Regional airports in the Ninth District face an uncertain future. Virtually
every community wants an airport nearby to bring in business and tourism
and to provide quicker access to the world at large. But while some regional
airports show signs of healthy growth in passenger boardings and cargo
shipmentsSioux Falls, S.D., Bozeman and Helena, Mont., for examplemany
face downward spirals of declining passenger demand and diminishing airline
The healthiest regional airports tend to be those serving cities that
provide substantial markets for airlines, communities that have a large,
affluent population and that are far enough from other cities with still
larger airports (for example, Minneapolis or Salt Lake City) that potential
passengers won't be tempted to drive elsewhere to get a cheaper fare.
These airports are likely to do well in the future because airlines see
them as natural profit centers.
But lacking this lucrative local demand, other regional airports face
stiff headwinds. Rapid City, S.D., for example, lost daily air service
to Sioux Falls in October when Northwest Airlink decided to cut its losses:
Its 34-seat planes rarely carried more than three passengers on flights
between the cities. Even the Sioux Falls Argus Leader acknowledged
defeat. "State and local officials can't expect those flights to continue
if there aren't enough passengers to make the trips worthwhile," said
a recent editorial.
In Escanaba, Mich., despite healthy boarding trends over the previous
two years, the airport lost one of its three daily Northwest Airlines
flights to Minneapolis in June 2000. Four months later, Northwest discontinued
the second daily flight. With just one Minneapolis flight left, local
leaders convened a meeting, hoping to plead their case to the airline.
Northwest representatives didn't show, and Rich Severson, the local airport
manager, could only tell the assembled Escanaba officials, "I'm concerned
with what could be in the future."
In the Ninth Districtas elsewhere in the countrymany communities
striving to enhance their economic vitality are burdened with airports
that can barely stay aloft. Without a modern airport with frequent service
to locations around the region and country, such communities fear they'll
become regional backwaters, forgotten fly-overs. Can anything prevent
the seemingly inevitable shrinking of such airports? More generally, what
forces will shape the future of regional airports, including those that
are doing well? Three factors, in particular, are likely to play a critical
role: technological innovation, federal government policies and local
community initiatives. All three may help build local demand for airline
service, but they push primarily from the supply side: better planes,
better airports and better service.
Arguably the most important force influencing regional airport trends
over the next decade is the rise of the regional jet. "RJs" are small
jetliners with between 30 and 100 seatsbasically stretch business
jets with larger enginesfirst brought to market in 1993 by Bombardier,
the Canadian firm that also manufactures rapid transit vehicles. A Brazilian
company, Embraer, soon entered the competition with a 50-seat regional
jet, followed by Fairchild-Dornier, an American-Belgian alliance.
Relative to turboprops, RJs are quieter, faster and more comfortable,
have longer flight ranges, and passengers tend to perceive them as safer.
And on flights longer than about 380 miles, they're also more economical.
Both national and regional airlines have been quick to embrace regional
jets, using them to replace or supplement turboprops and larger jets on
feeder routes from spoke airports to hubs. With shorter runway needs than
conventional jets, RJs are better able to fly into reliever airports,
reducing congestion at nearby hubs.
What truly excites airline analysts, though, is the capacity of RJs
to provide point-to-point, direct service between medium-size citiesbypassing
the hub system entirely. "The RJ has the potential to take virtually any
city in the United States and give it direct jet service to virtually
any other city," said Bruce Rocholl, director of market analysis for Fairchild
Aerospace. "The regional jet could theoretically completely replace our
current air transportation system." So instead of flying from Rapid City
to Minneapolis, laying over for a couple of hours, and then hoping to
catch a flight from Minneapolis to Marquette, Mich., a regional jet could
economically take you straight from one small city to the other.
Less partial commentators agree that the impact of RJs will be substantial.
