Tuesday, July 19, 2011

Delta Cuts Flights, Can Small Cities Survive?

Delta Cuts Flights, Can Small Cities Survive?: "

Last week, Delta announced what was really no surprise. Much of its small city service is unprofitable and it’s only getting worse. It wants to make changes. This isn’t a new trend; small cities have been losing service for years. But is there a way to save it? I think so.

Delta announced awhile ago that it would retire its contracted fleet of Saab turboprop aircraft that ply the skies of the Midwest and South along with some 50 seat jets. As a result, 24 small cities will see flying “adjusted” by Delta. What does that mean? For many, it means Delta will walk away. For others, the airline will partner with a small airline to re-bid for the service. For some, Delta will ask for higher subsidies.

Most of these cities are legacy Northwest cities. (Click to see the full list) In fact, of the 24, only Muscle Shoals in Alabama and Butte in Montana serve legacy Delta hubs. A whopping 15 of these cities are serviced from the Minneapolis hub, so let’s look at those in more detail. The lines below show how far those towns are from the nearest airports with half-decent levels of service. (And in some of these cases, “half-decent” is about right.) Green means that it’s less than 100 miles away, yellow is between 100 and 150, and red is over 150.

View Delta Small City Disruption in a larger map

Most of these airports have only kept service this long because of Essential Air Service program funding from the federal government. I’ve been plenty critical of this program in the past for being a waste of funds, but not all of it is a complete waste. Some of these cities truly are isolated. Take a look at International Falls, Minnesota for example. Yes, there is an airport with regional service right across the border in Fort Frances, Canada, but that’s not a great option for domestic US travel. Duluth is more than 150 miles away, and that in itself is a relatively small airport. International Falls is an isolated place.

But when government subsidies still don’t make it worthwhile for airlines, there’s clearly a huge problem. Nate Vallier wrote a column on fixing the Essential Air Service program over at AviationQueen.com. (Nate, by the way, is one of our concierges and will likely be doing some writing here soon.) I like what Nate says, and we have similar ideas.

The reality is that the deck is stacked against small cities. Low cost airlines serve large cities and have slowly moved into medium-sized cities. AirTran has led the way in that regard, and that means that its acquisition by Southwest should create more growth in that area. But other than infrequent service to leisure destinations from airlines like Allegiant, small cities are left out. Without enough service to sustain low cost airline service, they have to just hope they have any service at all. But then it goes into a spiral. Even if it’s a two hour drive to a decent-sized airport, the fares are now so much lower thanks to low cost airlines, so people flee the small cities. That leaves small cities will even less service until it goes away completely, as we’re seeing in some of these markets.

So what’s the solution? Here are my thoughts.

  1. Consolidate the subsidized route network
    For every International Falls with nothing for hundreds of miles, there’s a Tupelo, Mississippi which is less than 100 miles away from a hub in Memphis. People there would be better off driving. On top of that, as Nate mentioned, there are multiple small airports competing for service in a small area. In Iowa, three airports on Delta’s cut list lie within 100 miles of each other – Mason City, Waterloo, and Fort Dodge. Waterloo isn’t subsidized while the other two are. Maybe if the other two lost subsidies, more people would drive to Waterloo and the service there would be stronger. Let’s slice and dice to try to get a map of cities that could actually work with support.

  2. Shrink to profitability
    I know, I know. You can’t shrink to profitability, right? But I’m talking about shrinking the size of the airplane. The 9-seater is perfect for a lot of these markets since traffic is so low. These airplanes can be much more efficient to operate than larger ones (the Saab has 34 mostly empty seats), and that’s going to go a long way toward providing sustainable service.

  3. Make it a public service
    Many of the small city operators do their own thing and have limited partnerships with other airlines, if they have any at all. That makes it very difficult to provide a decent level of service into the national airspace system and that means people will just drive to an airport where it’s easier. If government money is going into service to a city, then the airlines that provide the service should offer good connections, through fares, and interline baggage capability with the airlines in the origin city. So if Sandpiper Air picks up service from International Falls to Minneapolis, then it should have to put together a partnership with Delta for easy connection in Minneapolis. There is a cost involved in that, but it’s worth it to make the service useful for more people. The government can help in that area if needed.

Now, I don’t know that these are the perfect solutions, but they make a lot more sense than what’s happening today. Money is being shoveled into flights that carry few passengers, and the airlines serving these cities simply can’t justify it anymore. Something needs to change before airlines simply give up on small cities entirely.


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