Originally Posted by
BoeingBoy
As far as vital to the economy goes, is it necessary for about every small city (and some large towns) to have air service? Is it vital to the economy that 3-4 carriers compete for passengers at places like CHS or BOI - each trying to eke out a profit?
This is a matter of degree. Short answer, no, it is absolutely not vital for every small town to have ITS OWN air service. At the risk of alienating those who live there, Pueblo, CO is a great example. They continue to maintain scheduled (EAS subsidized) service to DEN. Which virtually nobody uses. COS is about an hour up the road...a shorter drive than it is between DEN and the western suburbs, especially during rush hour. I think it is very difficult to argue that PUB is highly dependent on that service.
On the other hand - reliable, convenient air service access is a tremendous economic development tool. Many companies include air service access as an important part of the decisionmaking process when making facility location decisions. If it is inconvenient to get between headquarters and the plant, they may go somewhere else instead of to your community.
Having three or four carriers is not required...but having access provided through a hub is important (if WN served CHS, it could not provide anywhere near as much overall convenient access as DL via ATL or even US via CLT.)
The conundrum is that 1) too many seats chasing too little revenue is bad for carriers because they can't charge enough to make a profit, yet 2) this is a major component of keeping fares low. It's enough to make you bang your head against a wall!
Originally Posted by
BoeingBoy
I can't see re-regulation happening in my lifetime if ever. Besides, how would you regulate? Set fares? Based on who's costs - the highest cost carrier or the lowest? Would it be mandated which carriers served ORD, Washington, NYC? And kick anyone else out? Regulation worked reasonably well for the industry when you only had what are now legacy carriers, but it was the ultimate barrier to entry - the CAB decided who flew where and when.
I'm in full agreement. I can't see reregulation ever happening. I don't know exactly what the answer is to the industry's woes, but I'm pretty sure that reregulation is not it.
Originally Posted by
BoeingBoy
From the consumer perspective, deregulation led to an overall decrease in fares. According to a GAO study conducted in 1995, average yield for small cities decreased 37% in constant dollars. For medium cities, the decrease was 47%, and for large cities it was 41%. There was an accompanying increase in service - less short haul non-stop but greater connecting service to more cities - especially at smaller cities. The same GAO report cited FAY, which had non-stop service to 9 cities in the SE in 1979 but to only 2 in 1995. Yet one stop connecting service was available to about twice as many cities, particularly cities in the west. This was primarily due to emergence of hubs - under the CAB most service was point to point so the hubs opened up a whole new world of one stop service through the hubs for smaller markets.
Absolutely. This goes back to my point about the value of the hub-and-spoke system, even if it is technically less efficient than a well run point to point network.
Originally Posted by
BoeingBoy
Parker is right about one thing - the industry has too many carriers for all to be consistently profitable. But I'm not sure the answer is re-regulation as much as it is to reduce the number through consolidation. And if that consolidation leads to one or more failing, so be it.
Agree 100%.
Jim - check your PM.