"These aircraft ... are expected to open up new opportunities for growth
in nontraditional regional/commuter markets," said the Federal Aviation
Administration's March 2000 Aerospace Forecast, "[and will] lead to further
route rationalization by the larger commercial air carriers." The FAA
expects the number of RJs in U.S. regional/commuter service, which more
than tripled from 100 in 1997 to 343 in 1999, to top 1,500 by 2011.
In the Ninth District, the impact of regional jets is also likely to
be significant, though the small average city size here compared to the
rest of the nation suggests it will be served by small RJs, not 90-seaters.
"The advent of the 30- to 50-seat RJs will serve the Fargos and Duluths,"
said Steven Martin of the General Accounting Office, who expects to complete
the GAO's study of regional jets in February 2001. "They'll be getting
rid of turboprops." Local airport officials also seem impressed by RJ
"In a nutshell, I think RJs are the answer for the small community,"
said Larry Cooper, airport manager in Huron, S.D. "RJs pick up the speed-flights
aren't 2 1/2 hours anymore, they're 1 1/2 hours. And jets have an image
of safety. Plus they have more amenities, they're more comfortable, and
more consumer friendly."
Gary Ness, director of the North Dakota Aeronautics Commission doesn't
see RJs affecting North Dakota's four smaller regional airports, but does
anticipate they'll have a "big influence" in Bismarck, Minot, Fargo and
Grand Forks. "Instead of three 747s a day, you might have six RJs, and
it creates a synergetic effect," he explained. "Give them more choices
and you see people traveling more. And that is the thing I really look
forward to in the future; it's going to increase frequency and therefore
increase passenger load. The business community in particular really likes
it because they can get in and out much quicker."
Regardless of their potential, they do face obstacles. Scope clauses
in pilot collective bargaining agreements limit the number of smaller
jets that major airlines and their regional partners can fly. Pilots are
paid less for flying smaller planes, so to the extent that they replace
737s, RJs cut into their paycheck. The airlines say scope clauses unfairly
restrict their use of regional jets and so limit their ability to serve
small communities. Pilots argue that pure economics, not pilot scope clauses,
will determine the use of RJs. Eventually, no doubt, this scope trial
will be resolved, though not without a period of "painful negotiation,"
in the words of Fairchild's Rocholl.
More problematic may be the crowded skies. If the regional jet market
does take off as anticipated, it would expand the current U.S. domestic
jet fleet by 44 percent. With shorter, more frequent flights than conventional
jets, they would add a disproportionate number of takeoffs and landings
at the nation's airports. Overall, according to one analysis, the increase
in air traffic resulting from the growing use of RJs would virtually double
the current 21,000 daily airline takeoffs and require major upgrades in
the air traffic control system.
And there's the rub. Airline deregulation mandated in 1978 resulted in
the creation of a hub-and-spoke system, which has contributed to the dramatic
increase in air traffic over the past two decades. The air traffic control
system, however, and the airport regulations it works within, have not
undergone a parallel revolution; the technology is old, rules are little
altered and the FAA has been slow to change. Some argue that further deregulation
is needed not only to address national hub overcrowding, but to strengthen
weak regional airports as well.
For example, FAA regulations stipulate that airports charge fees on
the basis of aircraft weight, so fees are high for large passenger jets
and low for small turboprops. Economists Steven Morrison at Northeastern
University and Clifford Winston at the Brookings Institution argue that
"congestion pricing" would allocate airport capacity far more efficiently:
Airplanes would be charged according to the cost of the delay that each
aircraft imposes on others, highest at peak periods, lowest in the middle
of the night. Such a change might also tend to direct traffic toward less-congested
airports and less well-served communities.
Other analysts argue for privatization of air traffic control in order
to move the system away from ground-based navigation, which channels airplanes
into narrow flight airways, toward satellite-based systems that would
allow "free flight"pilots selecting their own flight paths. That
change would greatly expand air space, enhance air traffic flow and permit
regional jets more efficient point-to-point flight paths. Other technological
upgrades to the national air traffic control system"a vacuum tube
relic in a microchip world," according to John Robson, former chairman
of the Civil Aeronautics Boardwould increase airport productivity
and permit less costly service to smaller cities.
