The Global Economy Flies Away

We live in an interconnected world, dependent on links -- roads, telephones, fiber optic, airlines -- to keep us in touch with the global economy. If one of those links breaks, we are that much less connected to the world, that much further distant from the economy that determines our daily reality.

This is what may happen to 19 small cities in the Midwest, where Delta Airlines says it plans to change or shrink its service or end it altogether. In some of these cities, Delta is the only airline that flies in or out. If it leaves and if no other airline takes it place, these cities will become remote islands in the global sea, as cut off from the mainland as if someone dug up their highways or severed their phone lines.

All the affected cities are served by 34-seater Saab turbojets, which Delta is retiring. Eight may get upgraded Delta service by 50-seater jets, although this probably will depend on government subsidies. Delta says it hopes five others will be served by 19-seater planes operated by Great Lakes Airlines. The other six may lose service altogether. 

Residents of these cities, or people who want to do business there, can always drive to the nearest bigger airport, maybe 100 miles or so away. But this is a hassle, and a deterrent, and in time people who like being connected to the broader world will move away or do business somewhere else.

There are many reasons why small cities in the Midwest are shrinking, why rural areas are emptying, and why big metro areas like Chicago and the Twin Cities are growing. But one reason is that these big metro areas have big airports, so they are on the global highway: as a whole, the nation's airlines are concentrating service in 29 major hubs that account for 70 percent of all passenger traffic.

For airlines, like Delta, leaving smaller cities makes economic sense. For the smaller cities, it's just one more nail in their coffins.

The 19 Midwestern cities affected include five in Minnesota -- Thief River Falls, Bemidji, International Falls, Brainerd and Hibbing: four in Iowa -- Waterloo, Sioux City, Fort Dodge and Mason City; five in Michigan -- Alpena, Escanaba, Pellston, Sault Ste. Marie and Iron Mountain; three in South Dakota -- Watertown, Pierre and Aberdeen; and two in North Dakota -- Devils Lakes and Jamestown. See Delta for the complete list.

The five that could lose service altogether are Thief River Falls, Devils Lakes, Watertown, Alpena and Jamestown. These are generally the airports with the lowest load factors, from only 12 percent to Thief River Falls to 42 percent to Jamestown.

Delta says that, because it gets government subsidies to fly to these towns, it is obligated to keep serving them if no other airline moves in, at least until these subsidies expire in 2013. Given Delta's losses in these markets, it's hard to imagine the airline continuing service there indefinitely. 

Great Lakes Airlines, based in Wyoming, will be asked to take over service to Mason City, Pierre, Iron Mountain, International Falls, Fort Dodge and Brainerd. Great Lakes is said to be talking with the U.S. Department of Transportation now. 

Delta says it plans to continue serving the other eight cities -- Waterloo, Sault Ste. Marie, Bemidji, Pellston, Aberdeen, Escanaba, Sioux City and Hibbing -- by larger 50-seater jets, an effective upgrade to these towns. But it says this depends on extension of the government subsidies to these airports: at the moment, most are unsubsidized.   

(Delta also announced that it is ending service to four cities in the South. A fifth city, Butte, Montana, will be converted to 50-seaters, it said.) 

Many of the affected towns already are remote places that depend on air travel to stay in touch with the world. Three of the five affected Michigan towns are in the Upper Peninsula and the other two are in the northern part of the state below the UP. Of the five Minnesota towns, all but Brainerd are in the north. International Falls is right on the Canadian border. Thief River Falls has only 8,000 people, but it and its neighboring towns are the center of the global snowmobile industry. One city on the list, Pierre, is a state capital.

The subsidies, which affect 12 of the 19 cities, come under the Essential Air Service program (EAS), which the government uses to keep airlines flying to small markets. The program will expire in 2013 unless Congress extends it -- no sure bet in these budget-cutting times.

The Midwestern cities not getting EAS subsidies are Pierre, Sioux City, Brainerd, Aberdeen, Pellston, Bemidji, Sault St. Marie and Waterloo. These are the busier airports -- Waterloo has a 61 percent load factor. But a Delta spokesperson, Kristin Baur, said Delta's average load factor is 83 percent, far higher than even Waterloo's capacity. Because of this, Baur said, subsidies are crucial to Delta's ability to maintaining service to these cities.

Early press reports, including a story in the New York Times, made it appear that all 19 Midwestern cities would lose service altogether. The reAs far as I can see, only one article, by the Waterloo Courier's lreporter John Molseed, got it right.The reality, as described above, is more nuanced.

Even so, the Delta moves reflect dwindling air links to many Midwestern cities. Waterloo, for instance, may keep its service. But before Delta merged with Northwest, Waterloo got five flights per day. Then this shrunk to four, then to the present three flights. If Delta gets EAS subsidies for Waterloo, it will fly to that city twice a day with two 50-seaters, instead of three 34-seater flights. 

Other airlines may bid for the business. United Airlines used to fly to Waterloo: it may seek EAS subsidies to do it again. From Waterloo's point of view, this would give the city an air link to Chicago's O'Hare International Airport, potentially a more lucrative destination than Minneapolis, where Delta flies.   

Delta's announcement on the cutbacks cited "the new reality of mounting cost pressures faced by our industry." It said it is losing $14 million per year on the flights into these cities. On average, it said, only 52 percent of the seats on these flights are filled.

As it said, this is the new reality. But that doesn't ease the pain for the communities involved. They join a long list of towns and cities affected by new travel patterns -- towns that became remote when the Interstate highways were built, towns that lost access when the major railways dropped passenger trains, towns already stranded by the loss of airlines and airports.

If an airport like O'Hare is crucial to Chicago's status as a global city, the tiny airports in Alpena and Thief River Falls are their towns' lifelines to the world. 

Comments

[Aaron M. Renn]

Air travel is one of the most heavily concentrated things in big cities. Indianapolis metro is about 25% of the state's population, but IND accounts for about 70% of all air passengers in the state. That's the highest market share for any aspect of Indianapolis within the state that I've ever seen. High speed rail would be similar if not higher in many places, hence we can see that it's prospects aren't bright. (PS: It strikes me as infinitely more likely that the government will subsidize air travel to these small locations than that it will make the infrastructure investments needed to make its large metros competitive).

Another aspect of this same trend you might find of interest. After Borders closed in downtown Indianapolis, the Financial Times ceased print distribution in the central business district. At least I couldn't find one no matter where I looked last time I was there, and the stores told me they no longer carried it. (I'm told you can still buy it in suburban locations). I realize digital means this is less of a loss, but still it's troubling. Here's a downtown of a region of 1.7 million people, the largest city in its state and something like #32 in America, now cut off from part of the global conversation. Meanwhile in Chicago I can buy the FT print edition even at the small convenience store just down the street from my place in West Lakeview.

[Chris Barnett]

I'm not sure direct air service is essential to the success of a global enterprise or to the residents of small cities. Consider that Cummins has managed to grow and control its global diesel empire from Columbus, Indiana...a small city without commercial air service. It's 58 miles or so from there to Indianapolis International.

It is also 58 miles from Thief River Falls to GFK in Grand Forks, ND ("North Dakota's busiest commercial airport" per its website) from which there are five daily flights on Delta.

In this light, I'd have to assert that Delta pulling out of Thief River Falls might be both a rational choice for the airline and not that big a loss for the town.