Dumbest Cities to Receive Federal Airline Service Subsidies

Last Updated Mar 2, 2010 6:45 AM EST

Yesterday I talked about some of the Small Community Air Service Development Program (SCASDP) grant winners that I thought were most deserving. Today, I'm going to talk about the other end of the scale. Both Tunica, Mississippi and Rockford, Illinois received grants, and I just can't figure out why.

Let's start down South. The gambling town of Tunica was awarded $500,000 to bring scheduled air service to town. You'd think that a gambling center would already have air service, right? Well they do, through a nearby airport you might have heard of. It's called Memphis.

Tunica is a mere 40 miles from the amply-served Memphis Airport, so why the heck are taxpayers handing over $500,000 to them? The plan is to fund a four-times weekly flight from Tunica to Atlanta that is expected to lose a bunch of money in its first year. They think this flight will cost $4.6 million to run for a year with AirTran. They also expect to lose a whopping $1.38 million on that operation in the first year, though it should magically break even toward the end of that time.

Why the heck are we putting public funds here? It's just an effort to funnel gamblers into town, and the gaming industry is funding most of the shortfall in year one. There's no reason for the government to get involved, especially since Memphis has plenty of service just 40 miles away.

Now let's head north to a town just northwest of Chicago. Rockford will also get $500,000, and I'm amazed. You have to give these guys credit for persistence when it comes to air service development, that's for sure. But I still don't see it working, and I really don't see why federal funds are being used. Their proposal is to get money to fund low cost carrier service from Rockford to LA, Minneapolis, Dallas, Atlanta, Washington, and/or New York. Piece of cake, huh?

The presentation is full of all sorts of bluster. Rockford depicts itself as being far from Chicago, but the airport is called... Chicago Rockford! They say that Rockford's load factors are climbing, so everything is great now that they have routes to seven cities nonstop. What they fail to mention is that those routes are on leisure carriers that traditionally run full airplanes. Oh, and they only run a couple days a week, for the most part.

Four of those routes are on Allegiant (ALGT) with sub-daily service to sun destinations. Those, I imagine, do well for bringing the locals to sunny hot spots for vacations. The other three are similiar - two on Direct Air to Punta Gorda and Myrtle Beach and one to Cancun with Apple Vacations. But now Rockford wants to bring low cost carriers in to fill business travel needs. Too bad that's not going to work.

Rockford already paid United (UAUA) to fly regional jets to Denver for that same purpose and that service flopped. The problem? There's just too much low fare competition with too much frequency at other area airports.Many Rockford's passengers can drive to either O'Hare or Milwaukee and find far greater frequency and much lower fares. That's not going to change, even if Rockford does get a couple flights to business destinations.

I have no problem with Rockford spending its own money to stimulate service, and they've done that. But now they're spending all of our money, as are all these grant winners. While some of these may end up creating sustainable service, I'm not convinced that the government needs to be involved in air service development when there are already some very good options in cities nearby.

Photo by BryanKemp / CC BY 2.0]
  • Brett Snyder

Comments

Market Data

Market News

Stock Watchlist