Cranky Flier wants to learn lessons from the handful of government grants to subsidize air service that haven’t been total failures (but hardly represent the best possible uses of funds in a world of tradeoffs, hunger and homelessness and whatnot). His post is titled, When Airports Should Subsidize Airlines.
The short answer, though, is that they shouldn’t. And Cranky almost understands that:
As a general rule, if you as an airport think there’s some insanely large untapped market that nobody knows about, you’re probably wrong. The airlines do this for a living, and if there’s a missed opportunity, they’re likely to find it. In nearly all cases, it’s best to just work on lowering your operating costs as much as possible to try to attract service for the long run. Otherwise, you’ll just end up paying for service for a couple years and then end up with nothing.
But even a stopped clock is right twice a day, and Cranky want to learn how to make noon and midnight happen more often in a 24 hour period.
Brett points to three supposed successes — getting Delta to keep flying from Portland to Tokyo during the flight’s off-season (what’s the real public benefit in that?), guaranteeing a few months’ of minimum revenue to encourage Horizon to start serving Santa Rosa, and Southwest’s service to Panama City, Florida where major development is underway (and this one is hardly a fair argument for the government’s program, since it’s actually subsidized by the developer and not by the government… and what’s more, Southwest’s CEO says he doesn’t think the experience is replicable.).
It’s absolutely true that there are occasional grants that will lead to continuing air service. It’s very difficult to pick ex ante which those are going to be. If you make 100 grants, and 5 turn out well, and you don’t know up front which those five will be, you shouldn’t make any in the first place. Your portfolio will be operating at a huge loss.
And those that are obvious enough up front that they might turn out successful are projects that an airline might liekly undertake without the subsidy.. but might as well wait on to see whether they can obtain the subsidy first before starting service. The better investments that the government might make are ones they’re unlikely to be able to influence one way or the other, and the worse ones will pretty clearly turn out badly.
And on the whole, don’t forget what these programs usually wind up paying for.
It’s not really reasonable to say, “great, let’s keep having the program but make only the good investments.” That’s simply not how it works, or could ever work.