly two round-trips
a day between Macon, Ga., and Atlanta’s Hartsfield-Jackson
International Airport, 81 miles away. The airline projects that passengers will pay an
average of $78 for a one-way ticket – and that flights, typically on
planes with fewer than 70 seats, will run 83% empty.

Need I tell you that the program was supposed to be temporary?  Here’s some more data from USA Today.

Community Destination Annual subsidy Subsidy per passenger Average pass. per flight
El Dorado, Ark. Dallas/Fort Worth $923,456 $250 3.1
Devils Lake, N.D. Minneapolis $1,329,858 $203 5.7
Worland, Wyo. Denver $797,844 $187 4.2
Bradford, Pa. Pittsburgh $1,217,414 $174 3.6
Jamestown, N.Y. Pittsburgh $1,217,414 $135 4.7
Salina, Kan. Kansas City $487,004 $131 2.1

Sources: Department of Transportation, USA TODAY analysis of DOT and airline data

1 Alex F January 2, 2008 at 9:08 am

I wonder how much carbon dioxide the program puts into the air.

2 Vincent Clement January 2, 2008 at 9:50 am

Meanwhile I keep reading and hearing how America’s infrastructure is falling apart. Investing in the maintenance of bridges to prevent their collapse would seem a slightly better use of public funds than subsidizing short-haul flights. But that’s just me.

3 MostlyAPragmatist January 2, 2008 at 9:56 am

Some more background (via Wikipedia and the DOT website): The plan was created in 1978 and politically enabled passage of the Airline Deregulation Act of 1978. It was supposed to expire in 1988, but it’s been reauthorized since then. A lot of the subsidized routes are in Alaska.

It sounds like more pork that should be trimmed, but I wonder what effect cutting it would have on Alaska.

4 Chris Meisenzahl January 2, 2008 at 9:58 am

Depressing, but not surprising.

5 Vincent Clement January 2, 2008 at 10:25 am

Ted: Government shouldn’t be subsidizing private enterprise. Period. Besides, the last I looked, there are plenty of roads in and out of Bradford so exactly how is it disconnected from the transportation network?

6 jon January 2, 2008 at 10:36 am

On a related note, this is not neccessarily due to some govt. regulation but a quirk of airport regulations apparently. Who knows how many other airports do this practice also:

BA flying empty ‘ghost planes’ across Atlantic.

7 John Dewey January 2, 2008 at 10:42 am

Devils Lake, ND, is also served by federally subsidized AMTRAK. Competing with subsidized airline and rail transit, it is surprising that Rimrock Bus Service can even serve Devil’s Lake five days a week. but it somehow does.

8 John Dewey January 2, 2008 at 10:59 am

Vincent Clement: “But it doesn’t seem to stop them from voting for people that support rural subsidies.”

How do you know how the people I refer to actually vote? You are making a very general statement for which you can offer no proof.

Even if conservatives vote for an office-holder who supports subsidies, one cannot conclude that conservative voter approves of the office-holder’s stand on every issue. I have written many letters to politicians expressing my displeasure about their positions. But when election came around, I still voted for most of them because the alternative candidates were much less likely to represent my total views.

9 John Dewey January 2, 2008 at 11:28 am

“How would one get to Bradford, PA (or, as I was going, to Coudersport, PA, an hour away from Bradford) without a flight to Bradford?”

One simple way is to fly to Erie, PA, or Buffalo, NY, and then use ground transportation for the remaining 80 to 90 miles. Even those who cannot drive can get to Bradford. Greyhound provides bus service along I-86 between Erie, PA, and Salamanca, NY. I’m sure that either Reed’s Cab Service of Salamanca or Valley Taxi of Bradford would be willing to carry a non-driver the remaining 18 miles between the two towns.

My guess is that private bus lines would offer even better service to the Bradford, PA, area were the government not subsidizing the small airline routes.

10 John Dewey January 2, 2008 at 11:37 am

Eddie: “And flying a smaller plane may not be an option because you need the extra seats on Thanksgiving.”

I agree with most of your post, Eddie. But I want to clear up any misconception about airline practices in absence of subsidies. Few profit-seeking airlines, large or small, allocate aircraft based on demand for the few peak days of the year. Most schedules are based on optimizing profits over the full schedule period. Airlines recognize that demand will be much greater around certain holidays. For the most popular routes they often add frequencies. For the rest they use price to ration seats. In general, there are many more high-discount fares during late September or during February than around the Thanksgiving or Christmas holidays.

