Dominoes In Columbia
Yesterday, I wrote about Columbia’s generous offer to American Airlines. City officials offered a $3 million revenue guarantee over the next two years if the airline agreed to provide service to Columbia Regional Airport. Today, we learned that Columbia City Council members approved this offer at a meeting yesterday.
I know Columbia Mayor Bob McDavid has a catchy-sounding goal of “40 in 2020” — meaning, to have 40 percent of mid-Missouri airline passengers using Columbia’s airport by 2020. But doling out subsidies is not the best way to strive for this goal.
The revenue guarantee enables American Airlines to break even on each flight. But what about Delta, which already services Columbia without subsidies? Let’s look at an example. Airlines have a minimum amount they can charge for each ticket before they start losing money — say it is $200. But because Columbia is helping American, that airline now can provide fares at $150. Delta, on the other hand, does not have this extra help and cannot lower its prices below $200. Which flight will passengers choose? Unless they have an unwavering love of the Delta Biscoff cookies, they will choose the cheaper American flight; and this is how Delta now will be at a disadvantage in the marketplace.
Delta officials know this, and already warned the city that they will expect a similar subsidy if the American deal goes through. I expect that we will now see a domino effect. Chances are, Columbia will have to spend taxpayer money to keep Delta from leaving the airport, even though they were already providing service there for four years. There is also a third player. Frontier Airlines is scheduled to begin service to Columbia in a few weeks. They will have good reason to ask the city for a revenue guarantee as well.
The city created an artificial need for other companies to now require subsidies that previously they did not expect or request. Thank you, Columbia, for giving us an example of how subsidies can cause harm to a city.