The U.S. air transportation structure is dominated by “hub-and-spoke” networks and by agreements between major airlines and their regional affiliates. Since the deregulation of U.S. commercial aviation in 1978, most major airlines have developed hub-and-spoke systems. For example, Northwest Airlines (Northwest) has hubs in Minneapolis, Detroit, and Memphis. United Airlines (United) has hubs in Chicago (at O’Hare International Airport), Denver, Los Angeles, San Francisco, and Washington, D.C. (at Dulles International Airport). Major airlines provide nonstop service to many “spoke” cities from their hubs, ranging from large cities like Portland, Oregon, to smaller communities such as Des Moines, Iowa, and Lincoln, Nebraska. Depending on the size of those markets (i.e., the number of passengers flying nonstop between the hub and the “spoke” community), the major airlines may operate their own large jets on those routes or use regional affiliates to provide service to other communities, usually with regional jet and turboprop aircraft. The airports in small “spoke” communities are the smallest in the nation’s commercial air system. The Federal Aviation Administration (FAA) and federal law categorize the nation’s commercial airports into four main groups based on the number of passenger enplanements—large hubs, medium hubs, small hubs, and nonhubs. Generally, airports in major metropolitan areas—such as Chicago, New York, Tampa, and Los Angeles—are “large hubs.” There are 31 large hubs, and they serve the majority of airline traffic, accounting for nearly 70 percent of U.S. passenger enplanements in 1999. At the opposite end of the spectrum are the nonhub airports—the airports for the communities that are the focus of this study. In all, 404 airports were categorized as nonhubs in 1999. As a group, they enplaned only about 3 percent of passengers in 1999. Of those airports, we analyzed 267, which are generally the largest airports within this group. These included 202 small community airports in the continental United States and 65 in Alaska and Hawaii. Table 1 provides more information about the four airport categories, along with an illustration of each type. The typical community of the 202 small communities in our analysis had nine departing flights per day in October 2000, and most had no jet service. They were typically served by two airlines, though 41 percent had service from only one airline. Individually, however, they varied considerably, from having no more than 1 or 2 daily departures to having more than 60. As a group, their limited level of service is related to their small populations. As individual communities, the varied levels of service reflect differences in other factors such as the level of local economic activity and proximity to nearby airports. In October 2000, the typical small community among the 202 we analyzed had the following levels of service: Service from two different airlines or their regional affiliates, each providing service to a different hub where passengers could make connections to other flights in the airline’s hub-and-spoke system. However, a substantial minority of the communities—41 percent—had service from only one airline. Nine departing flights a day, most if not all of them turboprops rather than jets. In all, only 67 of the 202 communities had any jet service. The level of service varied significantly from community to community. At the higher end were airports serving resort destinations like Key West, Florida, where five different carriers operated 44 average daily departures to six nonstop destinations, and communities such as Fayetteville and Bentonville, Arkansas (the headquarters for Wal-Mart Stores, Inc.), near the Northwest Arkansas Regional Airport, where five air carriers scheduled 42 average daily jet and turboprop departures to seven nonstop destinations. The highest number of daily departures—62—was for Nantucket, Massachusetts, a resort community served by turboprop and even smaller piston aircraft. At the other extreme were communities such as Hattiesburg, Mississippi, and Thief River Falls, Minnesota, with an average of 3 and 1 daily departures, respectively. In total, the 10 small communities with the most air service typically had more than 38 scheduled departures per day, while the 10 small communities with the least air service typically had fewer than 3 scheduled departures per day.Table 2 summarizes the range of air service that was available at the 202 small community airports in October 2000. For purposes of comparison, appendix II provides additional information on key differences in the scope of air service that airlines scheduled at nonhub and small hub communities. Small hub airports tend to serve somewhat larger communities and have significantly more commercial air service than do the 202 nonhub airports in the continental United States. The most obvious reason for the generally limited level of service at these small communities is their small size. As a whole, the 202 airports served a small portion of the U.S. population and geographic territory. In 2000, the median population of the 202 nonhub airport communities in our analysis was about 120,000, and the median number of daily passenger enplanements in 1999 was about 150. However, airports typically serve populations and businesses in a larger surrounding area—typically referred to as a “catchment area.” An airport’s catchment area is the potential geographic area for drawing passengers. The geographic size of a catchment area varies from airport to airport depending on such factors as how close an airport is to other airports and whether the airport is served by a low-fare airline (and, therefore, attractive to passengers from farther away). Catchment area size estimates provided by the airport directors we surveyed showed that these airports potentially serve a total population of about 35 million (about 12 percent of the continental U.S. population).Figure 1 shows the location and catchments areas of the 202 airports in our analysis as estimated by airport directors responding to our survey and our estimates of catchment areas for those who did not respond to the survey. The small size of these markets greatly affects the level of service because airlines’ decisions about offering service are motivated primarily by the need to maintain profitability. An airline’s profitability generally depends on its ability to generate revenues in a given market while managing its costs. The airline industry is capital- and labor-intensive and is largely dependent on passenger traffic for its revenues. The airlines use sophisticated computer models to help them identify whether certain markets can be served profitably. The limited amount of passenger traffic from many of these communities limits the number of flights airlines provide. It is also not surprising that turboprops have typically provided most service to these communities, because turboprop aircraft are generally the least expensive type of aircraft to buy and operate. The role of size in limiting a small community’s service can be seen by stratifying the small communities into population groups. As part of our analysis, we separated the 202 small communities into three groups— those smaller than 100,000, those with populations of 100,000 to 249,999, and those with populations of 250,000 and greater. As figure 2 shows, the “smallest of the small” typically had lower median levels of service as measured by such indicators as number of daily departures (both turboprop and jet) and service from more than one airline. Besides population, a variety of other factors may influence how much service an individual community receives. In our analysis, two such factors stood out. One of these was the level of economic activity. The airline industry is highly sensitive to the business cycle, and its economic performance is strongly correlated with fluctuations in personal disposable income and gross domestic product. When the economy is growing, the demand for air transportation grows, allowing carriers to raise yields (prices) and profitability. When the economy falls into recession, unemployment grows, individuals postpone discretionary travel, and airline yields and profitability decline. In particular, a key element to the profitability of an airline’s operation in a given location is the availability of high-yield passenger traffic—that is, business travelers who are more likely to pay higher airfares than leisure travelers. Communities with greater amounts of local business activity may have more (and different) air service than communities with less economic activity. Of course, the reverse may also be true—that local economic activity cannot improve without enhanced air service. Thus, the presence or absence of air service may also positively or negatively affect local economic activity, rather than local economic activity dictating the amount and type of air service. Our analysis showed a statistically valid relationship between the economic characteristics of small communities and the amount of air service that they received. Economic principles led us to expect that passenger demand for air service would be greater in communities with more jobs and higher incomes. Our results were consistent with these expectations. Larger communities with more income and “regional product” had service from more major carriers and had more weekly departures. For example, for every additional 25,000 jobs in a county, a community received 4.3 more jet departures per week and 4.8 more turboprop departures per week. Similarly, for every additional $5,000 in per capita income, a community received 3.3 more jet departures per week and 12.7 more turboprop departures per week. In other words, if two small communities, A and B, were similar except that Community A had $5,000 more in income per capita than Community B, Community A would have had 16 more departures per week than Community B. A third main factor that stood out as helping to explain the variation in service levels between small communities, in addition to relative size and economic activity, was the community’s relative proximity to larger airports. If a small community is located within relatively close driving distance of another commercial airport, passengers may drive to the other airport, rather than fly to or from the local community airport.