11 Vincent Clement January 2, 2008 at 12:15 pm

John Dewey: Where is your proof that “many rural residents” moved “there because they are sick to the point of disgust of the attitudes, behaviors, and governments of socialist urbanites”? I’ll ignore that “some” became “many”. Don’t accuse me of making a general statement when you are guilty of the same action.

12 John Dewey January 2, 2008 at 12:26 pm

Vincent Clement,

You have mangled my comment to meet your own purposes. I did not state that “many rural residents moved there because they are sick to the point of disgust of the attitudes, behaviors, and governments of socialist urbanites”. I said that “some” such rural residents – including many residents I know personally – stated they moved for that reason.

Your claim – I think – was that those such persons I know voted for politicians who support subsidies. Did I misundersrtand your assertion?

13 John Dewey January 2, 2008 at 12:38 pm

Josh,

I think we’ve discussed the public expenditure for streets and highways before. Here’s what I remember:

1. Both federal and state highways are, for the most part, paid for by the gasoline taxes collected from motorists – the users of those highways;

2. Toll roads are certainly paid for by toll road users;

3. Local access roads are usually – but not always – paid by property and sales tax assessments in the communities which receive the benefit of such roads;

4. Residential streets are usually paid by developers who pass on the costs of those streets to home buyers through housing prices;

5. Maintenance of streets and access roads are usually – but not always – paid for through tax assessments on the local population.

So, for the most part, those who benefit from highways, roads, and streets pay for their construction and maintenance.

On the other hand, federal subsidies of rural airline routes – and federal subsidies of Amtrak – benefit a few users but are paid for by all of us.

14 guest January 2, 2008 at 12:56 pm

how is this different from the government paying for roads (esp highways/toll roads which could be excludable)?

Roads and highways are natural monopolies, and making them excludable (converting existing roads to toll roads) might be too costly. By contrast airline services are a free market, so government provision is unnecessary.

15 A student of economics January 2, 2008 at 1:14 pm

John Dewey asserts: “certainly far less powerful than … subsidies for urban/blue state (and blue city)”

Perhaps you are not aware that red states and rural counties get vastly more spending from the Federal gov’t than they pay in taxes, while the reverse is true for the more productive blue states and cities. I don’t blame you for not knowing, since the media and politicians overwhelming stress anecdotes that suggest the opposite. This is an example of “availability bias”.

16 A student of economics January 2, 2008 at 1:24 pm

albatross says: “without these subsidies, we’d have all the small towns in the country draining out to the big cities.”

Is there an externality involved in this that calls for gov’t intervention? Is there any reason that we should seek to override the free choices of people to live where they want? Ironically, I also hear arguments that we should preserve the population in the cities with various subsidies.

17 John Kunze January 2, 2008 at 1:38 pm

Greyhound (www.greyhound.com) has 10 trips a day between Macon and Atlanta and charges $27.50 per person ($22.50 if non-refundable).

18 David Wright January 2, 2008 at 2:30 pm

Given the imbalances between rural and urban representation in Congress, some sort of imbalance in spending is inevitable. I do wish we could just do it on a cash basis and dispense with the market distortions. For example, every representative could get $100M cash to divide among his constituants, and in return all subsidies and earmarks would be eliminated.

19 spencer January 2, 2008 at 4:43 pm

But on the other hand, analysts estimate that over the now some 75 years of the US commercial airline industry that it has never made a profit. Sure some years are profitable, but the loss years have been much larger. I have never fact checked this claim, but the Wall Street sources seemed reliable. And this is despite the fact that the industry has had massive direct and indirect government help over the years.

The same transportation analysts claim that no industry has ever made money carrying passengers.

20 A student of economics January 2, 2008 at 5:52 pm

John Dewey, I’m glad I prompted you to update your facts. Perhaps, in time, you’ll also update your conclusions or even ideology.

