Airlines Flying High with Government Subsidies

  George Stigler wrote about groups, regulation and the use of the state. He determined that there are four types of public policies and uses of the state that industries seek. One type is that which deals with substitutes and complements. In his paper, Stigler mentions an example that “the airline industry actively supports the federal subsidies to airports,” and I have decided to do some research on what he is talking about.

   In 1978, the “Essential Air Service (EAS) program was put into place to guarantee that small communities that were served by certificated air carriers before airline deregulation maintain a minimal level of scheduled air service,” which involves subsidizing some flights and air carriers through its support of small airports. This program was supposed to last only a few years to give the airline industry a boost, but is still going strong in 2016. Some are calling for an end to in light of the current budget deficit but others like Rural Air Service Alliance Inc, a small lobby advocating for rural airports is hoping that it will stay in effect. Those that are fighting for the program's end, feel as though the government is paying for empty seats, citing several occasions where there has only been one or two passengers on an entire flight and focus some of their research on an airport in Alamosa, Colorado. The airport in Alamosa received 1.85 million dollars from the government in 2010 and in 2011 had a low load factor for flights of 29.1 to 53.85. The load factor  being "miles a passenger has been in a seat in proportion to the miles the seat was empty." The Rural Air Service Alliance Inc, coupled with support from Boutique Air, the airline who flies out of Alamosa, however is fighting back. With their help, the airport has continued to receive federal money and has seen its subsidy increase to 2.6 million, arguing that this money is necessary to stimulate and maintain economic growth in the area. Initially the Department of Transportation put a pause on this year's funds as they exceeded a cap of $200 per passenger but a week ago the hold on the funds was lifted and the airports received the money, as many local officials in Alamosa, including the state congressional delegation and governor voiced their support of the subsidy citing growth and touting Boutique Air's commendable record. The example in Alamosa shows how the airline industry is interested in supporting federal subsidies to airports because they receive the benefit as well, thus proving Stigler's third type of public policies sought by industries.