Airline De-regulation Today

This is a GREAT article and in it they even cite my hometown airport of Grand Rapids, MI at the end as a perfect example. This really gives you some insight on the price of oil and cost of running an airline. De-regulation at the end of the 1980's saw some routes to tin towns federally subsidized, now even those EAS (Essential Air Service) routes may be cut due to fuel prices. I for one can't fault the airlines one bit, even though it is sad for these communities.

Joe Sharkey
-New York Times

"24 Towns may lose air service - Delta Air Lines says it's losing $14 million a year serving the small airports.

Rural America, already struggling to recover from the recession and the flight of its young people, is about to take another blow: the loss of its airline service.

That was underscored last week when Delta Air Lines announced that it “can no longer afford” to continue service at 24 small airports. The carrier says it is losing a total of $14 million a year on flights from places like Thief River Falls, a city of 8,600 in northwest Minnesota that fills only 12 percent of the seats, or Pierre, the capital of South Dakota, where Delta’s two daily flights are on average less than half full.

Nationally, all major airlines have been reducing and sometimes eliminating flights altogether in small cities, as the industry concentrates much of its service in 29 major hubs, which now account for 70 percent of all passenger traffic, according to the Federal Aviation Administration.

Delta’s announcement was especially acute because the airline operates in most of the small airports that receive a total of almost $200 million in federal subsidies to maintain air service under the Essential Air Service program. The subsidies are scheduled to expire in 2013 unless revived by Congress. Delta acquired many of those small-city markets in the Midwest when it merged with Northwest Airlines.

Airlines say that simple economics are driving them out of small-town America. With fuel prices high, carriers have been reducing domestic routes and seating capacity to focus on the flights that bring in the most revenue per plane — typically those in larger cities, especially major hubs. At the same time, airlines are removing less fuel-efficient aircraft from their fleets, including the 50-seat regional jets that have been the backbone of air service in small- and midsize markets.

“We just don’t have airplanes that can serve small communities economically anymore,” said Michael Boyd, the president of the air-service consulting firm Boyd Group International. “And unless somebody wants to pay a whole lot of money to carry a few people out of the airport at Thief River Falls, it just ain’t going to happen anymore for a lot of those places.”

One of those places, it appears, is Muscle Shoals, a town of about 13,000 along the Tennessee River in northwest Alabama. About $1.7 million a year in federal subsidies maintains two Delta flights a day from Northwest Alabama Regional Airport in Muscle Shoals, one of the 24 airports Delta wants to stop serving unless it can receive larger subsidies. Those flights are operated under the Delta name on Saab A340 turboprops flown by Mesaba Airlines, a Delta subcontractor.

Barry Auchly, of the Shoals Chamber of Commerce, said that the airport has enough market vitality to justify keeping commercial service. However, he said, passengers have fallen off since Delta decided this summer to redirect its two daily departures to Memphis, rather than to Delta’s global hub in Atlanta where the flights went last year.

Delta says its flights from the airport are an average of 35.7 percent full, which compares with the national average on Delta’s domestic flights of 81.9 percent in June.

“Last year, the first year with the Atlanta service, we exceeded 8,500 passengers and were well on our way to 10,000,” said Mr. Auchly. That growth proved, he said, that the local airport could eventually operate without federal air-service subsidies. He said Delta told him the destinations were switched because Memphis, though far less in demand, had more efficient turboprop service facilities than Atlanta.

“We want to be a self-sustaining airport,” Mr. Auchly said. “We think we have the demand; we just need to be able to depend on consistent service.”

Delta would like to continue flying from some of the 24 airports it designated last Friday as “underperforming” — but only if the federal subsidies were increased to cover the additional costs of serving them with regional jets. Meanwhile, Delta said it plans to abandon other airports where load factors were deemed too low, and assist those airports in finding replacement carriers.

Replacing a 34-seat turboprop plane with a 50-seat regional jet would seem to be counterintuitive in markets where the problem is too few passengers. Kristin Baur, a Delta spokeswoman, acknowledged that 50-seat regional jets, besides having 16 more seats, also are less fuel-efficient.

However, she said, regional jets are more popular with passengers, and can increase overall bookings in some markets where people will drive to more distant airports rather than fly a turboprop from the local airport.

Officials at some of the 24 small airports slated to lose Delta service said the airline has not flatly told them when it is stopping the flights, though at subsidized airports Delta said it would withdraw when the current contracts expired.

In some markets, depending on load factors, Delta would like to either receive new Essential Air Service contracts or get more money for the ones it currently has. Slightly more than a third of the airports Delta identified on its list would be in that group, it said.

Pierre, a scrappy city of 14,000 that sits smack in the rural center of South Dakota, got the news that it might lose Delta service just as weary residents were hauling away the last soggy sandbags as they recovered from major flooding of the Missouri River in May.

After years of receiving federal air-service subsidies, the airport now has four unsubsidized departures a day — two by the Delta subcontractor Mesaba and two by the regional carrier Great Lakes Airlines.

The city was recently so optimistic about its prospects that it began construction on a $12 million passenger terminal at Pierre Regional Airport.

“We’re rural America,” said Laurie Gill, the mayor. “It’s hard for me to understand a business decision to eliminate commercial air service based on the growth that we’ve seen here.”

Delta flew 4,840 of the total 6,833 passengers who boarded flights at Pierre this year through June, and Delta’s planes left with 47.4 percent of the seats filled on average. If Delta leaves and no other airline comes in, most travelers from the South Dakota capital would have to drive to the closest bigger airport in Rapid City, 140 miles away. Time-constrained corporate and government travelers dislike that idea, Ms. Gill said.

Welcome to the tough new world of commercial air travel, said Mr. Boyd, who thinks the Essential Air Service program serves a vital need for those communities that are far from an alternate airport with better service.

“It’s not like people are going to get cut off from the world. You may be able to have your local air service, but maybe it’s an hour’s drive away,” he said.

For example, Muskegon, in western Michigan, has a few daily flights operated by United Airlines, subsidized with $600,000 a year from the Essential Air Service program. Meanwhile, the Gerald R. Ford International Airport in Grand Rapids, 40 miles away, had two million passengers last year, and is served by eight airlines.

The savings from the short drive can be substantial. On Monday, for example, the lowest round-trip fare on a United flight to Kennedy Airport in New York from Muskegon, connecting through Chicago, was listed at $1,149. Drive to Grand Rapids, though, and you could find a flight to Kennedy for as little as $600 on various airlines.

'Muskegon has great air service,” Mr. Boyd said. “It’s called Grand Rapids." "

Link:
http://www.msnbc.msn.com/id/43814049/ns/travel-business_travel/