Incidentally, it’s not so much the retirees or the massive farm bill, as the imbalance in income that creates the “Red State Welfare Queens” as the link you provide colorfully puts it. For example, here’s a key part of the linked article that you did NOT quote:

“Which brings us to the real culprit: high blue-state income taxes.
States with the highest incomes per capita — and they’re all solid blue — pay much higher federal taxes per capita. ”

Blue states are wealthier and more productive and thus, due to progressive income taxes, pay more taxes. Relative to their contributions, red state voters get proportionately more welfare, medicaid, farm subsidies, and pork projects, not to mention subsidized air travel. Even rail, which you brought up earlier, is much more subsidized (per capita) on rural routes.*

Perhaps blue state voters are willing to pay more even if red state voters benefit disproportionately, because, hey, we’re all Americans and, beyond that, all humans. Most of these hardworking, patriotic Americans apparently aren’t just out for themselves.

However, I’m sure blue state voters wouldn’t mind if red state beneficiaries, and their media mouthpieces, were less ignorant and erroneously indignant about the actual flow of benefits.

*This does beg the question of why blue states are so much wealthier and more innovative, and how much of this is transferable to red states. Certainly, that would be better for everyone than simply transferring cash. Perhaps that can be a topic for a future discussion.

21 John Dewey January 2, 2008 at 6:41 pm

M1EK: “John Dewey ignores the fact that when you drive on one of the streets not part of the federal or state highway system, you still pay the gas tax.”

I did ignore that fact because I believe it to be irrelevant. First, urban arterials are often state highways and thus funded by the state gasoline tax. For example, two long sections of Lamar Street in Austin are parts of State Highway Loop 275 and State Highway Loop 343. Much of Congress St within Austin is also State Highway Loop 275. For most of its length, Austin’s 1st Street is State Highway Loop 343. Other Austin streets I know about that are also highways include Koenig (SH 2222), Parmer Lane (SH 734), and Ed Bluestein Blvd (U.S. 183). I’m sure you know more.

IMO, suburban drivers burn as much gasoline per household on non-highway streets as do urban drivers. Rural drivers likely do so as well. Many rural drivers, such as my sister, my nephew, and my in-laws, drive across a mile or more of unimproved road several times daily before reaching a highway.

22 A student of economics January 2, 2008 at 7:26 pm

John Dewey:
“Isn’t the higher wealth of many blue state residents simply the much higher real estate values they have realized?”
No, incomes are higher too. In fact, the causality probably runs the other way: the higher real estate values reflect, in part, the higher net present value of living in places where higher incomes can be earned, e.g. Manhattan, Silicon Valley, Boston, LA, Seattle, etc.

“Please explain what you mean by more innovative.”

More patents per capita, more scientific publications, more high tech startups, more VC funding, more movies and creative arts, more books authored, more software designed, more art, more R&D labs, more people in “creative” professions, etc. Warning: I’ve seen stats on many of these indicators, while others are just my impression.

“How can you know it is the Democrats within blue states who are more productive and more innovative?”

I don’t. However, the state-wide political leanings and accompanying policies and/or attitudes seem to be correlated with higher productivity and innovation, among other good things.

23 J January 2, 2008 at 10:33 pm

“incomes are higher too”

Well, in some cases. So is income inequality, particularly in California.

“state-wide political leanings and accompanying policies and/or attitudes seem to be correlated with higher productivity and innovation, among other good things”

To continue about California, I’m skeptical about any statement of statewide political leaning – it’s actually pretty polarized, with the left usually a little more motivated at the polls. But I don’t think the I&R voting pattern (or, more correctly, lack thereof) supports a contention that CA voters lean left in general. You guys are all assuming a homogeneity in these places that simply doesn’t exist, and, this being an econ blog and all, ignoring effects at the margins.

Finally, for Stephen, that was an awesome troll! Keep up the good work.

As for the EAS program…it’ll be tough to kill it. I’ve never known a city official or businessman to turn down a subsidy, regardless of their politics. But it’s time to admit that a community that won’t support twice daily 100 seat air service is a community that won’t support scheduled air service.

24 a January 3, 2008 at 3:03 am

“Stephen Downes is completely full of shit,” Thanks for destroying all intelligent discussion.

25 Evan McElravy January 3, 2008 at 11:02 am

It is actually quite mad that the Bradford and Jamestown to Pittsburgh services still operate. (I’m from the area, by the way, and always use Erie or Buffalo.) When formerly PIT was a hub city for USAir, these puddle jumper flights (also from such regional metropoles as DuBois, PA and Franklin, PA) made a little sense, but there’s just nowhere to go onward from Pittsburgh anymore, and no one is going to fly from those places just to Pittsburgh when you can drive in not much more time. It used to be that these flights (all on 19 passenger aircraft) were quite full and more frequent, but no longer. (They also used be be quite cheap, but even with the subsidy, prices have skyrocketed in recent years; last I checked, it about doubled the price of your ticket to Express from one of these places and connect to wherever, versus just flying from PIT.)

