Subsidy in the Air

A friend (call him Zeke since I don’t know anyone named Zeke) called about Huntsville (AL) International Airport (HSV). I lived in Huntsville for almost 30 years, while Zeke still lives there. Zeke is upset, to put it mildly, that HSV is using some $3 million of public money to “bribe” AirTran Airways to provide service to/from HSV.

If, Zeke said, I really believe in the free market I would be as angry as he. Zeke has a point. I am a loud and dedicated believer in the free market —not just parts of it, like many so-called believers, but all of it. As such, I don’t support public funding (or bailouts) of businesses or industries. Free markets can’t work unless businesses are allowed to fail.

Here are the facts as provided by various online sources and by Ms. Barbie Peek, the enthusiastic missionary in charge of attracting new service to HSV, who sincerely believes she is serving the public in a big way.

HSV has had rising fares even as average fares have dropped nationwide. The DOT says HSV’s average fare is some 60 percent higher than the national average and indeed now has the highest average fare in the country.

That drives many air travelers to other cities; HSV measures this by a survey of cars with HSV-area tags parked in the Birmingham and Nashville airports. This definitely hurts the community financially. HSV received a $1 million Small Community Air Service grant from the Department of Transportation. That comes, as Zeke points out, directly from taxpayers at a time when our citizens can ill afford it. I don’t approve of such subsidies and would have voted against it if anybody had asked. But nobody asked, the subsidy does exist, and airports who take it fare better than those who do not.

As former GE CEO Jack Welch stated, you must deal with the world as it is, not as you wish it were or as it should be. I totally dislike the so-called Social Security system. But it is there. I was forced to pay for it over more than 50 years, and you can bet that I now take the benefits. The board of HSV took the grant and I would have voted in favor.

The city of Huntsville also provided $2 million to the cause. That’s a loan, and Peek hopes it will be paid back, just as HSV repaid a recent such loan from the city. She hopes that AirTran will quickly become profitable, the subsidy will thus fade away, and the community will get a bonus of $60 million in reduced airfares alone. Zeke and others laugh at the idea, but Peek has facts, figures, and predictions that tell the story in great detail and make the concept more believable. As King Agrippa said to Paul, “Almost thou persuadest me...”

HSV also has commitments from businesses who are big airline users in the area. Some feel that this is a fool’s game and bound to fail. AirTran, they say, will serve HSV only until the subsidy is gone, then the company will pull out. Peek and many others believe it to be a good risk.