But of course, one of the most significant federal government influences
on regional airports is money: annual appropriations for airport maintenance
and improvements. Without them, airports shrivel. With them, runways can
be lengthened, navigation systems upgraded, hangars built. In April 2000,
Congress passed a huge appropriations bill, AIR-21, which authorizes $40
billion for aviation programs for 2001 through 2003. In addition to increasing
the FAA's facilities and equipment budget by 50 percent to enable upgrades
to the air traffic control system, the bill substantially raises entitlement
grants to large and cargo airports. But AIR-21 also includes a number
of provisions intended to support smaller airports:
- An increase in minimum funding for nonhub airports from $500,000
to $1 million per year;
- New discretionary set-asides for reliever airports;
- An incentive program to help airlines buy regional jets if they agree
to use them to serve small airports;
- A program to help small, underserved airports promote their air service;
- For the first time, funds for small general aviation airports.
The three-year federal allocations guaranteed by AIR-21 provide a level
of funding predictability that regional airports should find reassuring
as they contemplate capital improvements. Other AIR-21 budget lines should
also help build local airport capacity.
Another federally funded air service program relevant to regional airports
in the Ninth District is the Essential Air Service. EAS was created as
part of the Airline Deregulation Act of 1978 to ensure continued air service
to small communities that airlines might otherwise abandon. The program
will subsidize air service to a community if it's located more than 70
miles from the nearest medium- or large-hub airport and if the per passenger
subsidy is $200 or less.
But while EAS has undoubtedly served as a lifeline for some areas, the
cost of the program has swelled, from $3.4 million in 1979 to $46.3 million
in 1999 (in 1999 dollars). Its recent history has been particularly expensive.
According to the GAO, the number of communities served by EAS declined
from 95 to 89 between 1995 and 1999, and the number of passengers dropped
from 617,000 to 590,000, but government subsidies increased 47 percent
during the same period when increases in air carrier costs (due to FAA-mandated
safety compliance and carrier decisions to upgrade their aging airliners)
weren't offset by a rise in passenger revenues.
In the Ninth District, EAS served seven communities in Montana in 1999,
two each in North and South Dakota, one in Minnesota and one in the Upper
Peninsula. But that doesn't include cities like Worthington, Minn., which
received EAS service in 1995 but not in 1999 because its average subsidy
per passenger exceeded the $200 limit. Nor does it count towns like Mankato,
Minn., and Mitchell, S.D., which required subsidized service in 1999 but
didn't receive it, because their carrier, Mesa Air, stopped service and
no other carrier was willing to fill the gap.
Basically, the skies are clouded for EASsmall air carriers don't
find it worth their while to go after EAS contracts when subsidies don't
cover their rising costsbut realpolitik suggests it is likely to
continue, at a growing cost to taxpayers. "A lot of guys would like out,"
noted one GAO analyst. "But my sense is that Congress doesn't want to
see small communities without air service. [They] may have to relax the
$200 limit and subsidies are going to continue to go up."
A third element in the mix that will determine the future of regional
airports is local initiative. How much does any given community want its
own airport, and what steps will it take to ensure its airport thrives?
Ninth District cities and towns provide a spectrum of answers.
After suffering for years from significant passenger "leakage" as consumers
drove to the Twin Cities for cheaper flights and better connections, Rochester,
Minn., drew together a delegation of community leaders for a visit to
TWA's St. Louis headquarters in July. The trip paid off: In January 2001,
TWA's regional jet service, Chautauqua Airlines, will begin flying three
times a day between Rochester and St. Louis, a move that will bring Rochester
better access to the southeastern United States, including Jacksonville,
Fla., home to a major Mayo Clinic facility.