As I remember the issue from a few years ago, the regional airlines did actually want to do away with service to these places, subsidies or no, but couldn’t swing it regulationwise. So I’d be blaming area politicians and bureacrats first, not private industry. Though I would remark there that the Bradford airport used officially to be the Bradford/Olean/Warren Regional Airport, but the chamber of commerce types in my town at least (Warren) found so little value in having their name attached to the airport (and thus in airline computer systems, etc.) relative to taxpayer expense, they pulled out or at least tried real hard to about 10 years back.

At any rate, Jamestown is an hour from Buffalo and 45 minutes from Erie, and lies right on the I-86 autobahn to nowhere, and Bradford lies just down the recently (lavishly) refurbished US-219 four-lane from same, so highway connections are quite adequate.

Transportation in inland NW PA is a very real problem for the economy, but there’s no evidence that the EAS does a rats ass to help.

26 Russell Nelson January 3, 2008 at 5:34 pm

Big Sky, our local EAS provider, is abandoning all its NorthEast routes as being unprofitable. In spite of, or I might say, because of the subsidies.

http://blog.russnelson.com/economics/subsidies-bad-for-you.html

27 M1EK January 4, 2008 at 5:47 pm

No, John, you’re absolutely wrong – most roadway spending is on major arterial roadways, and suburban areas disproportionately have such arterials as part of the state highway system in question. The amount of minor arterials, collector roadways, and residential streets is much more proportionate – i.e. they have roughly the same amount of such pavement as do urbanites – it’s the major arterial roadways which they have a disproportionate amount of, per capita, and such roadways are disproportionately likely to be gas-tax-funded, unlike the urbanites’.

The very design of most newish suburbs points to this. Everybody has residential streets and collectors, of course, but primarily in the suburbs do you find the residential uses strictly separated from everything else (and other subdivisions) via access to a major arterial in only one or two places, usually by a collector and occasionally by a minor arterial.

This is my bread and butter. Did you click through to any of those links and look at any of those maps?

28 400 January 12, 2008 at 4:25 am
29 Eric H March 12, 2008 at 9:29 am

I was recently reminded of Stephen Downes’ comments here, and I have to say that he seems to be confusing recent history for all of history (besides blurring Iowa and Iraq). Agricultural and rural subsidies have been in place since the 1790s, but grew most extensively in the period during which Democrats controlled Congress for ~40 years straight. He might be interested in seeing this piece on the opensecrets website. It details the history of sugar subsidies, a policy set which helps sugar, beet, and corn farmers. The main players were

Harold Cooley (D-N.C.), who served in Congress from 1934 to 1967 and was the chairman of the House Agriculture Committee, used to call for votes “at two o’clock in the morning” and adds: “Now, in those days . . . Cooley was, you might say, the collector of campaign contributions from the sugar industry and was the distributor of those campaign contributions. And that was a fairly common thing back then. Senator [Robert] Kerr [a Democrat from Oklahoma] did the same thing with the oil industry in the Senate, and that was the way the system worked. That was the way industry interests were looked after in those days. [The Watergate reforms] really brought an end to that kind of stewardship by various interests, when certain chairmen basically funneled their contributions, and then they’d go back and just collect the votes.”

Under chairmen like Cooley, Bob Poage (D-Texas), Tom Foley (D-Wash.), and Jamie Whitten (D-Miss.) (who, as chairman of the Appropriations Subcommittee on Agriculture, was often referred to as the “permanent secretary of agriculture”), the House Agriculture Committee jealously guarded the interests of farmers, ranchers, and agribusiness.

Whitten was also known for having written That We May Live, a pro-pesticide response to Rachel Carson.

Ag policy is bipartisan. Now that the Left is back in control of Congress, and now that one of their own is poised to win the presidency, I suppose we’ll hear a lot fewer of these sanctimonious calls for eliminating the electoral college. As for his other comment about equality of votes, though I can’t speak for right-wingers, I will point out that federalism was once a policy popular even among liberals before Herbert Croly undertook the task of redefining “liberal”.

30 rc March 17, 2009 at 6:20 am

Comments on this entry are closed.

Previous post:

Next post: