Originally Posted by
mherdeg
OK I read the underlying rules a little more carefully and I'm not sure this characterization is exactly right.
Per
https://www.transportation.gov/polic...al-air-service , carriers are paid on a "per flight completed" basis -- in principle the DOT pays the same subsidy amount for OAK-MCE flight as long as the flight operated, no matter whether the flight went out booked 1/8 or 8/8.
*However*, there is a $200-per-passenger subsidy cap which applies to communities close to a large or medium hub airport -- so if VEL or MCE are within 210 miles of the nearest large or medium hub, then the DOT will not pay more than $200 in subsidies per pax.
So I don't see how EAS carriers are incentivized to carry extra pax *unless* the subsidies they are getting are so high that they're hitting the $200 per pax cap and need more pax to avoid maxing out the subsidy payment.
The $200 per pax cap is very much at play. VEL is less than 210 miles from SLC, therefore the $200 cap per pax applies. Let's look at VEL numbers.
Boutique Air operates 2,446 flights a year to/from VEL (24 weekly round trips multiplied by 2 directions multiplied by 52 weeks multiplied by a 98% completion factor), using a 9-pax King Air 350, to get a maximum subsidy of $3,324,848. To reach that subsidy they have to board a minimum of 16,625 ($3,324,848/$200) pax to/from VEL. So they need to fill an average of 6.8 (16,625/2,446) seats of that 9-seat airplane on every single flight. And that is measured each week. Any week they don't average 6.8 pax per flight they lose subsidy. So there is a very strong incentive to fill seats, and the $49 and $69 fares are very much a part of it. $49+$69 is $118 for SLC-VEL-DEN which is quite competitive with other airlines, especially when you consider the free checked baggage. Without the connecting pax they may not reach that average of 6.8.
My ATL-MSL-BNA flight was a good example. Without the connecting pax, they would have gotten 2 pax who were truly MSL pax. With the connecting pax, they got 14.