PASSENGER LEAKS AND THE FATE OF SMALL COMMUNITY AIR SERVICE

I. INTRODUCTION Small community air service has undergone a significant transformation since deregulation in 1978. Free to establish prices and routes, most major air carriers have moved to a "hub and spoke" system, in which the carriers feed flights back and forth from relatively small airport spokes to larger hubs. (1) As this transport system has evolved, many smaller communities have experienced a loss of service or have had unstable service. Recently, the General Accounting Office (2003) (GAO) reported, "daily departures from 202 small communities had decreased by 19 percent between October 2000 and October 2001" (p. 12). The U.S. Department of Transportation (2002) reported similar declines for a two-year period beginning in September 2000. Of the 202 community airports tracked by the GAO, the number served by just one commuter airline increased from 83 to 95, and 30 airports were notified of discontinued service, of which 15 had just one carrier. Although these community airports account for less than 5% of all air passenger traffic in the United States, they represent nearly three-fourths of the number of U.S. airports. For many travelers, driving to a hub airport has become an attractive substitute to flying from the local airport to the hub. The viability of driving depends on numerous factors related to the frequency of flights and fares from the local airport to the hub, the frequency of flights and fares from the hub, and the direct and indirect costs of driving. Passenger leaks are broadly defined as people who could fly to a hub or destination from a locality but instead choose to drive. (2) An obvious way for small community air service to grow is to reduce leaks. More frequent flights and/or larger aircraft flying to and from the local airport can work to further increase local demand for air service. Many communities view growth in local air service as essential to economic development. It is generally believed that businesses require good air connections as part of a region's infrastructure. (3) In light of this importance, little empirical evidence is available on the determinants of local passenger leaks. This article develops an empirical case study on causes of passenger leaks using data on departing travel originating in the state of Wyoming. As we will discuss, this case has important similarities to a significant subset of local airports across the country. We believe our estimates are likely to be relevant for many other rural areas of the United States. The analysis makes use of Ticket Control Number (TCN) data provided by Sabre. The data describe all ticket coupons sold by Sabre through associated travel agents in Wyoming from September 2000 through August 2002. A record in the TCN data set contains information about a leg of a passenger's airline trip. An individual record describes the point of purchase, itinerary, fare amounts, purchase data, and travel class. We use these data and other airport-specific information to empirically explain the factors that cause leaks from local Wyoming airports. Results from this analysis show that fare differences, distance between the local airport and hub, and the amount of regional jet service are important determinants. Short-run elasticities are estimated that measure the sensitivity of local air travelers to these factors. II. BACKGROUND INFORMATION The GAO (2002, appendix III, pp. 47-53) presents departure information for 202 non-hub airports. It tabulates daily departures of turboprops and jets, for calendar year 2001, as well as population for the relevant catchment area (from the 2000 census). (4) These summary statistics tend to be bimodal. Larger communities have more service, but the majority of airports have fewer than 10 flights per day. Table 1 summarizes the information from the GAO report, splitting the sample by frequency of flights. We report a variety of statistics for each of the two groups (9 or fewer flights per day, 10 or more flights per day): mean, median, 10th percentile, and 25th percentile. …