The strategy wouldn't work for just any town. TWA's director of regional
alliances, Mark Spiegel, explained that the visit came only after TWA
had conducted a market analysis that identified top potential markets
for expanded regional jet service. "We're getting at least 15 regional
jets ... between now and August 2001, they're 50-seaters, and we're looking
to deploy those in a way that is going to maximize our return," said Spiegel.
After crunching the numbers, TWA met with officials from potential markets
to judge the fit and determine what the communities themselves would bring
to the table. "From a numbers standpoint, [Rochester] made sense on paper,"
said Spiegel. "And when you added in the element of the personalities
[who visited from Rochester], and the personality of the communitythe
Mayo Clinic carrying quite a bit of weight thereit not only made
sense, but it felt right."
Other cities and towns in the Ninth District have conducted their own
market analyses and used them to convince carriers that they can and will
support expanded service. Kalispell, Mont., for example, hired a consultant
to prepare an analysis that last year persuaded Northwest to expand its
service to Kalispell from a few months a year to year-round. In Billings,
Mont., a market analysis by the same consulting firm-Sixel, Boggs &
Associates of Eugene, Ore.concluded that airport service levels
were good, but fares were too high. The study proposed the formation of
a coalition of airports that would use Billings as a regional hub for
Seattle-based Horizon Airlines, with connections to cities in Wyoming,
South Dakota and North Dakota. Billings airport director Bruce Putnam
hopes to generate support for the regional hub concept from local business
and civic groups before approaching Horizon with it.
Mark Sixel, the aviation consultant who conducted both Montana studies,
is convinced that local communities can and must take such initiatives,
if only because airlines tend to be focused more on international traffic
rights and code-sharing with KLM, say, than on trends in small-town markets.
"It's just like any type of economic development that a region will do,"
stated Sixel. "If you're trying to attract a new company, or another restaurant
chain or department store, you need to get out and proactively market
Eugene, Ore., for example, launched an elaborate campaign to bring in
America West Airlines. Local businesses pre-purchased America West tickets
and the airport committed itself to fund a full-time marketing position
and a two-year advertising campaign dedicated to selling America West.
To clinch the TWA deal, Rochester's economic development association pledged
$50,000 toward a local TWA ad campaign.
While such incentives may convince an airline to choose one market over
another, they won't significantly alter the basic "lift" problem. If a
market is too small, it won't appear on an airline's radar screen. "Communities
like International Falls or Bemidji [Minn.] or Iron Mountain [Mich.],
those communities will never see a regional jet," said Sixel. "They're
just too small. [Carriers] are just not going to put those valuable assets
in there." They'll be served by turboprops and will likely remain marginal
markets with uncertain service.
A more comprehensive solution has also been advanced to save weakened
regional airports. Building on a proposal floated a few years ago by South
Dakota Sen. Tom Daschle, political leaders and managers of small regional
airports in the West and Midwest have developed an "interline/add-on"
plan that would require all national carriers to accept passengers flown
to hubs from small markets by any commuter or small regional airline and
to be paid a regulated add-on fare based on segment mileage between cities.
According to its proponents, this initiativewhich would also revise
Essential Air Service subsidieswould loosen the hold major airlines
currently have over their respective regional carriers and the geographic
territories they serve. It would, they say, provide incentives to serve
small communities, increase the independence of regional carriers and
possibly improve load factors for national airlines.
In an era of airline deregulation, the plan seems quixotic, and it may
never see the light of day, but its existenceand the fact that the
Western Governors' Association discussed it at its December 2000 meetingspeaks
to the level of frustration felt by small towns and cities. As local airport
managers and their communities are buffeted by new technologies, shifting
federal policies and what they perceive as strong-arm tactics by national
airlines, that frustration is not likely to diminish.
"The status quo isn't working for small communities," Sixel said. "They're
losing service and they don't see deregulation as being beneficial for
them. There's a lot of anger out there."