Rural flight subsidies

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Commercial air transport gives carriers freedom to serve any cities and routes they wished, so air carriers will only, other things being equal, provide routes where they are profitable, which gets back to the fact that the subsidies are necessary to convince the airlines to provide services and offset the impacts of the commercial air transport. Under this background, government provides rural flight subsidies to help flights and communities with relatively lower traffic levels maintain a minimum level of air transport service and connect them through carrier hubs to the national network, so they would not lose service entirely. [1] In U.S, it is the Federal Aviation Administration (FAA) that allocated a $199 million dollar combination of mandatory and discretionary funding for small and geographically isolated locales throughout the United States during fiscal years 2012–2015. [2] In China, the Civil Aviation Administration of China provided 152 small airports with around 1.9 billion dollar in 2016 to eliminate the numerous gaps in both accessibility and quality of Western airplane transportation.[3] [4]In the context of Europe Union transport law, Public Service Obligation (PSO) is arranged in which a governing body or other authority offers subsidies to low-density routes for a specified period of time. This is done in cases where there is not enough revenue for routes to be profitable in a free market, but where there is a socially desirable advantage in this transport being available [5].

CONCEPT


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Goals


Conceptual Example

Small rural and remote communities with low traffic volume would be abandoned by carriers due to commercial air transportation which allowed the airlines to serve any routes they desired. While that kind of air transportation stimulated competition between carriers on popular routes connecting large cities, it would likely lead to a reduced or complete elimination of services for smaller communities. In this case, rural flight subsidy was structured to provide air transport service to communities that do not have local markets (i.e. Passenger demand) that can independently support at least one commercial air carrier. Rural flight subsidy guaranteed that any community that had received commercial passenger service before commercial air transportation would continue to maintain service.In U.S., each day, about 3,000 passengers enjoy mostly empty, heavily subsidized flights, financed by rural flight subsidy that requires the government to guarantee commercial air service to scores of small communities that can't support it themselves.[6]

Specific Example

In 2015, Boutique Air has been awarded the Essential Air Service (EAS) contract for Muscle Shoals, Alabama following SeaPort Airlines' termination of flights in late October. Boutique Air provided 24 round trip flights a week. Two flights a day will go from Muscle Shoals to Hartsfield-Jackson Atlanta International Airport (ATL) and two flights a day will go to Nashville International Airport (BNA). By having the Atlanta connection passengers can connect to over 1200 flights per day to anywhere in the world. Businessman said that this was great news for the business traveler who can leave MSL in the morning and return later that evening. For the leisure traveler Nashville was a destination market that serves over 50 markets with 390 flights a day with both Southwest and Jet Blue Airlines as low cost carriers. [7] Boutique Air was already located in the Nashville International Airport and was servicing Greenville, Mississippi with two flights a day before 2015.In 2016, the Shoals’ new commercial airline, its third in 31/2 years, boarded 440 passengers in its first full month of operation. San Francisco-based Boutique Air began commuter air service Feb. 23 to Nashville International Airport and Hartsfield-Jackson Atlanta International Airport. The airline boarded 45 assengers from Feb. 23-29, which worked pretty good. [8]

Tradeoffs

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Tradeoffs of implementing this policy may include:

  1. May result in a waste of fuel and cause a less than welcoming environment when the aircraft only carrying a few passengers
  2. Will lead to inefficiency of airplane uasge because there will only be several flights every week
  3. Distort the incentives of rural flight carrier to attract passengers by themselves.
  4. May illogically increase the number of air passengers when other modes (e.g.land or marine travel) may be more cost-effective and environmentally friendly
  5. May divert air passengers from profitable airports, increasing overall passenger costs
  6. Expensive to maintain because the total amount of the subsidy is increasing year by year
Compatibility Assessment

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If answered yes, the following questions indicate superior conditions under which the policy is more likely to be appropriate:

  1. If subsidies were eliminated, would it drastically reduce opportunities for smaller, more rural communities in the United States to access the national air transport system?
  2. There is no redundancy in airport market coverage with larger, geographically proximal airports?
  3. Would it be possible to prioritize subsidies by evaluating community eligibility and then assessing the potential impacts of inclusion/exclusion on community access to the air transport system?
  4. Are there enough properly-sized, economically viable aircraft to serve smaller communities?
  5. If given the subsidy, do these airlines have profitability-focused management strategies to run?
  6. Are supporting infrastructures appropriate to operate air transportation?
  7. Are there a significant number of areas in the jurisdiction that are geographically underserved by air travel?
  8. If new airline routes were introduced, would a significant number of passengers in underserved areas utilize it?
  9. Is sufficient funding available to provide the necessary amount of subsidy in order to attract air carriers to provide service to the rural areas?
Design

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The following questions and considerations are offered for determining how to implement this policy:

  1. What carriers (e.g., demostic carriers only), if not all, will be eligible to receive rural flight subsidies?
    1. Because the purpose of this policy is to connect rural counties to national air network, the subsidy should be allocated to demostic carriers only.
  2. What criteria will a route be required to meet in order to qualify a carrier for subsidies?
    1. It should be unconvinient for other travel modes(e.g. auto or marine) to come.
    2. Withnin certain distance there should be no larger, geographically proximal airports with any redundancy in airport market coverage
  3. How will the amount of subsidy be calculated for carriers based on different route?
    1. If calculated by travel distance, carriers will lose initiative to attract passengers by themselves.So maybe calculating by passenger is appropriate.
    2. The ratio of cost over revenue should be taken into account.
  4. How often will subsidized carriers operate these route weekly?
  5. How to prevent subsidizing flights which is easier to access by auto?
    1. The distance from subsidized counties to airport of destinations should be stipulated.
  6. How to make sure the subsidy divided correctly and impartially?
  7. How to waive the subsidy timely when certain flight no longer meet the requirement to get subsidy?
    1. The qualification to receive subsidy should be checked every few years.


ADOPTION


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PolicyGraphics
Adopters
  • Notable entities who have implemented or adopted this policy include:
    • Country of United States of America Approximately 60 communities in Alaska and 115 communities in the lower 48 contiguous states in U.S.[9]
    • Country of China Western cities in China, such as Xizang, Xinjiang.
    • International Organization of European Union PSOs currently in operation in Europe are routes from Dublin to Kerry and Donegal, routes between the Greek Mainland and the Greek Islands, routes from Italian mainland to Sardinia and Elba, routes between the French mainland and Corsica, certain domestic routes within Sweden and Finland, and routes to the Scottish Highlands and Islands.[10]


STAKEHOLDERS


Supporters

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Opponents

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  • Government Agencies - Environmental Protection. Assumption: Low ride rate and redundancy results in resources waste. Flights typically go out less than half full, and many airlines that get the subsidies find they still can’t break even.
  • Constituent Groups - Automobile Clubs and Owners. Assumption: Some of the time saved by flying rather than driving to a reasonably close airport will get eaten up by waiting for a connection.[11]
  • Electeds - National Executives. Assumption: National Executives want to eliminate rural flight subsidy right away because they want to show they’re at all serious about cutting government waste.
  • Labor Unions - Airport Workers. Assumption: Because the service is so unreliable, the spinoff business benefits of having an airport with commercial service probably don’t actually accrue to towns that get the subsidies, which makes airport workers struggle for living.


REFERENCES


Research

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Resources

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Footnotes
  1. https://www.transportation.gov/policy/aviation-policy/small-community-rural-air-service/essential-air-service
  2. http://www.sciencedirect.com/science/article/pii/S0967070X13001376
  3. http://www.doc88.com/p-0713220612232.html
  4. http://news.163.com/15/1218/23/BB5F14FK00014AED.html
  5. https://en.wikipedia.org/wiki/Public_service_obligation
  6. http://usatoday30.usatoday.com/news/washington/2007-12-30-cheap-flights_N.htm
  7. http://www.ch-aviation.com/portal/news/42484-boutique-air-secures-muscle-shoals-al-eas-contract
  8. http://www.flytheshoals.com/about-us/news-and-updates.php
  9. https://www.transportation.gov/policy/aviation-policy/small-community-rural-air-service/essential-air-service
  10. https://en.wikipedia.org/wiki/Public_service_obligation
  11.  https://www.heartland.org/news-opinion/news/eas-program-a-complete-taxpayer-waste


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