Airports that generate $27.2 billion in economic output and support nearly 275,000 jobs are at increasing risk of not only losing air service but of failing financially owing to the changes in U.S. air transportation and increasing pressure from airlines to provide concessions to either continue current service or provide new service, according to a report issued this week by the Community Air Service Coalition (CASC). The airport study was done by East Tennessee State University (RAN, April 3, p.4) The impact of deregulation of major industries such as airlines and communications are continuing to erode basic services. Rural areas are not only losing their air service but also bus and rail service. In addition, these areas are also most at risk for either failing to get or losing internet service and even phone service as costs to serve them, just like airline service, exceed the revenues. Perhaps the greatest hope for these communities is the emerging market for per seat, on-demand air taxi services such as DayJet. Speaking recently Eclipse President Vern Raburn promised Very Light Jets will add a new layer of air transportation to underserved communities getting small communities back on the economic development train.

"It used to be that if a market exists, someone will serve it," said Jon Lane Smith, director of the Bureau of Business and Economic Research at East Tennessee State University, who conducted the study. "That is not so today, and we are losing a great deal of service. The question is; what are we really losing with that service? The bottom line is there is no hue and cry over this loss of service."

Non-hub commercial airports, numbering 243 in the U.S. with enplanements between 10,001 and 0.05 percent of total U.S. passenger boardings, earn $7 billion annually, however, as a group they have been unable to generate operating revenues sufficient to cover operating expenses in almost every year since 2001.

The report is just one of a number of reports recounting how the changes in airline service have impacted small communities. Recently, BACK Aviation Solutions noted that nonstop routes served by turboprops have dropped by 58 percent since 1996 and departures have fallen 69 percent. (RAN, April 3, p.1)

Nicole Reider, a BACK Analyst, noted routes dropped from 1,347 to 565 between the second quarter of 1996 and the second quarter of 2006, resulting in a loss of billions of dollars in economic activity at these points.

Reider also indicated that more turboprop markets will be dropped even if they are financially viable as fleets are reassigned. "Many communities have already lost all scheduled service and many more are vulnerable to this same fate." Thirty-five airports with at least five weekly flights in January 2001 had completely dropped off the scheduled route map as of January 2006. Over half of U.S. airports depend on only one or two destinations to connect to the national air transportation system and nearly 100 airports nationwide have connections to only a single destination.

Markets under 300 statute miles have dropped by more than 20 percent, Reider said. While the economics of the RJs may no longer work in today's economic environment for regionals, their larger counterparts are changing the landscape by allowing low-cost carriers to go into smaller and smaller markets, further threatening the viability of the regional markets.

"When there is an alternative airport with a low-cost carrier, there is no motivation to stay at the small airport," said Reider

Smith is equally concerned. "We've had a decade of erosion, and as the industry changed so has the business model at the airport. Some smaller markets have foregone landing fees. Even so, as the commercial air service goes down, so do the parking revenues and the passenger facilities charges, as well as the income from concessions and rentals."

Airports, he noted, have always run on a business model that treats them as a municipal service. That may have to change in the face of the new economic reality at non-hub airports. As airlines make decisions on where to invest their aircraft, it becomes a downward spiral. They move their equipment away from the markets that don't cover the relatively high fixed costs of that equipment.

Further exacerbating this is the diminished funding from the Airport Improvement Program. The budget proposal for fiscal year 2007 is a $600 billion reduction in AIP funding. Smaller non-hub airports in particular, have come to depend upon funding from AIP.

These markets will also have to change the way they do business. "A market that enjoyed service from United [UAUA] and USAir [LCC], for instance, is a pretty good market," said Smith. "The city that goes to airlines with all the charts of O&D passengers and tries to get air service is often confronted by an airline saying, 'That's all well and good, but how much are you going to pay us to serve your market?' One city offered $250,000, which they thought was a lot, but it was not enough. For most cities, offering even that is not a possibility. State transportation agencies are also telling them they will have to find another way to fund airport operations since tax dollars are already committed."

The purpose of the study is to try to evaluate the markets and what they bring and find a business model for them, Smith said. Questions posed include: What is the state and federal responsibility in preserving air service given the tremendous economic impact of these non-hub airports? What is the appropriate amount to be funded by the taxpayer? Where do these non-hub airports fit into the total transportation network and the economic structure of the country?

Smith indicated that if one were only to look at the access to the national air transportation system or the convenience of passengers, they could conclude that perhaps the loss of these markets is the way that it should be in a deregulated world. "But this is about much more than convenience," Smith said. "The aviation system is complex, making this about jobs and local economies and the viability of some of these points to sustain their local economies. It is about what that loss will mean to the air transportation system and the country."